Improving Chart Analysis

[yogi-in-oz]

Hi folks,

BDG ..... fwiw, it should finish 2006 on a very strong note !~!

..... and BDG is a typical example of the dilemma that faces
all traders, when a stock falls off its perch ..... that is, at
which point do we re-enter this market???

If we consider the price axis alone, then our TA will be
focused on a PRICE level that may have been historical
support ..... ..... at the lower edge of a trading channel,
for example.

Tools for analyzing the price axis seem to be endless, but
even if the price level from our TA proves to be correct, how
long will BDG bounce along on its lows, before lifting into
the next upswing ..... ???

Maybe, if we do some analysis of the TIME axis and marry
it to our analysis of the PRICE axis, we may be able to
come up with a better entry, BEFORE the next rally comes
along.

As time moves on, confirm your regular BDG analysis with
the following time cycles:

25102006 ..... minor and positive (intraday move only)

30-31102006 ..... 2 minor cycles here .....

03-06112006 ..... minor

21112006 ..... minor (intraday)

23112006 ..... significant and positive - finances???

30112006 ..... positive spotlight on BDG .....

13122006 ..... significant and positive news here???

15-19122006 ..... 1 major, positive cycle and 2 minor cycles


27-29122006 ..... 2 cycles and a strong rally here ... ???

In January 2007, BDG still should stiil be well supported,
but February 2007 will likely bring the next slide in price.

happy days

yogi



=====

 

[barney]

Hi guys, It was my first Chart post so it was messy ......... what can I say??

Can I start this again (now that is not 4 am in the morning!!)

Thanks for the feedback so far ........... It is fairly difficult for me trying to get my points across ..........

1) Without sounding like I'm pretending I know what I'm talking about!! , and,

2) Actually conveying clearly what I'm thinking with regard to charts etc. ...so here is kinda what I was thinking with regard to BDG ...........

Firstly I noticed BDG as a heavily falling stock yesterday on a generally up day for the Oz S. Market .....created interest for possible "short sell"

I looked at the chart, but considered the heavy down spike to be "well under way" , and therefore a short sell on this stock maybe in fact now risky (considering the stock was at lowest point for a year.

My opinion was that I would NOT short sell this stock!! (Not enough downside to justify it)

Baring in mind that it is a "quality" stock with great potential, I then thought, if it is at a "low point" (mainly due to Gold price dropping and news of resource downgrade), then, assuming that the resource (according to the Company) would/could be increased substantially at some point in the future, then it may be more beneficial to wait for an "upturn" in the stock price from its present low, hence .................

The way I would consider this stock from a trading point of view, would be to wait for "confirmation" of a reversal (and I do believe it will reverse .... maybe in a week, maybe in a month maybe 6 months!!)

It looks to me as though the potential upside is far greater than the downside for this stock (even if not in the immediate short term ) ............

So that was my "analysis" of what I "saw" ............ not that technical, but I believe the chart will give a clearer picture of when the stock is ready to reverse .............

In saying that, the volume has lowered in unison with the price spread again today, indicating ..........well indicating nothing!!, other than it bares further investigation over the next period of time to see whether the sp might reverse, and IMO, if it does reverse, particularly on good news such as a resource upgrade etc, then the upside for this stock looks potentially promising ................. Hope that is clearer regarding what I was "seeing" ............ I will post a clearer chart (hopefully) showing nothing more than the Volume on SP decrease, and the possible support/resistance levels, which, when considered with "Time", hopefully "backup" my assumptions (OK I know assumptions don't count in the stock market ............. unless they are correct??!!) Cheers All .............. This may seem very "novice" orientated, but I assure you that I "consider" my opinions carefully, I appreciate that I don't understand the "true" concepts of technical analysis (YET), but I like to think I am "intelligent" enough to have "sensible" concepts ........... Again further comments and criticisms are most welcome .......... All the best, Barney.

PS If the SP dropped as low as $0.80 (previous support level) , but then reversed substantially, this would indicate a strong possible "upside" ?? .... Yes/No ?? Thanks .............

 

[MichaelD]

If the stock was to reverse in a week/month/6 months, is it fair to say that a) Due to the fact that the SP is currently at a very low point in its recent history, and b) The potential upward resistance to me seems very minimal (if the stock does rebound) , that the stock "bares attention" ....Thats all I'm really getting at ............ I put the chart in simply to visualise the spike down, and to try and give an example of my reasoning behind the "weak" upward resistance in case of an upturn .......

I have to say I pretty much completely disagree with this. I'd argue that unless something very exciting happens to the price of gold or to this company, it's going to wallow for a long long time.

Why?

Your assessment: Stock price is LOW. BARGAIN ALERT.

My assessment: The chart is merely a reflection of people and their actions. Every single person who bought this stock in the last 10-11 months and who is still holding it is now sitting on a LOSS. Everyone is in PAIN. The universal emotion is FEAR. There will be people that bought this stock at $2.50 who still hold it at $1. Ditto for all the prices in between.

What do you think the vast majority of these people will do as soon as the share price shows the slightest hint of getting close to their buy price? Answer: Sell and pat themselves on the back for getting out even. What will happen to the price if there is a deluge of sellers every time the price rallies? Answer: Down she goes, swamping the people attempting to bottom pick. Dead cat bounce heaven.

I could well be totally wrong - if I am, I'll lose a small amount of capital and move on - but if I'm right, I will do well. That's what a trailing stop is for. I expect to be right 40-50% of the time.

Take a look at BCL for an almost identical scenario being played out on a heavy downwards price/volume spike but a little further advanced down the line.


Bottom picking is a very, very dangerous strategy to your capital. It is much, much safer to find a nice trend already in progress and hop on. Yes, you'll sometimes pick the very top of the trend, but the upside of getting onto a trend that runs for months/years will far outweigh the occasional buys at the top.

Think about it - if a stock makes a new all-time high, that means EVERY SINGLE PERSON who has gone long on a stock is in PROFIT and patting themselves on the back for their cleverness. They are less likely to sell than owners who are panicking.

 

[barney]

Think about it - if a stock makes a new all-time high, that means EVERY SINGLE PERSON who has gone long on a stock is in PROFIT and patting themselves on the back for their cleverness. They are less likely to sell than owners who are panicking.[/QUOTE]


Thank again Michael, Point well made, and well taken.

My impession of BDG may have been a bit tainted with what I saw on BOL .......... about 25th September looked to be on a continous downturn ..........Looked like a good "short" opportunity ............ The share reversed north again fairly strongly last two weeks. I'd be interested in anyones perception of this stock? Does it look like the trend has finally turned or will the longer term down trend re establish itself? Cheers, Barney.

 

[It's Snake Pliskin]

Hello Barney,

I have to agree with Michael.

Re: your chart; higher highs and higher lows tell when it has turned - generally. Potential upside is generally hindered by those holders who sell out to recoup losses which takes time. When there is lighter supply it MAY trend up.

Regarding the first chart Magdoran got it right: I like spaghetti but can`t read it

Snake

 

[MichaelD]

My impession of BDG may have been a bit tainted with what I saw on BOL .......... about 25th September looked to be on a continous downturn ..........Looked like a good "short" opportunity ............ The share reversed north again fairly strongly last two weeks. I'd be interested in anyones perception of this stock? Does it look like the trend has finally turned or will the longer term down trend re establish itself?

Barney,

You will NEVER learn to trade profitably until you realize that the answer to this question is;

1. Unknowable except in retrospect, and
2. Makes no difference to your profitability.

You MUST stop wasting your time on the ENTRY and instead focus on what you do AFTER the entry, namely how to EXIT profitably.

If I were to assign profit %s to the components of a trading system, I'd suggest;

Entry - Less than 5%
Exit - 75%
Money Management - 20% of extra cream on top

...and then you need the psychological fortitude to cope with this.

What % of your research time do you spend on working out your exit strategy vs your entry strategy?

 

[Magdoran]

Crude is struggling to go down. But the trend in the daily is still bearish.

It is still possible for a capitulation move down to occur to wash out the sellers, but there is also a possibility now of this being the marginal low, and a bullish drive coming from here.

But I’m sticking to my guns till I see something to invalidate the bearish drive currently in the chart, and I’m not seeing this.

This has not been an orderly sell off. A lot of players were hurt, and some are still hurting, so I would not be surprised to see some more downside.

The trend is not as strong as it was in August and September, but it is still down.

There could be a small 5 wave structure in place now starting in late September. I’m going to watch this closely to see how it resolves.


Regards


Magdoran

 

[Magdoran]

Hi guys, It was my first Chart post so it was messy ......... what can I say??

Can I start this again (now that is not 4 am in the morning!!)

Thanks for the feedback so far ........... It is fairly difficult for me trying to get my points across ..........

1) Without sounding like I'm pretending I know what I'm talking about!! , and,

2) Actually conveying clearly what I'm thinking with regard to charts etc. ...so here is kinda what I was thinking with regard to BDG ...........

Firstly I noticed BDG as a heavily falling stock yesterday on a generally up day for the Oz S. Market .....created interest for possible "short sell"

I looked at the chart, but considered the heavy down spike to be "well under way" , and therefore a short sell on this stock maybe in fact now risky (considering the stock was at lowest point for a year.

My opinion was that I would NOT short sell this stock!! (Not enough downside to justify it)

Baring in mind that it is a "quality" stock with great potential, I then thought, if it is at a "low point" (mainly due to Gold price dropping and news of resource downgrade), then, assuming that the resource (according to the Company) would/could be increased substantially at some point in the future, then it may be more beneficial to wait for an "upturn" in the stock price from its present low, hence .................

The way I would consider this stock from a trading point of view, would be to wait for "confirmation" of a reversal (and I do believe it will reverse .... maybe in a week, maybe in a month maybe 6 months!!)

It looks to me as though the potential upside is far greater than the downside for this stock (even if not in the immediate short term ) ............

So that was my "analysis" of what I "saw" ............ not that technical, but I believe the chart will give a clearer picture of when the stock is ready to reverse .............

In saying that, the volume has lowered in unison with the price spread again today, indicating ..........well indicating nothing!!, other than it bares further investigation over the next period of time to see whether the sp might reverse, and IMO, if it does reverse, particularly on good news such as a resource upgrade etc, then the upside for this stock looks potentially promising ................. Hope that is clearer regarding what I was "seeing" ............ I will post a clearer chart (hopefully) showing nothing more than the Volume on SP decrease, and the possible support/resistance levels, which, when considered with "Time", hopefully "backup" my assumptions (OK I know assumptions don't count in the stock market ............. unless they are correct??!!) Cheers All .............. This may seem very "novice" orientated, but I assure you that I "consider" my opinions carefully, I appreciate that I don't understand the "true" concepts of technical analysis (YET), but I like to think I am "intelligent" enough to have "sensible" concepts ........... Again further comments and criticisms are most welcome .......... All the best, Barney.

PS If the SP dropped as low as $0.80 (previous support level) , but then reversed substantially, this would indicate a strong possible "upside" ?? .... Yes/No ?? Thanks .............

Hello barney,

So, the veritable Les Paul is getting dusty is it? Sounds like my guitars. The strings probably need to be changed and the cases dusted I haven’t picked them up for so long…

Ok, re your chart... Thought I’d make a quick comment (quick for me that is). I’ve looked at BDG and made up a couple of charts for you to look at and consider. One is pure charting, and some observations that may be of interest.

After such a strong drive down, it is not unusual for a kind of consolidation to occur after the panic and activity. The move often uses up many of the available sellers and buyers, hence these “spike moves” down with “spike volume” tends to “stop the move” (a “McLaren-ism”).

We may see a marginal low come in now, or a false break to end the bear campaign. I agree, there may not be much downside, hence there is some risk here. Just my opinion though.

Sure, historical major lows can be important price levels. This is after all an interpretive game. It’s a good idea to look at the longer term charts too sometimes, depending on the time frame you want to trade in.

Frankly though, there are much better shorts around (if you think shorting is a good move in a currently bullish market). I tend to think Weinstein is on to something good – essentially short the weakest stock in the weakest sector in a bear market, and go long the strongest stock in the strongest sector in a bull market. Simple really (bunyip would agree with this I’m sure).

Even better then, if you think the market is bullish, look, as Michael quite rightly suggests, for an up trending stock… higher lows, confirming volume, bullish pattern… etc.

Regarding your example, it is likely that for this kind of pattern to become a bullish, the prospect usually needs to base for a long time (sometimes longer than it took to go down, maybe twice or three times as much time), so just be careful. You want higher lows, and bullish patterns, don’t you.

Every chart tells a story, you just need the right “babel fish” to understand what it is telling you. This is the challenge – how to read the charts and comprehend the clues and patterns embedded in them. This is where experience comes in.

Keep up the good work barney, I can see your mind fired with inspiration pushing the boundaries every day. It’s a “rush”, isn’t it?

Regards


Magdoran

P.S. For those that don’t know, the “babel fish” was a fictional fish you put in your ear in Douglas Adams' “Hitchhiker’s Guide to the Galaxyâ which acted as a universal translator so you could understand other languages. Mag.

 

[barney]

Thanks Gentlemen, A few little "pearls of wisdom" amongst those replies.

Snake, as always, good advice with minimal words .....That is a rare art form!

Michael, Just wanted to clarify that I am very conscious of the importance of exits now (wasn't previously) For example,I had to work (real job!!) yesterday, and have a couple of trades in place, but everyone is covered by a tight stop loss setup ............. My point is that I was able to "leave the house" relaxed knowing that I shouldn't come home to any ugly surprises ............. This has been one of the most important things I have learned and I thank all those that have continued to remind me of this ....... So I do appreciate the entry is far less important than the exit, but from my "novice" level, I need to understand/comprehend how to "read" charts better to give me more confidence overall ........... Thanks again for your comments.

Mag, As always your explanations and advice are top shelf .......... Thanks for posting that chart; your additional comments cleared the smoke a bit for me. I'll take it all on board and hopefully climb another notch up the ladder ........ and yes it is addictive this stuff ................. Its kinda like Mathematics crossed with Phsycology (both of which I enjoy) .................. what a crazy mixture!!

PS The Les Paul is outa the box tonight ........... gig at a local RSL. Actually got a bit more work coming up towards the end of the year .......... Its the "Marrying" season!! ................... Cheers to all, Barney.

 

[barney]

Hi Guys, Have to go out shortly, but just a quick one regarding PMN below. Curious as to anyones opinion on a likely scenario for this stock. They are going to be bought out by Suncorp I believe hence the SP spike, but then a massive SP down turn on another up day for the Oz Stock Market. Interesting ........... Could have been seen as a long position 2 days ago ........... Now maybe a short? I don't know; just curious for more experienced opinions, Cheers Barney.

 

[MichaelD]

Could have been seen as a long position 2 days ago ........... Now maybe a short?

Barney.

Profitable strategy:
Stock going up: BUY
Stock going down: SELL
Not sure whether it's going up or down: Don't touch.

Want a simple, highly profitable strategy for stocks?
1. Buy a stock which hits an all time high
2. Sell it when it breaches a long term stop, such as a wide ATR stop or a long term moving average.
3. Repeat 1 and 2 ad nauseum.

You will make far more money than the majority of traders will ever do. Making money on the stock market is the SIMPLEST thing you can possibly imagine. Actually consistently executing this laughably simple thing, however, is the HARDEST thing you will ever do because your own psychology will refuse to believe just how laughably simple it is.

Charts won't help you.
Fundamental analysis won't help you.

 

[tech/a]

Michael.

100% golden.

Most fail because they want to turn $5k into $500k this year.

 

[rex]

Michael D

Very good post.

Except for the bit about charts not helping you. Your simple strategy involves buying new highs with a stop below support or an ATR. How are you meant to see the support without a chart?

Rex

 

[swingstar]

I think Michael's point was that the type of analysis used doesn't matter (even so a chart isn't necessary in that example--you could do it in Excel).

Although analysis is very important, and there should be certain probabilities given the condition, as in any risk taking venture. What separates the net winners from the losers is having an edge, planning (unless it's a mechanical system that tells you when to act), and following the plan.

 

[Porper]

Michael.

100% golden.

Most fail because they want to turn $5k into $500k this year.

I think all beginners are guilty of trying for huge gains, I certainly did (and sometimes still do).In a raging bull market you will survive but when there is even a relatively small correction you get nailed.

It's a misconception that the "blue chips" can't make big gains.They won't double overnight, but they also won't lose anywhere near that amount either.

MichaelD is pretty onto it also.Simple is good.

Learning too many indicators, taking Elliot Wave to it's extremes, does this make you more profitable ? . Does having 30 projection lines on a chart give a better probability of likely price action than just taking the trend, price and associated volume, using support / resistance levels with good money management rules.Probably not.In fact it can make you confused, too many conflicting signals can freeze you out, stop you being able to place a trade.

Nothing wrong with learning, especially if it is enjoyable, but as everybody keeps saying, the tools don't make the money.

 

[machi]

Making money on the stock market is the SIMPLEST thing you can possibly imagine.

True, in a strongly trending market as we have had for the last 3 years. In fact you don't need such a strategy as 90% of the stocks are rising.
However how would such a strategy perform under other conditions?
ie a choppy, volatile market or even in a bear market?

There is nothing simple about making $$$ in the market. This is the hardest game in town. After all, bull markets don't last forever. The only way to become consistant is to learn to trade markets in all 3 directions. For most folks that takes years of learning and practice.

 

[nizar]

Barney.

Profitable strategy:
Stock going up: BUY
Stock going down: SELL
Not sure whether it's going up or down: Don't touch.

Want a simple, highly profitable strategy for stocks?
1. Buy a stock which hits an all time high
2. Sell it when it breaches a long term stop, such as a wide ATR stop or a long term moving average.
3. Repeat 1 and 2 ad nauseum.

You will make far more money than the majority of traders will ever do. Making money on the stock market is the SIMPLEST thing you can possibly imagine. Actually consistently executing this laughably simple thing, however, is the HARDEST thing you will ever do because your own psychology will refuse to believe just how laughably simple it is.

Charts won't help you.
Fundamental analysis won't help you.

Great post.
On the ball, Michael.

 

[machi]

Learning too many indicators, taking Elliot Wave to it's extremes, does this make you more profitable ? . Does having 30 projection lines on a chart give a better probability of likely price action than just taking the trend, price and associated volume, using support / resistance levels with good money management rules.Probably not.In fact it can make you confused, too many conflicting signals can freeze you out, stop you being able to place a trade.

What actually is taking Elliott to extremes? Didn't know such a thing was possible. You just follow the rules. Simple. A move will either work out or becomes invalid.

Does it make someone more profitable? Who knows?. But it might give you a hell of an edge if used in the right hands. If you really would like to have your question answered Porper, then perhaps you should pit your skills against someone who uses one of these systems. Then you would find out huh?

 

[tech/a]

True, in a strongly trending market as we have had for the last 3 years. In fact you don't need such a strategy as 90% of the stocks are rising.

Well its far less than 90%

However how would such a strategy perform under other conditions?
ie a choppy, volatile market or even in a bear market?

There are times to be in the market and times to stand aside.Attempting to trade stocks in ALL market conditions will see periods of drawdown.

There is nothing simple about making $$$ in the market. This is the hardest game in town. After all, bull markets don't last forever.

It doesnt have to be it truely is very simple. Bullmarket or not. If you take a look at the all Ords,I could argue strongly that its been bullish since 1987.

The only way to become consistant is to learn to trade markets in all 3 directions. For most folks that takes years of learning and practice.

No I dont agree that its the ONLY way.Maximum consistant return I agree could come with trading Indexes or Futures when bullishness in the stock market turns to bear. If you dont think you can be net profitable over long periods trading in a bullish manner only then I would say think again.

Humans have this ability of turning the most simple into the most complex.
This is seen on a daily basis on stock market forums.

 

[machi]

It doesnt have to be it truely is very simple. Bullmarket or not. If you take a look at the all Ords,I could argue strongly that its been bullish since 1987.

That's true, but that is history. Past perfomance is no guarantee of future perfomance. Trends can change at any time from going up for years to going sideways for years or even down for years just like in the 1970's. Anything is possible in the market.