TECHNICAL ANALYSIS OF THE FINANCIAL MARKETS was mentioned weeks ago by another Irregular as an excellent reference for technical analysis (TA). ( I apologize for not being able to give him credit, but I could not find his name by searching SGS.) I bought the book because of his recommendation and because the book has 4 1/2 stars (out of 5) on Amazon. After starting to study it, I realized that reviewing the book might be a way to say “Thank You” to the Irregulars who are teaching me so much. I hope everybody finds this useful. If you don’t, you can complain to our CEO!
Before I get started – Joe, I was very disappointed when I found that Marxism was never mentioned. Not once!
The book was written by John H. Murphy; Revised 1999; New York Institute of Finance; IBSN 0-7352-006-1. Amazon’s price for a new book is about $55. Used books, as of today’s date, are available for between $25 and $30. The book has 542 pages, 19 chapters, and 4 appendices, all of which are listed at the end of this review.
To briefly sum up this review: I am glad that I bought the book. I have started using some of the techniques, and I’m convinced that it was money well spent. However, one wishing to learn TA cannot expect to read the book once and then magically be able to read charts. There must be a willingness to study the techniques and perhaps read some of the chapters more than once. Murphy says repeatedly that that the ability of analyze charts comes only with experience. TA is not a Holy Grail for guaranteeing stock performance, but I believe it has its uses.
The first edition, published in 1986, was TECHNICAL ANALYSIS OF THE FUTURES MARKETS. Although it did not specifically talk about stocks, many of the techniques can be used for either one. This second edition, published in 1999, contains much of the information from the first one, but there is much new information and the emphasis, of course, is on stocks. The differences between TA for futures and TA for stocks are well explained.
To benefit readers new to TA, one sentence from Chapter 5, and one from Chapter 6, might have been better placed early in Chapter 1. From Chapter 5: “The analyst must face the realization that he or she is dealing with percentages and probabilities. . . .” From Chapter 6: “The treatment of all chart patterns deals of necessity with general tendencies as opposed to rigid rules”.
The Good: A lot.
>> Murphy discusses many of the popular TA techniques in easy to understand language (usually, anyway, see the comment about “Elliot Wave Theory” below). Investors with no or little knowledge of TA and wanting to learn will find it invaluable. Investors who already use TA will probably learn additional techniques and at a minimum learn some nuances and variations of the techniques that they already use. There is a plethora of easy-to-read charts illustrating the techniques (easy to read except for some “Point and Figure” charts, see below), with explanations under each chart. The text font is large and easy to read.
The Bad: Not much. A few brabbles, just to be picky:
>> I earlier stated that the charts are easy to read. An exception: some of the ”Point and Figure” charts used a small font in order to pack as much data into the chart as possible. Sometimes the font size was so small that I had to use a magnifying glass.
>> I would like to have several practice charts at the end of most chapters with the question: “What is this chart telling us, and why?”
>> I would like to have a chapter on “Risk Analysis”, but since the risk would vary according to the expertise of the chart reader, I suppose such a chapter would not be possible.
>> I would like to have some discussion about the frequency of techniques occurring, e.g., “A head and shoulders pattern occurs roughly ”X” % of the time”. I would like it, but it probably can’t be done, once again due to the expertise of the chart reader. You might recognize a head and shoulders pattern, but I might not see any pattern at all.
>> The biggest complaint that I have is that Chapter 15, “Computers and Trading Systems”, says very little about software packages for PCs, although “Trade Station” is mentioned in the Chapter and later in Appendix C. I download end-of-day data daily and update my charts manually; I was hoping to find a review of some low cost software packages that would automate the procedure.
This is not a criticism of the book, but I feel that TA often would be of little use in working with microcaps. TA uses as its basis the buying and selling actions (derived from sales price and volumes) of shareholders. My thinking: The fewer the shares, the more the actions (warranted or otherwise) of a small number of shareholders can almost instantaneously affect the price. Conversely, I think TA would be of great benefit when investing in behemoths like JNJ.
Whole chapters are devoted to the basic concepts of many of the techniques. Murphy does not dive deeply into some of the topics, since some, such as Japanese Candlesticks and Elliot Wave Theory, have had whole books written about them. He lists several resources for such topics in one of the appendices.
After explaining the basics of a technique, he frequently writes about or mentions variations of the technique. When explaining RSI, “While 9 and 14 day spans are the most common values used…..some use shorter lengths, such as 5 or 7 days, to increase volatility….[or] 21 or 58 days to smooth out the RSI signals.” Also, he frequently mentions ways to confirm a signal. Many variations of moving averages are discussed.
Chapter 1 starts with a definition: “TA is the study of market action, primarily through the use of charts, for the purpose of forecasting future price trends”. It then lists the three basic assumptions of TA:
1. Market action discounts everything.
2. Prices move in trends.
3. History repeats itself.
(I think “History can repeat itself” or “History often repeats itself ” is more likely. )
There is a discussion about the differences between fundamental analysis and TA. Murphy says that, in essence, the fundamentals of a stock are built into the chart. “The fundamentalist studies the cause of market movement, while the technician studies the effect.” Later in the book, he says that charts are often leading indicators of changes in fundamentals and gives a few examples.
Chapter 13, which discusses Elliot Wave analysis, is hard for me to understand, although it seems to me to be a souped-up (I checked the spelling! ) version of moving averages. The basic theory is well explained—price movements come in 5 advancement (up) waves and 3 correction (down) waves. Then there are 9 different levels of magnitude. Etc. There are several explanatory charts — the thing that eludes me is how to easily apply the technique to buying/selling a stock. Since I am new to charting, and since this is a complicated topic, I will wait till I master the simpler techniques before getting into this one.
Gumlandians probably will not use the concepts of time cycles (Chapter 14) unless they are long-term investors, but it’s interesting to read about them. “. . . 37 different examples of the 9.6 year cycle, including caterpillar abundance in New Jersey, coyote abundance in Canada, wheat acreage in the U.S., and cotton prices in the U.S. . . . acted in synchrony ; that is, they turned at the same time. . . .” Seasonal cycles, typical stock market cycles, and the January Barometer are some of the topics worth reading.
Chapter 18 discusses evaluating the market as a whole and why it is important. Techniques such as the Advance-Decline Line and the McClellan Oscillator are discussed, and I found the information about comparing the various market averages very educational. If the comparison is to be meaningful, there is more to it than one would think.
Chapter 19 presents a 23 item check list that can be used when thinking about buying or selling. At first, I found the checklist to be intimidating, but after re-reading it, I saw that much of it would become second nature after understanding the techniques discussed in the previous chapters.
I will close by repeating the statement that “I’m glad that I bought the book”, and saying, “ Alan, I hope you were not overloaded with complaints! ”
Here’s the Table of Contents:
Chapter 1 Philosophy of Technical Analysis
Chapter 2 Dow Theory
Chapter 3 Chart Construction
Chapter 4 Basic Concepts of Trend
Chapter 5 Major Trend Reversals
Chapter 6 Continuation Patterns
Chapter 7 Volume and Open Interest
Chapter 8 Long Term Charts
Chapter 9 Moving Averages
Chapter 10 Oscillators and Contrary Opinion
Chapter 11 Point and Figure Charting
Chapter 12 Japanese Candlesticks
Chapter 13 Elliot Wave Theory
Chapter 14 Time Cycles
Chapter 15 Computers and Trading Systems
Chapter 16 Money Management and Trading Tactics
Chapter 17 The Link Between Stocks and Futures:
Intermarket Analasis
Chapter 18 Stock Market Indicators
Chapter 19 Putting It Altogether – A Checklist
Appendix A Advanced Technical Indicators
Appendix B Market Profile
Appendix C The Essentials of Building a Trading System
Appendix D Continuous Futures Contracts
Plus Glossary, Selected Bibliography, Selected Resources, and Index.
This is a discussion topic or guest posting submitted by a Stock Gumshoe reader. The content has not been edited or reviewed by Stock Gumshoe, and any opinions expressed are those of the author alone.
Thank you Hi pockets. Great synopsis. Tostart with i will buy the book. Piease excuse mylousy tablet typing.
Hi pockets, this was great work. I have looked at TA in the post and played for a few minutes with charts, but have never invested real money based on this discipline. If you are going to give chart lessons, I am open to learn.
Great starter HP. I think our problem is going to be finding a way to display graphic examples and our verbal descriptions may mangle the meaning. Has anyone got an idea for how we can draw and share pics so that everyone can view?
Google Drive
Thanks for the post and the creation of the thread. I, too, have been working on my charting and I believe it can be useful in helping to choose entry and exit points, though it is certainly far from perfect. Is it too early to discuss what some of the best indicators might be? It seems everyone has their own favorites, and I must confess, there are some that I just ignore because I don’t really understand how to use them. My biggest gripe with charting is that it is basically looking back on what has happened and drawing conclusions about why it happened … many indicators don’t seem to be “confirmed” until they actually completed the move that the indicator is supposed to “predict”. Maybe I’m over-generalizing, but I try to stick to trendlines, support and resistance levels, major moving averages, and RSI and/or money flow movement. Many people seem to like MACD a lot, but I haven’t yet found it to be useful. Maybe I’m not using it properly.
Hello all. I’ve been studying Dr. Elder’s books. I have drawn a tree diagram based on his triple screen method. I don’t think I can attach it as a document hereto. Please let me know your email if you want a copy and I will forward it. I’m now studying Richard Wyckoff since I think a better way to play this game is to determine whether the institutions are buying and, according to what I’ve read so far, Wyckoff found out how to do this (note: this is what the Trading Academy peddles for many, many thousands of dollars). This latter makes sense to me since price movement is based on supply/demand and greed/fear factors. Having worked, decades ago, on the floor of the CBOT, I can attest that price movements are related to the emotions of fear and greed. You can feel the emotions roll around the floors.
I look forward to this discussion.
Eliott, I use 2-day Force Index and MACD-H and MACD. Can’t say that I totally understand how to use them, but I have a notebook full of analysis of the DJI, S&P and the stocks I’m in (CTIX and ARWR) as well as those I want to be in (COP, NBY, MKL, AAPL).
Good gaming to all.
Welcome, J-P — we don’t currently host images since that would slow down the site dramatically on the larger threads (maybe we’ll come up with a fast, safe and secure way to do this in the future, but don’t have one now), but if you’re able to post your documents publicly in Google Drive or Dropbox or some similar file sharing service (there are many free ones) you can post the link to those public files in comments here. That way you don’t have to give anyone your email address if you don’t want to. Thanks for contributing!
JP, I agree on following the institutional buying/selling but have a hard time finding up-to-date information. I can pull up individual stocks on my E-trade site under insider activity and it shows monthly share rotation. Have you or anyone else here found anywhere on the internet that actually shows relatively up-to-date daily buying/selling? Or is the only way to get this information through analyzing volume and accum/dist levels and sp movement?
Thanks for the excellent review, Hi-Pockets!
Hi Linda. I get reports 3X a day from this site: J3SG.com.
It allegedly reports sales and purchases from insiders. Other than that, no. Lately, I’ve been reading up on Larry Williams’ Commitment of Traders report and trying to see if it does, as he claims, provides a “heads-up” or advance notice of the likely/probably direction of prices. I plan on giving a summary here later today.
Hi Pockets
Thanks for sharing. I’ll be a learning participant as you and Jean-Pierre guide us on this journey.
Per Alan’s comment, one may try useing the app, “Skitch” to create/draw charts.
Jean-Pierre knowing what and when institutions are buying/selling certainly seems like an ibdicator that could warrant further study.
As flattered as I am, I’m not sure I should be “guiding” anyone. If anything, I am myself looking for a “guide.” Happy to provide synopses of what I read though, along with my thoughts.
Eliottt – Re post 4 — keep in mind that (a) I’m a beginner, and (b) TA is about percentages and probabilities.
I think that, at best, the best indicator is right about 66 % of the time. That’s why one always looks at some way — perhaps another TA technique – to confirm the signal. The confirming technique should be one that works on different parameters than the primary – e.g., do not use a technique that is based on moving averages to confirm a moving average signal. The more the number of disparate signals saying the same thing, the higher the % of being safe. See the AAPL comments below.
Murphy says that one way to confirm MA signals is to wait 1,2, or 3 days after the signal to confirm it. The safer one want to be, the more days one waits. Also, volume can help confirm a signal.
The chart referenced below does not show them, but I feel that it is important to try to pick out resistance and support points. Of course, one way to do this is to pick out recent highs (resistance) and recent lows (support). How recent is recent? It depends on the general direction and the volatility of the stock. If the general direction is up, and the volatility is not too bad [ how much is too bad? 🙂 ], one can use a recent point.
This might help when picking out resistance and support points: Murphy points out that, when a stock falls back, it usually falls back to either 1/3, 1/2, or 2/3 of the recent main increase. And vice versa, of course. The “probable” change is selected according to the amount of risk one can tolerate.
The following comments are based on Yahoo’s 6 month chart for AAPL. The chart shows information for moving averages (20, 50, and 200 day), volume, Bollinger Bands, RSI, MACD, Money Flow, and Stochastics. Go to http://tinyurl.com/AAPL-Yahoo6mochart .
I think the technique you use should be based on the degree of risk you can stand. For example, prices will stay within the Bollinger Bands (gray lines on the main chart) 66 % of the time – 33 % above the middle line (an exponential moving average) and 33 % of the time below it. If the price is down around the lower line, it’s a buy signal. If it’s around the upper line, it’s a sell. So using B’Bands, one should be successful 66 % of the time. BUT: If the price is down around the lower line, and volume is higher than normal, bad things might happen!
On the AAPL chart, the price is slightly above the upper band, but the volume is lower than normal. Not many people are buying at that price, and quite a few might start selling. Probably not a time to buy.
Taking the signals down the Yahoo page, I think that the money flow is neutral.
The MACD signal line is below the MACD, which (I think) is negative.
The RSI is high, which I know is negative.
Both the fast and slow Stochastic line is up near 100, which is very bad.
So, in my beginner’s way of thinking, I would not buy AAPL now.
Moving away from Yahoo, I have found Triangles to be useful. Take a look at http://www.simple-stock-trading.com/triangles.html . Murphy says that the breakout point usually comes from 66 to 75 % of the time from when the triangle first starts to form. I have found this to be true. The longer the triangle (time wise) the better the signal.
Here’s a chart tip for you. It might work slightly different in other browsers, but it works in Firefox and Chrome.
Go into your bookmarks folder, and create a new folder inside it, naming it as you want.
Copy the monster URL below and paste it into two new bookmarks in the new folder.
In each bookmark, you will see the stock symbol, AAPL, immediately after the first = sign.
In one of the bookmarks, change “AAPL “ to the stock symbol of another chart you want to look at, e.g. “ESPR”, and rename the bookmark.
Now, by right clicking on the name of the folder, you can select “Open all in tabs” and you will open both charts. If you have several charts that you want quick access to, it’s best to limit the number of URLs to “X” number per folder, where “X” depends on your browser, the amount of memory in your computer. and the speed of your CPU. I use 20 or so, so it saves me a lot of time and mouse clicks.
You can go to http://www.tinyurl.com and create a shortened URL for inserting links into emails and on SGS threads, but I do not know how to easily change one to another stock.
Here’s the monster:
http://finance.yahoo.com/echarts?s=AAPL#{%22range%22%3A%226mo%22%2C%22indicators%22%3A{%22sma%22%3A[{%22id%22%3A%22sma20%22%2C%22name%22%3A%22sma%22%2C%22params%22%3A[20]%2C%22lineType%22%3A%22line%22%2C%22color%22%3A%22%23ff00ff%22%2C%22weight%22%3A1}%2C{%22id%22%3A%22sma50%22%2C%22name%22%3A%22sma%22%2C%22params%22%3A[50]%2C%22lineType%22%3A%22line%22%2C%22color%22%3A%22%23f1c232%22%2C%22weight%22%3A1}%2C{%22id%22%3A%22sma200%22%2C%22name%22%3A%22sma%22%2C%22params%22%3A[200]%2C%22lineType%22%3A%22line%22%2C%22color%22%3A%22%2300ffff%22%2C%22weight%22%3A1}]%2C%22ema%22%3A[{%22id%22%3A%22ema50%22%2C%22name%22%3A%22ema%22%2C%22params%22%3A[50]%2C%22lineType%22%3A%22line%22%2C%22color%22%3A%22%234a86e8%22%2C%22weight%22%3A1}]%2C%22bollinger%22%3A[{%22id%22%3A[%22bollinger_upper%22%2C%22bollinger_lower%22]%2C%22name%22%3A%22bollinger%22%2C%22subLines%22%3A[%22upper%22%2C%22lower%22]%2C%22lineType%22%3A{%22upper%22%3A%22line%22%2C%22lower%22%3A%22line%22}%2C%22color%22%3A{%22bollinger_upper%22%3A%22%23999999%22%2C%22bollinger_lower%22%3A%22%23999999%22}%2C%22weight%22%3A{%22bollinger_upper%22%3A1%2C%22bollinger_lower%22%3A1}%2C%22params%22%3A[20%2C2]}]%2C%22rsi%22%3A[{%22id%22%3A%22rsi14%22%2C%22name%22%3A%22rsi%22%2C%22params%22%3A[14]%2C%22lineType%22%3A%22line%22%2C%22color%22%3A%22%23cc4125%22%2C%22weight%22%3A1}]%2C%22macd%22%3A[{%22id%22%3A[%22macd_divergence%22%2C%22macd%22%2C%22macd_signal%22]%2C%22name%22%3A%22macd%22%2C%22subLines%22%3A[%22divergence%22%2C%22macd%22%2C%22signal%22]%2C%22lineType%22%3A{%22divergence%22%3A%22column%22%2C%22macd%22%3A%22line%22%2C%22signal%22%3A%22line%22}%2C%22color%22%3A{%22macd_divergence%22%3A%22%23ff0000%22%2C%22macd%22%3A%22%239fc5e8%22%2C%22macd_signal%22%3A%22%23f1c232%22}%2C%22weight%22%3A{%22macd%22%3A1%2C%22macd_signal%22%3A1}%2C%22params%22%3A[26%2C12%2C9]}]%2C%22mfi%22%3A[{%22id%22%3A%22mfi14%22%2C%22name%22%3A%22mfi%22%2C%22params%22%3A[14]%2C%22lineType%22%3A%22line%22%2C%22color%22%3A%22%23ff00ff%22%2C%22weight%22%3A1}]%2C%22stoch%22%3A[{%22id%22%3A[%22%22%2C%22stoch_k%22%2C%22stoch_d%22]%2C%22name%22%3A%22stoch%22%2C%22subLines%22%3A[%22%22%2C%22k%22%2C%22d%22]%2C%22lineType%22%3A{%22k%22%3A%22line%22%2C%22d%22%3A%22line%22}%2C%22color%22%3A{%22stoch_k%22%3A%22%23e69138%22%2C%22stoch_d%22%3A%22%2300ff00%22}%2C%22weight%22%3A{%22stoch_k%22%3A1%2C%22stoch_d%22%3A1}%2C%22params%22%3A[14%2C1%2C3]}]}%2C%22scale%22%3A%22linear%22}
HP I give you credit for taking on a daunting task. I probably won,t follow much for so much involves driving by looking in a rear view mirror,,so to speak. Market direction ,volatility, sentiment and such may all be charted but the minute world news changes, a new discovery made a multitude of seeming unrelated things occur the model you may have crafted,crashes. At basis charting is giving a visual image of number crunching and is why it is so popular now with computers readily and cheaply available. If you think about it all you are doing is setting up forecasting models,,the more comprehensive they are the more you must rely on a computer for computational analysis. That is why it is so hard to compete with the big boys who may be watching the output of 3 or 4 computers with multiple screens on each. Models are very prone to failure and must be back-tested and found reliable and even with that continually tweaked with new information. If you can code you may do well at this . In any case thanks for your effort.
I prefer to look at a chart just to see the highs and lows of performance over time period variability and do so more or less intuitively. Not outstandingly successfully however.
You are 100 % correct about competing with the “big boys”.
I read an article ( I did not bookmark the URL ) about the importance of very tiny amounts of time. One example that was mentioned: Except for delays caused by routing electronic data through one or more servers, the signals travel at almost the speed of light. According to the article, some of the big boys have moved / are moving their offices as close to the stock exchanges as possible, in order to get their transactions in ahead of everybody else by a few nanoseconds.
Also, as you mentioned, when certain conditions are met, many of the transactions are triggered automatically. Then, almost instantaneously, the orders are sent by the comp0uter to the stock exchange. Overall transactiome: probably less than one second. It usually takes me at least 3 minutes to enter a transaction at Scottrade.
I think it might be educational to watch the first 30 minutes of trading in $GILD tomorrow AM 29 Oct 2014. You may see high speed/high frequency trading in action.
Here is a link to a chart. Would you be willing to analyze and give opinion on what happens when FED stops QE?
https://mail.google.com/mail/u/0/?shva=1#inbox/1495874b95f796d4
I did not have a google account. When I sat one up, I got the message “The conversation you requested no longer exists”.
My bad Try this
http://e.businessinsider.com/public/3258280
‘Fraid I cannot help with this. Above my pay grade. Way above.
Hi I really did not expect analysis yet. If you keep this chart and look at it again in a few months it may make more sense.
| What do these icons mean?
dogg says:
October 29, 2014 at 11:20 am
Hi Pockets,
Tough question. I usually look at the chart. If the uptrend is broken I do not give it much room. Look at GILD. When it hit 108 it ran out of steam. Nice rolling top. I meant to sell half but listened to everyone saying how great the company is and hesitated. When it broke 100 I sold. It bottomed at 91 and I reentered at 94. Sold again yesterday before earnings at 113 and bought again after hours at 109. Now I will give it some room, maybe to 105. If I just entered the position I give it a little room. For me this is the most dangerous trade. The number one rule is no emotions. Fear, Greed, Denial, etc. They will ruin more trades than anything else.
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913 | | What do these icons mean?
Alan HarrisAlan Harris says:
October 29, 2014 at 11:28 am
Good comment and I truly hate to be a nag. This is the bio thread and unless we follow that theme, good comments are lost. Please cut and paste to http://www.stockgumshoe.com/2014/10/microblog-technical-analysis/
Thanx
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LuluLulu says:
October 29, 2014 at 12:40 pm
Dogg, Im following yr discussion with Hi Pockets…..Im intent on having a few bios in my portfolio but waiting for pullbacks as I missed the boat on CTIX at 1.60 and ESPR 21.50. IBB at 262. GILD just watched it goooooo. Would you offer good entry points on these shud they pull back. Id be looking at a min 100/20/10 Re: CTIX, GILD, IBB. Just to get my feet wet.
thanks Lulu
(Hope Im not being too forward in this request)
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dogg says:
October 29, 2014 at 2:13 pm
Lulu, trying to get me in trouble with Alan?
FWIW – my take on CTIX- If you believe in Elliot wave it looks to be on wave four. Good place to be. Should move up from here. If it is going to pull back the last area of support would be that area of consolidation from 9/23 to 10/22. Hate to see it break below that. If it does I am out. Gild – This will probably move with the Market as will IBB. IBB had such a strong move from 250 to 290. Not sure how I feel about the market at this point. We were at full value before the pullback and now we have moved back almost to that same level. Biotechs have outperformed on this rally and may continue to do so. Looks like the place to be. If IBB pulls back to 280 it should find support there. Gild has dropped back to it’s support area. You might want to dip your toes in the water so to speak. Buy 1/2 or 1/4 positions lessen the risk, dollar cost average, that sort of thing.
Hope this helps.
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As requested by our esteemed CEO
Author: Alan Harris
Comment:
Er!!!! Lulu….see you on http://www.stockgumshoe.com/2014/10/microblog-technical-analysis/
The point is, us tec’s that are hanging on your every word (like me) will miss these shafts of light from your grey cells in a nano seconds time and not be able to refer back. Those 100’s that dont give a fig for technical’s, are having their inbox cluttered up with ‘yawn’ stuff.
Woof Woof!
Im just trying to keep the train of thought directed….nothing personal…honest guv.
Dear Allan, Im the first to admit….I don’t understand much of anything here at Gumshoe and maybe Im too stupid and shud just butt out or cancel my subscription…….but I am an optimist I can learn. My apologies to those brilliants whom I am wasting precious time & energy of. I have a question after reading every post but don’t post. You didn’t have to answer as it was directed to Dogg. Sorry…..Im just trying to learn.
not so cheery Lulu
Lulu Don’t take Alan too seriously, he may bark but he doesn’t bite. Here is a link where you can ask anything or just go and rant if you wish, Thats what is was set up for.
http://www.stockgumshoe.com/2014/07/microblog-politics-rights-religion-sex-and-investing-other-unmentionable-subjects
Where we are now has just been setup for questions/ideas on chart reading /tech
analysis and etc. Travis owns gumshoe and if he lets you post you are ok.
Hello everyone. So, I’ve been following Larry Williams who claims to have been trading for over 40 years and now ‘teaches’ others his techniques. Recently (like today), he blogged about how he uses the Commitment of Traders (COT) report to get advance notice of the likely/probable way the price will move. he claims to have developed an index (probably an EMA) tied to the COT to do this. He gives a couple of examples and even includes one where he just gives you the index and asks you pick the direction of the price. Then he shows you the chart. I’ve double-checked with the actual chart and it correlates.
Since this is an email, I can’t give a link. However, I’m happy to forward it to anyone who would like it. Just give me your email address by emailing me at: jpruiz1958@gmail.com.
Hi Guys,
I think Clovis Oncology (CLVS) is a good one to watch here … it’s been on a tear, up 40% since I bought in and has been making major breakouts lately. One last real resistance level is apparent to me, at it seems to be right where the stock is trading right now – around 61 – 62. If it breaks this, it could be off to test former highs. If it can’t break it, it may come down to touch the previous wedge resistance or one of the major moving averages such as the 20 day or 50 day. Thoughts on playing this would be appreciated.
Eliott, I agree – CLVS is looking good.
Market Watch rates it as a “Buy”
Moving Average Convergence/Divergence (MACD) indicates a Bullish Trend.
Chart pattern indicates a Weak Upward Trend.
Relative Strength is Bullish.
Up/Down volume pattern indicates that the stock is under Accumulation.
The 50 day Moving Average is rising which is Bullish.
The 200 day Moving Average is falling which is Bearish
Thomson Reuters : Average of 9 analysts: Buy
I’m seeing two support points – one about 50 and one about 55. I think that the resistance point is about 60. Last price was $59.66.
If the price breaks above $61. I think it would be a good buy.
Elliot – I apologize for misspelling your name. I think I will call you “Bob” from now on. It’s easier to spell. 🙂
I have some questions about resistance and support points. Remember that I’m just getting started in TA.
For resistance points, I can look at:
>> significant recent highs
>> 50 day moving average
>> an upper trend line in a price channel.
>>1/3, 1/2, or 2/3 of recent meaningful price increase.*
For support points, I can look at:
>> significant recent lows
>> 50 day moving average
>>a lower trend line in a price channel.
>>1/3, 1/2, or 2/3 of recent meaningful price decrease.*
*Change can take place over as few as 1 day or over many days. Source of idea: Murphy’s Technical Analysis of the Financial Markets.
Once I have identified the above points , other than using them as a buy or sell signal,, is there any use for them,? Can / should they be factored into purchasing decisions in order to determine the probable amount of a possible loss if the stock goes south?
How would you rank these points in reliability? Which ones (including any not listed) do you use?
Thanks for your input.
all major moving averages (are supposed to) act as support when the SP is above them and act as resistance when the SP is below them. This generally includes 20sma, 50sma, 100sma, and 200sma. Traders use resistance points as sell areas and support points as buy areas. They also use breaking of resistance points as buy areas and breaking of support points as sell areas. Each stock trades differently and therefore responds differently to the different indicators. You have to look at history to tell how it responds to different forms of support and resistance. Also, one that you left out is all support levels reverse to become resistance levels as soon as they are broken through (And confirmed to be broken through). All resistance levels reverse to become support levels after they are broken through (and confirmed to be broken through).
Hope this helps.
Thanks, Eliott.
Now I realize that one has to look at the whole chart to see how any one indicator acts.
Sorry for the delayed thanks – I lost the URL to the thread. 🙁 🙂
you might want to look at the Point and Figure charts to get resistance levels. This is according to Richard Wyckoff. I’m a newbie at this too and will be looking at this during this week,
Anyone: When a stock returns to fill a gap, is it considered filled if it did not fill it to the penny? Thank you.
Leo,
Did you get an answer to ” when a stock returns to fill a gap, is it considered filled if it did not fill it to the penny?” since there r new threads now? Curious, cheers Lulu
HI Lulu! No, I did not get an answer to complete or incompletely filled gaps, but they surely don,t owe it to me based on what I contribute to the threads. I have limited time and limited typing capability right now with a temporarily disabled index finger. Maybe we can find out between us. I will ask another source and post it.
Regards.
Hi Leo:
This link won’t answer your question, but it’s a nice article on a way (alledgedly, a financially successful way) to trade gaps. For the records, you can sign on to these guys newsletter for free. I find their articles interesting even though it’s a lot of heavy selling for their (very expensive) program.
http://lessons.tradingacademy.com/article/trading-gaps-properly/?elq=9b71e9fb56e14cb29e4e4dafbd5c9216&elqCampaignId=1891
Thanks JP, I really do appreciate the link, even though I am not savvy enough to take it to an advantage. I do not yet deal in options, futures or shorts. I was more interested in using unfilled gaps as re-entry points when I have made a poor exit and then watched the stock shoot the moon. It would be nice to know the probability of gaps being re-filled and also what the probabilities were of returning to partially filled gaps for a stock. I will post about it if I ever answer it. I am not only a newbie for technicals, I am a neophyte newbie. Thanks again for the link. The real good news is that I have all ten fingers back so I can type again instead of hunting and pecking. Thank you for all the information you provide.Take care.
Re: ACHN
TSM- No trade
P/V – Lower vol (almost 50%), smaller range. Lower High and Open; Higher Low and Close. Range within previous day range which, itself, was mostly within the previous day’s range. Close almost 1/2 way between High and Low (closer to High). Fast over Slow >0, trending up. MACDH >0, trending up. 2FI briefly dipped under 0 and is now trending up. Aftermarket activity raises price $0.06 ($14.03) 2ith Fast about to cross over Slow and trending up, >0. MACDH<0 and trending up. 2FI flat. Buyers in charge.
This is NOT a recommendation to BUY/SELL ACHN. Full disclosure: long ACHN.
Re: ARWR
TSM – Higher vol. and range; Lower High, Open, Low and Close. Close near 1/2 between High and Low. MACDH >0, flattening to trending down. Fast over Slow <0, trending up; 2FI flat at about 0. Aftermarket activity raised price to $6.11. More likely than not that sellers will be in charge.
For the record, yesterday's "call" was WRONG. I should have not have based on after-market activity.
This is NOT a recommendation to BUY/SELL ARWR. Full disclosure: long ARWR.
Re: ARWR chart analysis
Sorry everyone (or at least anyone reading this). the above post (Re: ARWR) should read:
TSM- No trade
P/V- Higher vol. and range; Lower High, Open, Low and Close. Close near 1/2 between High and Low. MACDH >0, flattening to trending down. Fast over Slow <0, trending up; 2FI flat at about 0. Aftermarket activity raised price to $6.11. More likely than not that sellers will be in charge.
For the record, yesterday’s “call” was WRONG. I should have not have based on after-market activity.
This is NOT a recommendation to BUY/SELL ARWR. Full disclosure: long ARWR.
Re: CLDN chart analysis
TSM – No trade
P/V- Higher vol. and range. Range within 11/11 Range. Lower High, Low and Close. Close nearer Low. Fast and Slow >0. Fast dipping down towards Slow. MACDH >0, trending down. 2FI dipped below 0 and trending down. Sellers in charge.
For the record, yesterday’s “call” was WRONG. I should have not have based on after-market activity.
This is NOT a recommendation to BUY/SELL CLDN. Full disclosure: long CLDN.
RE: CTIX chart analysis
TSM- No trade
P/V – Lower vol., and range. Lower High, Low, Open and Close. Close 1/3 off High. Fast under Slow, <0, trending down. MACDH <0, trending down. 2FI dipped <0 and ticking up. Aftermarket activity may indicate that Buyers are in charge. Market activity indicates Sellers likely to be in charge. Wyckoff describes this as a "hinge". Decisive movement can be expected during the next trading day.
For the record, yesterday’s “call” was RIGHT. I should have not have based on after-market activity.
This is NOT a recommendation to BUY/SELL CTIX. Full disclosure: long CTIX.
Jean-Pierre – Thank you for cranking these out for us.
I bought 50 ACHN shares @ 14.14 and 1 opiton @ 3.50
(I’m not good at entry or exit points – needs mega improvement)
View options by expirationLayout: Stacked | Straddle
ACHN
13.97 +0.48 (3.52%) 4:00PM EST
Disclaimer
Calls Jan 17.2014
Strike Price Change Bid Ask Volume Open Int
15.00 3.50 +0.36 3.00 3.80 70 6148
Have an excellent weekend and beyond.
Best-Ben
ACHN 15 Jan 17, 2014 Call
Best Ben,
Im lost…
If you paid $3.50 the SP has to go to $18.50 before u break even? Call gives you the right to buy ACHN at 15.00.
Thats 63 days. You must be expecting a run on this….or Im really missing something.
Perhaps I shud stick to MAverages for now. Maybe I shud go to bed!