Catching a falling knife....

That could appear as nothing more than a pullback on daily charts, whats to say it wont continue lower the next day or two.

maybe you can show us a chart?



cm69

 

No such thing as catching falling knives, the phrase is used to imply" do not be foolish"

Point being: To see a chart of the weekly and looking for entry by then shifting eyes to a lessor time frame and taking a signal in the lower time frame would be a waste of time looking at weekly in first place.

Why take a trade on a lower time frame unless you are prepared to set the STOP LOSS relative to the time frame used as entry signal?

If the signal taken from smaller time frame is a winner.........then just use trail STOPS on profits. Naturally this is intention in the first place, but to say taking a signal on the hourly looking at the POTENTIAL in the weekly is useless unless one places STOP LOssES relative to the hourly.

The weekly is wishing and hoping. LOL

Myself as a 5 min chart daytrader the longer time frames are mox-nix anyway ........except as "just for general knowledge and FWIW".

 

Don't you have to look at fudamentals to decide if a company is worth buying for long term?

 

What do you consider a bounce ? Falling knives tend to retrace a lot. Hardly anything falls in a straight line.

What sort of volume ?

 

I think VLCM would be a good example of the falling knife rebound. It took a significant hit this summer when it released earnings. They missed estimates, although not by much. Then it gradually trended up to come back to the point where it originally was before the large hit. Take a look at the 1-yr

 

Another example is Mo on September 24th when all the legallity issues arrose, it has bounced back to where it was before though quite nicely in my favor.

P.S. the best falling knives are options backdating scandals for some reason almost all of the companies hit with them have all bounced back hmm.....

 

HITT is on my watch list for monday...yes i agree.

 

check out the first page fo the post...I use the IDB 100 list of HIgh relative strength, and high EPS growth with positive earnings as a starting point.

However...rarely are these very "long term". With the volitility that you get from the huge corrections...you need to cut and run in case it happens again.

 

sorry...i really dont have exact definitions.. Maybe we could say 10%+ drop within a couple day time period...vs. a pullback which coupld have similar amplitide...but different time periods...a pull back just happens much slower.

a nice pull back setup would be GROW over the last couple of month...versis HITT the last couple of days as a "falling knife".