Trend' , empirically it seems there are three patterns that appear. The first is the optimal which is a tight consolidation over 7 days or so, often forming, as you say, a triangle, or flag, etc. The second pattern is less optimal but still good and that is more of a lower case m or inverted m, rolling tops or bottoms, but still in a faily narrow range. The third scenario is not very good at all, imo. That is the one that for 3-4 days prior to the NRID the stock has made a significant move. So to your question, the first two patterns lend themselves to support and resistance lines like triangles, etc., but the third one doesn't. The foundation of this setup is the principle of volatility contraction and expansion.
"They" say we're all waiting for Friday's unemployment number. Perhaps as a result the major stock indices printed Narrow Range 7 Inside Days. Much has been written about this potentially explosive pattern.... Crabel, Connors, Farley, Hansen, Raschke.... Contraction.... expansion.... contraction.... ??? Be aware of the location of the major ma's. Good luck.
Good observation.. and this is what I expected. The markets are also finding a small bid as friday comes closer but the volume is weak. If we sell off or rally on thursday I bet the market knows the numbers already and is adjusting for it... this way if the market is right before friday the jump wont be too dramatic and some of it will already be priced in. Personally I wanna see the IWM touch 116 and thats when I will begin scaling into a fresh short position into any strength. If we we break the key market pivots 4/30 low.. the Nasdaq would break the 200ma.. and the bull market would be technically over by some means. I think by scaling into a short for the IWM between 116-120 would be an excellent risk to reward for a longer term swing trade.. because its inevitable that we break the 110 level. --MIKE
Previously I have used StockWatch Pro to scan for stocks. I also wrote the code using Excel. As you can imagine, it's easy. Anymore I just eyeball it.... especially the major indices. We all look at those everyday.
Your seeing things. You want to believe in what you think works. You put on a trade that is an illusion and one from a canned book. When the pattern doesn't work, you continue to fight it until its too late. Your seeing things.
Geometric patterns and narrow range / inside days are illustrations - not illusions - of consolidation. Narrowing ranges bound by the previous days' extremes form these patterns as traders/investors delay making larger commitments until they have more knowledge. This is basic information and rudimentary knowledge for professional traders. That markets consolidate and break over different time frames is also basic information and rudimentary knowledge. Identification of periods of consolidation affords opportunities to profit from the consolidation break. The consolidation pattern itself provides a good landmark for stoploss placement. All of this is nothing more than elementary support and resistance concepts. Your statement suggests that you're commenting about the directional predictability of consolidation patterns. I am not a fan of that much either. But there is no doubt that consolidation leads to consolidation break, ie., contraction leads to expansion.
The connection between monitoring (sensing with associated emotion) and beliefs is separated by an intermediate step. Secondly, converting beliefs to action is a two step process. Lets say you are willing to take some risks the understand what I said above, since you can't now. The best experience you might have would be to "see" something. Illusions are the fodder of magicians so that is not where to "see" anything. One formation that is not debatable would be the best for you to consider. After learning what it is and how to manifest it, you have dealt with the illusion perspective and the illusion has disappeared. To make it go away forever for you, you need to do another step or two, Once you have a "provisional intellectual and emotional basis" from the paragraph above, it is in your system and it gives you vibes. Trend fader has spoken he thinks the market will go up or down today to get ready for tomorrow. No one can really agree with that because it is non sense. It doesn't get into anyone's pictures not even provisionally. He is seeing things like you do; he see illusions that he makes up uniquely. If you learned about something and learned to manifest it, then you could let this stuff be part of you on a "provisional basis" until you have further experience and skill using it. Then after a while you could use this basis of knowledge, experience and skills to go further. You could deal with the provisional aspect of this circumstance. Naturally this provisional stuff is going to rub up against what you use to say what you did say. You posted a belief that you have. I wouldn't do this. But you could make a time line and discover where you got the belief from. It does have a life that started at somepoint as a consequence of something. The thing on the table now could be getting a life. "provisional" is a word like gestation in many ways. suppoese the "provisional thing I ask you to conside actually gets to manifest and suppose it is rubbing against your "illusion" belief, then ,further, consider what could happen it the two things were not compatible. One is going to survive and the other is going to complete its "life" with you. Naturally, what I suggest has little chance with you. That is how it is. Occassionally people do go through "change" this way. What I would suggest in association with this thread turns out to be a "killer". It is an experience that will rank as "religious" if you have it. Some people annot have such experiences because they are intellectually shot and pooped out. What makes it so extremely significant is that you go through a process of doing the "trust" thing. Getting to a place to trust something is difficult. We all get to trust our children at some point. Same for our partners and wives (husbands) in a serial manner for periods of time. For making money, skills are acquired to the extent that "trusts" are built with respect to what has been appropriately learned. For any "provisional" stuff to get to be trusted, it has to "fit in " with beliefs. The job is easy if you are assembling a total picture by adding parts. New stuff is added. It is harder when you "have" beliefs and they are not compatible with what you are presently considering. ome thing has to give after a while. In fact, some people get so whatever that they cannot consider taking on "provisional" stuff. Finally there are those in the space of "repeated failure" especially as it applies to "making money". Money is a special thing in life because it is a consumate "enabler". There is one money making formation above all others that can become part of a trader that is a super undebatable enabler. What makes it so vibrant and exciting is that it works. You get to try it out provisionally and then you let it rub against other beliefs and then you get to have the "religious experience". This experience occurs when you without exception "believe" it works. You absolutely trust it and it is part of you and you "know you know". Anyone can make a list of these trading elements and precepts. they are the beliefs you use to "decide what you decide when you trade. Mechanical traders and systems traders have a common one of these. They believe systems work. Others of us have within us beliefs that relate to how we trade. Losers who have repeated failure cannot deal with beliefs anymore. hier mental processes have been shut down by thier protective processes of their immune system whereby their immune system attaches permenant "turn off switches" (peptides) along their sensory pathways (at receptor locations) to prevent "data" from reaching the brain. the brain is being protected so the person will "survive" what would be more repeated failure. Tough situation. To keep things neat and organized I will post this part first and the formation exercise in the next post.
for this we simply do a mechanical thing by drawing lines using one rule of geometry. The key consideration is why does the geometry rule apply? And why does it work. So there is an answer involved as we all see. Lets say you cannot figure out nor understand what others explain to you about why it works. It works. You can't under stand why or how though. Does it matter? It may matter. It is an issue related to being able to assimilate this as a tool for making money. You need to use it to make decisions and it is paramount that you "trust". You will incorporate it as a belief and then trust it always. The geometry rule is that parallel lines can be drawn though points if you have three points. you use the rule to get the "left" trend line which is where price often maxes and where the trend always reverses a traverse from one side to the other. In trends the trend always bounces off trend lines. You construct the trend line asap from the minimum of points. I have used this for nearly fifty years as the envelope of money making with trends. There are always trend lines at play. 100% of the time on a chart you have trend lines. I use LT, IT, Daily, Intraday trend lines and within them I use traverses which are the finest detailed mini trends to get across slower periodicity trend line pairs. I trust two parallel lines for trading. I always have several sets of parallel lines set up in ever slower periodicities that are "outside and beyond" the fractal I am using to make money. A person posted that this is an illusion. It is not. and it is the most super way to learn how beliefs work to help you make money. I trust trend lines and they tell me when and how to be alert for makng timely decisions like nothing else can. i recommend drawing each and every trend line every day and having the experience of seeing price come to them and cause you to make a decision. The last FOMC price movement zinged all over the place. On ES it happened to come to the lines of the daily trend that was in effect for two days before the event and the day of the event. I was mentoring a person who "trusts" trend lines. he got to have his first "Greenspan". We wrote out the three associated trades before 14:00 hours. We took the first trade the "smart money" gave us on YM04M as "flapper" indicated 14:09 or there abouts Trend lines forming channels were very helpful to us on these fast paced "tapes".
Although the indices have printed nice charts that fully illustrate this trade, the opening gap in the futures and ETF's made it more difficult to profit from today's break via those instruments. However, keep in mind that indices can only print narrow range and/or inside days, when many of their components do the same. As such, the opportunity exists for those components as well. The SP100 and the Nas100 are good places to start looking for candidates. Like every other trading idea, this method doesn't always work, nor does it always work this well. But it worked today, and at least you were aware of the opportunity before it occurred. Here is the Dow chart. PS: Grob is posting wisdom. I confess that it is very difficult for me to ascertain the wisdom with the first read. As such I have depended on the interpretations of other learned and scholarly members on this board. However, from my work with the Jack Hershey equity model, I learned that Grob has some very important lessons to reveal, and it can be well worthwhile for a trader to take the time and think about what Grob is saying.