http://www.finviz.com/quote.ashx?t=KITD&ty=c&ta=1&p=d&b=1 KITD jumped from 8.36 Tuesday 11/8 to 9.32 open on Wed 11/9 and went as high as 11.19 for Wed. Did any of you catch this using Technical Analysis? I'm a newbie when it comes to trading and have been reading books on Technical Analysis, but have not been able to pinpoint it in the real life. Looking at the KITD, I think one could have spotted the uptrend during the open on Wed 11/9 due to a large volume increase with the upward price movement. However, I'm not sure what indicators would one use to gauge the end of the upward run. Say, if you bought at $10, how would you know when to sell for a profit?
It was a result of their earnings. No TA could have spotted that and could have just as easily ended up below 5.00.
Thanks for your response. Let me revise the question a bit. Once the stock's jump registered on Wed, were there any signs of it going past $10? And then downwards? Basically, I'm trying to decide whether TA is worth studying practically.
TA is useful, but not when big news (such as earnings) come in to play. Then you can ignore it. TA only tells you the overall underlying mood of the market, and you can maybe sometimes get signals out of that. TA is pretty much a filter to see trading activity which bounces up and down in small amounts around the real market picture. These bounces are caused by people and algos which follow certain rules, and since some of them use TA, it's a self-creating prophecy that TA will be valid in some cases. You just need to figure out what kind of TA others are using and get in sync with it. In my experience, support/resistance (levels and triangular trend lines) are the most used, followed by trend channels (variation on trend lines, also a form of support/resistance). I've also read a lot of people who use TA for much longer than me have a similar opinion. Using indicators such as MACD, RSI, etc, won't get you very far. So when some news like that comes up, ignore TA. When news are good, though sometimes you'll get a bull short, and that's somewhat part of TA. What that means is that the price overshoots realistic levels, so when people realize that, they start selling. Great %s can be made off of bullshorts, you just need a market analyzer/screener to detect them.
Price formed a breakout higher high in late Oct compared to late Sep and then moved down to form a higher low. Classic pattern.
You could have also placed a buy stop entry order just above the late Oct high and got in around 9.90
TA theory: If price can break above a previous high, it will run higher. Of course that is not always true, but is it usually true? Let your research begin.