Sunday, November 23, 2008

Charts & Comments


Let's start with the USO (Crude Oil ETF) Triangles Chart. I haven't been trading this one but want to include it here because it illustrates just how well the Triangle trading system works. In roughly the past twelve months there have been five trades on the Weekly chart. The first three were all modest losers, whipsawed out of trades as Oil sought to establish a tradable trend. Then on February 11, 2008 a Buy Signal at 73.43. This was followed by a Sell signal on July 18th at 106.83. This Sell is still in effect today, with USO at 40.91. A few modest losses and then two grand slam home runs, back to back. What more can we realistically hope for in a mechanical trading system?


Above is the chart of the QQQQ (Nasdaq 100 ETF). The Sell from September 2 at 45.92 is still in effect. I chose the bar chart for this format to point out that a Weekly Buy signal is far away, above the 32 level for this coming week. The Q's finished Friday at 26.66 so it would take about a 20% rally to trigger a Buy next week. Unlikely, but good to know just in case.


Above is a Daily chart of NNVC. This stock is one of the few that I have found that trades much better on the Daily charts then the Weeklies. For what it's worth NNVC triggered a Buy this past Friday and if you were following the bar charts, you could have anticipated the Buy Triangle appearing upon a break-out on the Daily bars, which occurred on a spike up in price just after Friday's Open. The Triangles don't distinguish between spikes to new 3-period highs or modest pops above three-period highs. The beauty of a mechanical trading system is that there isn't much thinking involved.

Above is a chart of GLD (Gold ETF) which triggered a Buy last week on the Weekly chart. I have just recently been following this Triangle chart because is appears to be doing a pretty good job of tracking the ups and downs in the price of Gold. Both GLD and SLV (Silver ETF) are tradables that can enter into huge price trends, both up and down, and like the USO chart above, represent other lucrative ways to trade a commodity, thus diversifying out of a trading portfolio of only stocks.

Finally, we have AAPL, which continues to trade very well under the auspices of the Weekly Triangle trading system. The pattern above is like many of the successful Triangle studies, modest whipsaws followed by huge trends followed by modest whipsaws followed by huge trends. Maybe half of the trades are losses, but the half that win more then compensate for those losses.

Short Term Analysis

I wrote last week that Friday and Monday should give us a clue as to whether a bottom was in. Despite the rally late Friday, the picture is far from clear. Now with Thanksgiving pending, it may not clear up until after the holiday. But as they say in the dance hall, lets dance with the one we came with. Since early September, all ambiguities in the market have resolved themselves to the downside. Until this pattern changes, I am favoring lower prices across the board and, believe it or not, maybe much, much lower prices. The primary trend of the market is DOWN and it is going to take more then a few hours (or even days) of robust buying to present a tradable bottom. When we go LONG we want to be buyers for weeks or months, not hours and days. We are not there yet.

A

14 comments:

Anonymous said...

I tried to make a comment again but there's nothing in the verification space to allow me to verify. Any idea why I can't get a verification code? Maybe ask if other people had this problem and solved it, e.g., post this email for me and maybe someone will help...?

Anonymous said...

Browser incompatibility problem. If you're using Firefox you won't see verification code (may also depend on what addons you installed with Firefox.) Try IE or some other browsers. IE worked for me.

ilene said...

Hi Allan and Anon, Thank you for the help. I opened firefox and have the verification box using firefox, except the difference is that it looks active here. Using IE, there's the box, but nothing in it to verify. So we'll see if this works.

Ilene said...

That last comment needs approval, so I'm going to try with the google info. instead.

Allan said...

Ilene, I see you made it, welcome. When I click on your name I get taken to "Phils Back-Up Site." Why don't you explain what that is all about in case anyone wants to access it.

A

ilene said...

Phil's backup site is the backup site for my section of Phil's Stock World - the Favorites, or educational/news section (free section). Phil's site is at www.philstockworld.com. The section I edit for phil is here (typically more up to date than the backup site): http://www.philstockworld.com/author/phils-favorites/. If anyone has any questions, or is interested in receiving more material, please email me at ilene@philstockworld.com. Thanks Allan!

Ilene said...

While I'm doing "crass" self-promotion as you put it, here's my other website, for Washington state (law practice): http://oglebayandbassler.com/

Anonymous said...

Allan:

Would I be out of line in complimenting you on yet another superb and educational post?

John K. in DC

GO STANFORD CARDINAL!

Allan said...

JK: No.

Anonymous said...

Allan:

What part does Astrology and planetary movements play in your decision making?

The two biggest proponents of this are the GREAT Gregory Meadors and Norm Winski. Do they consult with you?

Allan said...

Ahh, a voice is heard from the Prodigy "Hypotheticals" board, the forerunner of all Internet stock forums, circa 20 years ago, dial-up services, desktop computers and astro-traders, selling their wares with false bravado tales of imaginary trading prowess. Those were the days, eh?

Kat said...

Thanks Allan, just added USO to my watchlist :) A question of the triangle entries: On those where weeklies work best (like USO), do you use the weeklies for BOTH trend and entry confirmation, or weeklies for trends and dailies for entry timing? I suppose either could work, weeklies for trade and trend in you are a intermediate term trader, or weeklies for trends and dailies for trades if you are a short term trader. Did I just answer my own question? :)

Allan said...

Kat, whenever I have a choice between more or less complicated, I always try less complicated first. That is how I use Triangles for trends, weeklies or dailies, but not both. I am not sure that is the best way to trade them, but I am sure it is the simplest. So far, so good.

Kat said...

Allan, my learning curve just got cut into half with that golden nugget! Was struggling with the weekly/daily timing thing all weekend.