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     ingot54
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Username: ingot54
Post Number: 407
Registered: 05-2004Rating: N/A
Votes: 0
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| | Saturday, February 12, 2005 - 01:47 pm: |  
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With thanks to Robert De Niro and Billy Crystal for the thread title!
Here is a mystery chart.
The hard right edge shows no more than 1st February 2005.
All you get is the OHLC bars in two window snapshots, to allow perspective, the 30-week MA, and the daily volume.
The object of the exercise is to attempt to predict the next couple of days. Before you whack me with the obvious statements - have a go at it, just for fun. Some chartist schools ask you to do just that.
The idea is to bring traders to commit to enter a position, based on simple analysis, and then to show them it's OK to jump out if the trade goes against them.
Admittedly there is not much to go on, but that's the point. Can you form an opinion? Do you really need all those indicators?
The idea is not to get it right, but to make a call, and follow through with the right management.
Please don't spoil this for yourself and others, by pre-empting which company this is - it will be revealed tomorrow afternoon.
If you have any suggestions to make this a sharper exercise, let 'em rip. I'm open to comments to improve this approach.
If a kite can just catch the breeze, how high can it go...
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deanrosario
Member
Username: deanrosario
Post Number: 546
Registered: 11-2002Rating: N/A
Votes: 0
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| | Saturday, February 12, 2005 - 02:48 pm: |
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Hi Ingot
I think this is a very worthwhile exercise and you are to be commended.
This is pure chart analysis based on
- no names
- just the 5 basic parameters of OHLC and volume
- and no benefit of hindsight.
I only trade short term - hence I wouldn't ever use weekly charts - however, to me, a pattern is a pattern so any time period should be tradeable.
So, if this pattern presented on an intraday chart (or even a daily chart), I'd have 2 strategies
1. Short strategy: IF the price moves through the recent low on the next bar, I'd open a position, and set a stop one tick above the last green bar on the chart you've posted.
If this trigger is not reached on the next bar, I may be prepared to short the stock on a subsequent bar, but it would all depend on what the next bar does.
2. Long strategy: If the next 2-4 bars make lower highs, but still remain above the moving average, I would then go long when the price exceeds the high of the last green bar on the chart you've posted, with a stop set below the low on the last red bar on the chart you've posted.
In both cases, I would ignore the trade if:
- the price gaps through my trigger point on opening
- the stock is scheduled to go ex-dividend whilst I'm in the trade
- the stock is scheduled to issue a major report whilst I'm in the trade
Exit: Whichever occurs first - the stock moves 1% in my direction, or the close of the 2nd bar.
Hope this makes sense.
How would you trade this pattern?
"It's not whether you're right or wrong that's important, but how much money you make when you're right and how much you lose when you're wrong." George Soros
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ingot54
Member
Username: ingot54
Post Number: 408
Registered: 05-2004Rating: N/A
Votes: 0
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| | Saturday, February 12, 2005 - 04:01 pm: |
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Took a moment to follow that, but I got it Dean. Thanks.
The single green bar breaks the downtrend. The next two bars continue to close lower, but respect the MA.
Good volume is maintained, and the last 4 green bars are making higher highs.
I would enter LONG at the next bar, but ONLY if the price is at, or higher, than the close of the last shown bar. (I would ignore the trade if the price opens lower than the high of the last green bar.)
The stop is set at the low of the bar that broke through the MA.
In long positions, I would hold until the day before ex-div and exit at the close - never hold through announcement. If the price is closing lower on consecutive days as announcement approaches, exit at the close of second consecutive day.
If a kite can just catch the breeze, how high can it go...
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ingot54
Member
Username: ingot54
Post Number: 409
Registered: 05-2004Rating: N/A
Votes: 0
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| | Saturday, February 12, 2005 - 04:10 pm: |
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After looking at my post, I think it's exactly what YOU said, for the long position.
It looks like a 1-2-3 reversal, but is not a copy book of it.
If a kite can just catch the breeze, how high can it go...
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deanrosario
Member
Username: deanrosario
Post Number: 547
Registered: 11-2002Rating: N/A
Votes: 0
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| | Saturday, February 12, 2005 - 04:27 pm: |
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It's also a very similar set up to the 2B reversal as described here:
http://www.dacharts.com/2b.htm
However because the reversal bar (the last green bar) was slow to form, I'd prefer to wait for another retracement (i.e. 2-4 lower highs) before going long.
"It's not whether you're right or wrong that's important, but how much money you make when you're right and how much you lose when you're wrong." George Soros
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ingot54
Member
Username: ingot54
Post Number: 411
Registered: 05-2004Rating: N/A
Votes: 0
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| | Sunday, February 13, 2005 - 12:32 pm: |
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Will post the full action later this afternoon.
If you have an opinion - just post it.
There is no prize for being "right" and there is no "wrong" answer - only an opportunity to learn trade management.
If a kite can just catch the breeze, how high can it go...
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ingot54
Member
Username: ingot54
Post Number: 412
Registered: 05-2004Rating: N/A
Votes: 0
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| | Sunday, February 13, 2005 - 04:40 pm: |
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There was a long entry at the next bar, No.1.
But the trade was short-lived as the priced moved against the position. The MA was not respected at No. 2 and an exit made.
As the MA was not respected as support, it is unlikely it will be respected as resistance, No. 3.
The position closed with a loss of 3.77%.
Was there a better way to manage this trade?
If a kite can just catch the breeze, how high can it go...
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deanrosario
Member
Username: deanrosario
Post Number: 548
Registered: 11-2002Rating: N/A
Votes: 0
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| | Sunday, February 13, 2005 - 04:59 pm: |
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Nice one Ingot.
I've found the 20 day SMA to be a valuable reference point for the shorter term trend.
Looks like another short opportunity may present this week.
Dean
"It's not whether you're right or wrong that's important, but how much money you make when you're right and how much you lose when you're wrong." George Soros
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ingot54
Member
Username: ingot54
Post Number: 413
Registered: 05-2004Rating: N/A
Votes: 0
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| | Sunday, February 13, 2005 - 05:40 pm: |
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Just a small exercise in "curve-fitting" before we leave this one.
I have drawn 2 green "up-bars" to respect the 24 day SMA. The plan is to observe the price, and if it does respect the 24 day SMA a shorting opportunity may arise.
You'd agree this kind of dreaming is life-threatening to an account, but I'm trying to read the patterns - not trade them in this case.
The 2B bottom reversal you showed me above, actually looks like it is developing on a much larger scale with the low at $15.70. If it really is a 2B BR, the price may push straight on up through the 24 SMA line extrapolated for the example.
So there are always differing scenarios.
The lesson - you can only trade what the chart shows you. If the trade goes in your favour, stay with it until stopped out. If not, get out - quick!
If I'd been thinking a bit more along these lines 6 months ago ...
If a kite can just catch the breeze, how high can it go...
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iwillwin
Member
Username: iwillwin
Post Number: 46
Registered: 10-2004Rating: N/A
Votes: 0
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| | Wednesday, February 16, 2005 - 03:21 pm: |
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Hi
Maybe you could have
- assumed price was going to carry on falling and placed a limit sell at the high of the firs bar in the first graph & placed a buy stop at the high of the ninth bar prior to the first day, where there were 2 border line days at just above 16.00??
just a thought
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