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     hershy
Member
Username: hershy
Post Number: 1803
Registered: 10-2002
Rating: N/A
Votes: 0
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| | Saturday, December 23, 2006 - 01:59 pm: |  
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Here is a chart of the Lear Corporation traded on the NYSE.
It has it's own thread in the US part of the forum but have decided to bring it over here to spark more discussion that it does where it is now.
I stated 3 days ago that I intended to short this stock for a ride to the bottom of the gap which incidentally is also around where the inverted H & S is pointing. This elicited a response from a guy in the US advising care because as he put it, the LEAR corporation is on "jet fuel". He posted the following chart:
As I am looking for only a short trade I don't feel this is an issue. I have a contingency order in place just below the last low. The issue I wish to raise here is the effect of time on my plans. The Bulls & Bears report (of which I have received a few issues) always abandon any planned trades if they don't "fire" in 3 days.
The 20 and 34 day SMAs are pushing the price down but the 2oo day SMA is moving upwards quite strongly. One should always trade with the trend and as I plan a short term trade the trend is down.
So now the question:
A consolidation movement became apparent after the 12th bar following the latest high. Consolidations usually break in the direction of the preceding direction and that is down. That gap is a strong magnet pulling down but I am no longer convinced that this play would pan out as i had first though it would even though the risk ratio of 1/5 is still valid.
I will cancel my contingency order and will not trade this setup but wonder if others would come to the same conclusion.
As a further point, a failure to break through support and a new high would see me go long.
I don't have a plan so nothing can go wrong !!!
http://members.optusnet.com.au/~hershy/
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hershy
Member
Username: hershy
Post Number: 1804
Registered: 10-2002
Rating: N/A
Votes: 0
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| | Sunday, December 24, 2006 - 12:40 pm: |
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Re-reading "Foundations for successful Trading" by Bill McLaren I found the following statement:
"Sideways movements(consolidations) that price moves down into, that become narrow and dull are indicative of a base or bottom"
This is certainly the case with Lear so it seems unlikely that the SP will move down to my short trigger.
(Message edited by Hershy on December 24, 2006)
I don't have a plan so nothing can go wrong !!!
http://members.optusnet.com.au/~hershy/
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mosaic1996
Member
Username: mosaic1996
Post Number: 1387
Registered: 01-2003
Rating: N/A
Votes: 0
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| | Thursday, December 28, 2006 - 09:27 pm: |
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hershey,
It doesn't look like an obvious short to me as it looks like it is simply consolidating. Well above 200 DMA and probably hovering around the 50 DMA (I prefer a slightly longer short-term MA, but I haven't charted to look), and it is basically respecting your consolidation support line.
You stated that
A consolidation movement became apparent after the 12th bar following the latest high. Consolidations usually break in the direction of the preceding direction and that is down.
I would have said that the previous direction was up (from $20 odd). What downtrend are you talking about - very short-term (i.e., consolidation) of longer-term?
I can't even see an obvious price component to a H&S, nor is the volume consistent for a H&S pattern for those that believe volume pattern is equally important in H&S patterns.
Personally I believe that "the gap will be filled" theory is overrated.
In summary, I would have given the LEA setup as a low probability short = better value elsewhere.
Based on past long-term moves, LEA could move strongly to the upside if it breaks out, so a trade on the long side could be a reasonable trade.
Having said that, the market has been performing very strongly at the moment, and I figure that long has been the place to be rather than short, and that there has been money to be made elsewhere.
On the fundamental front (which can usefully supplement TA IMHO):
a) LEA price recovery may be related to the oil price retracement which looks weaker rather than stronger in the short term
b) the DOW taking off lately will result in bigger Wall Street bonuses and the toys that these bonuses can buy. Whilst it ain't the good old dotcom days, it is rumoured that a couple of Lear Jets may be ordered by the exceptional performers.
Cheers,
Mosaic
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lafee
Member
Username: lafee
Post Number: 259
Registered: 04-2003
Rating: N/A
Votes: 0
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| | Friday, December 29, 2006 - 10:07 am: |
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I believe that the directional break from narrow consolidations cannot be predicted. Short term opportunities come about due to a large number of misguided actions all taking place at the same time. There is not a lot of action taking place in a narrow range - most people are not doing anything. Volatility on the other hand traps participants collectively providing opportunities to fade their actions.
Nevertheless, It is usually advantageous to remain on the long side in stocks - even in the short term. The stockmarket, globally, has had an approx 10% upward drift for over a hundred years. Going against that drift just reduces your change of success.
Cheers
Lafee
If nobody can be certain of anything, how can I be certain of that?
Ayn Rand
When I was young people called me a gambler. As the scale of my operations increased, I became known as a speculator. Now I am called a banker. But I have been doing the same thing all the time.
Ernest Cassel
"My major hobby is teasing people who take themselves & the quality of their knowledge too seriously & those who don’t have the guts to sometimes say: I don’t know...." (You may not be able to change the world but can at least get some entertainment & make a living out of the epistemic arrogance of the human race).
Nassim Nicholas Taleb
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msparks
Member
Username: msparks
Post Number: 737
Registered: 10-2004
Rating: N/A
Votes: 0
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| | Friday, December 29, 2006 - 05:08 pm: |
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Lafee
""Volatility on the other hand traps participants collectively providing opportunities to fade their actions.""
How do you "fade" Lafee ?
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hershy
Member
Username: hershy
Post Number: 1813
Registered: 10-2002
Rating: N/A
Votes: 0
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| | Friday, December 29, 2006 - 05:37 pm: |
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Your chart Sparks is too distant from the action. As stated above momentum was to the downside. This has dissipated and it is most unlikely that the move down will re-ignite. In fact every day that passes makes a bullish move more likely.
Happy new Year to all !.
I don't have a plan so nothing can go wrong !!!
http://members.optusnet.com.au/~hershy/
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lafee
Member
Username: lafee
Post Number: 260
Registered: 04-2003
Rating: N/A
Votes: 0
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| | Friday, December 29, 2006 - 06:29 pm: |
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Msparks,
Fade means to trade in the opposite direction. ie. if price goes down with increased volatility you buy, if price goes up with increased volatility you sell.
Cheers
Lafee
If nobody can be certain of anything, how can I be certain of that?
Ayn Rand
When I was young people called me a gambler. As the scale of my operations increased, I became known as a speculator. Now I am called a banker. But I have been doing the same thing all the time.
Ernest Cassel
"My major hobby is teasing people who take themselves & the quality of their knowledge too seriously & those who don’t have the guts to sometimes say: I don’t know...." (You may not be able to change the world but can at least get some entertainment & make a living out of the epistemic arrogance of the human race).
Nassim Nicholas Taleb
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redrover
Member
Username: redrover
Post Number: 788
Registered: 04-2005
Rating: N/A
Votes: 0
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| | Saturday, March 24, 2007 - 10:41 am: |
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Will be interested to hear your opinions on this article
http://www.theage.com.au/news/business/so-much-money-so-little-courage-so-much-r egret/2007/03/23/1174597889155.html
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hilarius
Member
Username: hilarius
Post Number: 2142
Registered: 04-2004
Rating: N/A
Votes: 0
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| | Saturday, March 24, 2007 - 12:16 pm: |
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Good Afternoon
The stock market abounds in myths
Myth No 1
Fundamental analysis plays no part in the valuation of stocks like Fortescue and Paladin
The opposite is the case. Those with access to the inside information are most certainly valuing the stocks on the basis of future projected earnings. The problem is the process is far from transparent and the information is not being shared. Internal company financial people and external analysts will have a clear concept of the true worth of the stocks ... they just don't like to share their expertise. Discounted cash flow determines todays value along with the added blue sky hype of the speculators.
Reality and perception combine to set the price
In the case of One Tel the perception far exceeded the reality ... and in the case of One Tel the internal information systems plainly failed so that one could ask in that case whether anyone knew the truth
With the passage of the dot com boom mining analysts are almost certainly far ahead of the tech whiz kids and probably have a shrewd idea of true underlying value
Even now they will be keeping it in mind for the time when they need to approach the institutions for more capital
In the mean-time the tea leaf chart readers try to capture trends based on true value + hype
We can be sure that in the end, whatever the price growth or retracements ... true fundamental value will prevail and we should not kid ourselves that no one knows true value
That true value will also change along with the underlying commodity price is undeniable but true value is always knowable .... it is just not shared
Myth No 2
Tea leaf reading of charts helps measure the hype issue
Well that is largely nonsense ... sentiment can change overnight and unless the fundamentals are right stops will be hit with monotonous regularity ... long term support for a rising share price depends on fundamentals, not hype
Myth No 3
Money management is the sole preserve of technical analysts
This is simply a falsehood. Fundamental investors can make just as good use of money management.
Myth No 4
Technical analysis has no value
It can be highly valuable for selection of entry points, but the combination of great fundamentals and smarter entries will always beat either FA or TA on their own
Blessings and Peace
Hilarius
I come in peace to share my thoughts and to shine my candle light on possible long term opportunities
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lafee
Member
Username: lafee
Post Number: 487
Registered: 04-2003
Rating: N/A
Votes: 0
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| | Saturday, March 24, 2007 - 05:34 pm: |
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A few points:
-Considering the population of the world it is indeed probable that someone will amass a fortune such as Buffets, through sheer luck alone. It is foolish to believe that the richest person in the world must be the best business man or women.
-There have been many hedge funds created using Mr Graham's value analysis (Buffet's mentor) and they have mostly failed.
-Hype shown on the charts as momentum influences the 'fundamentals' ie a rising share price whether justified or not increases the companies power and therefore opportunity.
-Fundamental analysis is based on revision to correct value. Correct Value is created by the human mind and is not real ie there is nothing fundamental about fundamentals.
Cheers Lafee
IF it can be tested, it must be tested
VICTOR NIEDERHOFFER
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hilarius
Member
Username: hilarius
Post Number: 2143
Registered: 04-2004
Rating: N/A
Votes: 0
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| | Saturday, March 24, 2007 - 05:50 pm: |
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Good Afternoon
I suppose when you trade all night daylight is darkness 
Hype is incapable of accurate measurement
Fundamentals can be measured precisely
With Best Wishes
Hilarius
I come in peace to share my thoughts and to shine my candle light on possible long term opportunities
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lafee
Member
Username: lafee
Post Number: 488
Registered: 04-2003
Rating: N/A
Votes: 0
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| | Saturday, March 24, 2007 - 06:01 pm: |
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But so is everything else. Thats my point.
TA becomes valid if enough people use it. The same for FA. Big market shocks tend to make people redesign what they believe. This is why all mechanical system (TA or FA based) eventually fail.
Cheers Lafee
IF it can be tested, it must be tested
VICTOR NIEDERHOFFER
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hilarius
Member
Username: hilarius
Post Number: 2144
Registered: 04-2004
Rating: N/A
Votes: 0
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