What methodologies do you use? Candlestick? I'm very much an amateur and I find that those indicators confirm my guesses. I don't have a ton of experience trading so just utilizing price and volume makes me quake in my boots. Can you provide some insight on just using price and volume? Is there a particular book or some resource that could point me in the direction of expanding my knowledge.
The market as a whole responds better to technicals, cycles etc. because they represent a wider spectrum of traders/investors/money. As I have improved myself as a trader, I have moved further and further away from individual stock plays. I still trade equities extensively, but more playing them off of my "market as a whole" plays. IE Shorting weak sectors in bear markets and buying strong sectors in bull markets. Now you can always find strong stocks in a down market, and weak ones in an up market. But IMO that would be doing yourself a disservice. Why try to find a needle in a haystack, just to go against the market? When there are plenty of opportunity to go with it. So for example, although I am short AAPL for some stock specific reasons, 99% of it is because I am bearish on the market as a whole.
Good bye Market, good bye AAPL, good bye Semis, good bye XME Reits everything 1040 neckline for giant Head and Shoulder Hello 940.
CXbby, would you be kind enough to please show us a graph of this head and shoulder? I'm on stockcharts.com but not sure if I'm looking at the same pattern as you. I'm lookin at it from last 3 months SPY.
Also to add to the above....since you said "giant", I also looked at it from last 7 months and it seems that from this view, we're at the end of the shoulder? Is it possible to get a pattern within a pattern when looking at different time periods? see http://stockcharts.com/ (SPX with range of 7 months and range of 3 months)
Cxbby, A lot of this stuff is still going over my head and I'm finding it hard to follow but thanks for the lessons. I'll have to read TA of the financial Markets sometime soon.
Getting a little ahead of ourselves, but since it pertains to the trade we are in, this is what I am looking at. It is a very simple setup, but if there are things you guys don't get, don't worry. I will get into it more in depth in the future. Looking closer, this is where I got the 1120 entry, and 1150 initial stop. Fibonacci retracements are a powerful tool when you know what to look for. The 50% and 61.8% levels are key resistences. Entry: 50% Fib level- 1123 100SMA(pink line)- 1125 Upper Bollinger bands- 1126 As you can see, there was a cluster of strong resistence right around 1120-30, with the 50% Fib being the biggest factor. Also there was confirming levels in the NQ as well, with it trading at its 61.8% Fib. Those were the reasoning behind my entry price. Exit: Stop loss 61.8% Fib- 1144.5 This is where I got the 1150 stop loss from. If we break higher than the 61.8% retracement level, then higher prices is more likely. Profit Target 50% Fib retracement from March 09 lows to May 2010 highs- 925 June 2009 high- 935 Fibonacci Extension 100% of H&S pattern- 948 Giving myself some leeway, this is where I get the 940-50 projection. It all looks simple after the fact. Hindsight 20/20. But the hardest part was the decision to look for the Short, the Right Shoulder, in the first place. If you simply used Fib retracements on everything you looked at, I guarantee you will blow up your account. So although it was the technique that got me the entry and exit prices, allowing me to risk very little for a potentially great reward(read: ability to leverage), deciding to look for shorts in the first place was more on longer term analysis, intuition, experience. The former(technique) I can teach you guys. While the latter you will have to figure out yourselves. Just know that no matter how much intuition/experience you have, without the proper technique, you will never trade the size you are capable of. Again, for those who have some knowledge of trading, hopefully this was helpful. For those who think this is a foreign language, don't worry. I will get to everything eventually.
Why did you use 61.8%? Is that a standard number for a head-n-shoulders pattern? (sorry if I'm asking questions that are way ahead of ourselves)
Don't worry. I plan on starting a thread or blog soon starting from the very basics. Starting from what Technical Analysis is in the first place. Why we look at charts and lines. What use is it. Why we don't care about news, the economy, earnings etc. And of course, all the technique I use, from the ground up. The goal in the end is to open people up to a different way of thinking and viewing the market. It is not as complicated and daunting as some of these "professionals" on CNBC make it out to be. On the other hand, there are aspects of the markets that these talking heads couldn't dream of. The longer I've been in this industry, the more I lose respect for my peers. Some of these "professionals" either on TV, or real fund managers, simply DON'T know what they are doing. I work for a top hedge fund in the industry, and I can say unabashed that I am one of the TOP traders out there. Rest assured you are in good hands.
We are indeed getting ahead of ourselves. Fibonacci retracements have nothing to do with Head and Shoulder patterns. I am using them in conjunction with eachother. 61.8% is a standard, and MOST important retracement, followed in importance by the 50%. 23.6%, 38.2%, 50%, 61.8%, 76.4% are the standard Fib levels. I only use 38.2, 50 and 61.8. With 38.2 being an aggressive, initial(early) entry. And 50, 61.8 being the "line in the sand". BTW you can use Fib retracements for Longs as well. Just draw them on up legs. Be patient. I will get to every indicator and technique, in detail.
Honestly, I feel the best way to learn is to just jump into and play around with it initially for a very short period of time. Then start from scratch. That way I get those "Oh yaaaaa, that's what that line meant" moments as we go along which to me means I'm actually learning. So I appreciate your reply and you being patient . I understand and feel free to tell me "Qazi, you're doing it again" when it comes to me asking questions that are ahead of the discussion level. I must warn you I will probably do it again but your latest post will keep me quiet and busy for a while :grin: . Thanks again.
Cxbby, you have the neckline drawn at 1033? I thought the neckline is in the 1050 or so... I'm waiting for confirmation of the head & shoulders to close below the neckline so I can plan on moving the rest of my 401k to cash (I still have 25% left in stocks). The S&P should close at what today to confirm the head and shoulders? Right now it's at 1,046. We should look at the closing price and not the intraday to confirm the breaking of the neckline right? Thanks for all of your help! Also thanks for the charts and explanation. I'll read up more on Fibonacci this weekend so I can full absorb your post.
For every single price I am using E-mini futures. It's what I trade. There is about a 2-4 point difference compared to the S&P cash.
I see, cool. Head and shoulders almost confirmed..its right on the neckline then! oops I didn't see this...so breaking 1040 on close or intraday to confirm head and shoulders?
