A Little Known Trend Line Trick and Stage Analysis

Written on 01-11-2006 4:49 pm by Craig

What Really Wins Elections

Here is another interesting video form From History's Hidden Engine.

"An uncanny correlation exists between social mood trends and the success or failure of incumbent politicians, and this relationship doesn't end at The White House. Social mood affects everything from the elections for U.S. Congress and governors' offices to your city council and school board. So, why did George W. Bush really retain the presidency? Will your preferred candidates win in the upcoming elections? This two-minute video from the socionomics documentary History's Hidden Engine helps answer these questions. In fact, socionomics can forecast much more than the results of the upcoming elections."



Learn more with additional resources on the new science of socionomics:

Watch History's Hidden Engine FREE at:

Socionomics.net

Read about and buy books and videos on socionomics at:

Elliottwave.com

Written on 02-11-2006 9:03 pm by Craig

The Bookstore, the Video, and the E-book

Here is another unbelievable bookstore special:

traders bookstore special

There are tons of bestselling trading books and dvd's. The best part? All of them are $9.99 or less. It will take you awhile to sift through all of them, but there are some real gems in here.

View the complete list here.

Couple more things...

I put the new market timing video up. Check it out if you haven't seen it yet (it's short).

I took the reading charts e-book and put into a couple of web pages. Now you can read it online or download it.

Written on 06-11-2006 5:46 pm by Craig

Why the Stock Market is Like an Episode of Cops

cops logo

Ever watch an episode of Cops?

You know the one I'm talking about - "Bad boys, bad boys, watcha gonna do...".

Well then you have probably seen at least one episode where a cop goes to the criminals house, knocks on the door, and the criminal refuses to answer.

The cop KNOWS the guy is in there. So what does he do? He proceeds to break down the door. There is one problem.

It always takes several attempts to break down the door!

This is because the police officer is running into resistance. But the door gets weaker with each attempt. Finally the door comes crashing down (sometimes with the cop!).

The same thing happens in the stock market.

Take a look at the following chart:

stock chart

You can see on this chart that the stock ("cop") ran into resistance several times at $24.00 ("the door"). With each attempt to break through $24.00, that resistance level got weaker.

Finally this stock broke the door down - it broke through resistance. So the next time you are looking at support and resistance on a chart, think of Cops.

Just try to keep that annoying theme song out of your head!

Written on 15-11-2006 8:08 pm by Craig

The Problem With Stage Analysis

Remember the four stages? I first learned about it when I read the book, Secrets For Profiting in Bull and Bear Markets by Stan Weinstein. It was a real eye opener for sure!

It's pretty simple really. Stocks go through four stages. Stage one is a consolidation, stage two is the uptrend, stage 3 is the topping phase, and stage 4 is the downtrend.

But there is a problem.

How do you know if a stock is topping out and ready to enter a stage 4, or if it is just trading sideways (consolidating)?

Take a look at the following chart...

stage analysis

This stock had a real nice uptrend (stage two), and then it stopped. It just bounced around. You could even say that if formed somewhat of a triple top pattern. Looking at this chart you could safely assume that it was topping out and getting ready to enter a stage four down trend. A bearish chart, indeed.

But look at what happened!

stages example 2

This stock went on to make enormous gains. It didn't top out and enter a stage 4 downtrend like we thought it would. What appeared to be an extremely bearish chart turned out to be extremely bullish!

So how do you know if a stock is consolidating or topping out?

You don't know!

You just have to wait to see if it breaks above or below the pattern to really confirm one way or the other. In this case, we would have had to wait for it to break above 20, or fall below 17.

That is the only way we can solve this perplexing problem!

Written on 18-11-2006 3:27 pm by Craig

How to Trade the Thanksgiving Market

How do you trade the week of Thanksgiving? Here is an excerpt from one of my favorite reference books - The Almanac Investor:

"The day before Thanksgiving day and the day after have combined for only 9 losses in 53 years on the Dow Jones Industrials. For 35 years the combination of the Wednesday before Thanksgiving and the Friday after had a great track record, except for two occasions."

"Attributing this phenomenon to the warm "holiday spirit" was a no-brainer. But publishing it in the 1987 Stock Traders Almanac was the "kiss of death." Wednesday, Friday, and Monday were all crushed, down 6.6% over three days in 1987. Since 1988 Wednesday - Friday lost six of seventeen times with a total Dow point-gain of 442.22 versus a Wednesday-Monday total Dow point-gain of 653.26 with only four losses."

"The best strategy seems to be going long into weakness Tuesday or Wednesday and staying in through the following Monday or exiting into strength."

Mmmmmm... I can almost smell that turkey.

Written on 21-11-2006 11:47 am by Craig

A Little Known Trendline Trick

Trader Vic book cover

This little trendline trick comes from the book, Trader Vic - Methods of a Wall Street Master. This is one of my favorite technical analysis books of all time. This gem comes from Chapter 7 - Where Fortunes Are Made: Identifying a Change of Trend.

"...this one observation, considered alone, has the greatest potential for catching the exact highs or lows; it carries more weight in terms of probability that any single one of the other three criteria for a change of trend."

The 2B Rule

"In an uptrend, if a higher high is made but fails to carry through, and then prices drop below the previous high, then the trend is apt to reverse."

Here is an example chart:

2B Trendline Trick

"...the locals as well as the brokers who trade on their own account have a vested interest in driving prices slightly above or below these "resistance" or "support" points to force execution of the stop loss orders. This is called "taking out the stops." After the stops are executed, the market will readjust. This is exactly what happens in the case of most 2B's and is typical action in all markets."

If only I could be a floor trader.

Written on 27-11-2006 7:13 pm by Craig

How to Go Broke Taking Profits

Ever heard this stock market adage:

"Nobody ever went broke taking profits." or "You can't go broke taking profits."

On the surface it sounds good. But this is a dangerous mentality especially for new traders. Not only is it dangerous but it is totally false. You can go broke taking profits.

Here's how...

As a trader you WILL have losses. That is just part of doing business. So in order to make a profit, your losses have to be small and your winners have to cover your losses and still make enough to stay in the green.

So, if you are constantly taking little profits thinking that, "Well, everyone says I can't go broke taking profits!", then you may be doing yourself more harm than good because your losses may very well end up being more than your winners.

Here is an example:

  • Trade One: Yeah! I made $100 bucks!
  • Trade Two: Yeah! I made $125 bucks!
  • Trade Three: Yeah! I made $150 bucks!
  • Trade Four: Rats. I lost $200.
  • Trade Four: Rats. I lost $200.

On trades one through three "Joe Trader" took small profits thinking of that old stock market adage, but in the end he lost money and he even had more winners than losers. If he keeps that up he will go broke!

Now here is a stock market adage that makes a lot more sense:

"Cut your losses short and let your profits run"

Joe did exactly the opposite.

Written on 28-11-2006 1:34 pm by Craig

Save the Cheerleader. Save the World.

Heroes characters

Have you been watching that show Heroes?

What a killer show! Finally we got a decent show to watch on TV. I'm so tired of sitcoms and game shows.

If you haven't seen it, here is a brief overview:

A genetics professor discovers that people all over the world have freaky supernatural powers and abilities. One can fly, one is indestructible, one can paint the future, and so on. Their goal? To save the world from a nuclear disaster.

I was watching the show and it got me to thinking about traders and the stock market. What can I say? I'm a stock market addict and just about everything reminds me of the market!

In the show, every one of the characters has a niche - a special ability that they focus on and try to perfect. This is the same thing that traders do. They find a strategy (pullbacks, chart patterns, breakouts), or a market (stocks, futures, forex), or even a time frame (intraday, daily, weekly) that they try to learn and master.

In the book, Enhancing Trader Performance, he says:

"The greats do not become great by working hard; they work hard because they find a great niche: a field that captures their talents, interests, and imagination."

and...

"When you have found your niche, you don't need discipline to do the right things; you won't want to do anything else."

Finding your niche in trading may not save the world from a nuclear disaster, but it may save you from financial disaster!

So, what's your niche?

Beginners: Learn the Basics

Intermediate: Trading Strategy

Advanced: Swing Trading Tactics