Hi all, here's a couple of charts looking at a few different things and a few "thinking out aloud" comments- so please be patient!
I'm constantly amazed how some completely different methods of TA somehow come up with very close and sometimes the exact same conclusion. Take levels for support and resistance for instance. I don't use Fibs for major levels, I use the Volume Profile (or Volume at Price) first on the Weekly chart, then fine tune on the Daily. Not that I dismiss Fibs- there's too many traders out there using them and I've seen them come in to play often enough that it would be silly to ignore them. It's just that the Volume Profile makes sense to me and it's probably best with this stuff to limit the number of different techniques and keep it fairly simple. I was amazed and reminded of this again today when
@Darkstone mentioned a couple of Fib levels that are the exact levels or within a cent of some the boundaries of some volume "shelves" I had drawn a couple of weeks ago (not posted before now).
The Volume Profile uses horizontal bars to show the relative volume traded at individual prices. A significant high volume node in the Volume Profile shows you where the battle between supply and demand was most intense compared with price levels just above and below. A high volume node in the Volume Profile can leave a scar on the chart that comes in to play next time price approaches this level. You can draw a horizontal box to highlight this battle zone, and some call this a "volume shelf". You can sometimes gain some insight as to how strong a price movement is, or where to expect the next consolidation or reversal by how price reacts to these zones. It's not voodoo or based on a mathematical formula - it's simply that professionals and big money traders know where these zones are, and they are logical spots to park big buy or sell orders where they are less likely to move the price against themselves- based on the historical record of previous high volume trading zones. There's more to it than this of course, but that's quick summary of how they can be useful for charting a potential road-map or points of interest for a stock.
So below is the chart from two weeks ago which I did as a road-map. The grey volume shelves are areas of significance from a few years ago up until the bottom in about March 20. The blue shelves are more recent high volume nodes, and in theory confirm stronger levels when they overlap. Sometimes I'll draw a pink box around several shelves to mark a wider range high volume area that can appear on the Volume Profile as a pot belly rather than a spike.
The next chart is a GXY daily. I'm not much good at predictions, I tend to use the charts to try to manage the risk and manage the trade once I've found a company I think looks good, trying to participate in the upside while limiting the downside. So this is not a long term view, just thoughts for the immediate next few days, I think from what I've read a similar time horizon as Beisha and Baba perhaps? I've been trying a strategy of scaling in (purple arrows) and scaling out (sell half - purple padlock) until it finally kicks me out (dollar sign). Jumping back in can end up being below where half the trade was locked in or where it kicks me out, or above. So that's the frustration at this very moment- it kicked me out last Thursday and now I'm stinging to get back in- however I'm trying to stick to my "rules" and the chart is throwing up my most hated pattern - a broadening wedge (or megaphone). So here's a bit of discussion just for fun and my own therapy- apologies for the ramble but charts are hard enough to read in the first place, and I find these patterns especially tricky.
It's not the pattern itself but rather the underlying trading characteristics it represents. Most chart baggers don't realise that many of these named patterns are simply shortcut names that chartists use to describe a trading or price action situation. A Head and Shoulders top for instance simply describes a point where after a series of higher highs (and higher lows), a lower high is made (which is bearish), and if price then breaks below the trend line of higher lows (the neck line), then it's a good indication or potential confirmation that things aint looking that great. A broadening consolidation period like potentially now throws me, because instead of price highs and lows converging while buyers and sellers sort themselves out like it did in December, price highs and lows expand. It's still indecision but a lot more bi-polar with (to me) less clues as to which way it will finally break.
OK, so this has not been running long enough to be properly called a megaphone- but I can't unsee it. If it's just price testing the breakdown of an up-sloping flag and fails, then that ends up bearish. There's been a couple of bearish momentum divergences at each of the last two highs. I rate divergence really highly and one of my pesky rules is to never take the next entry trigger until the divergence has been "cleared". This can be with a hidden bullish divergence, or a higher high, a strong VSA sign of strength or simply time (a longer consolidation period)- but I've had none of those yet. On the other hand the weekly chart shows no bearish divergence and the hourly shows a bullish hidden divergence- maybe I should add those to my rules.
And price blasted up through volume shelf number 3 and demand has defended this level quite strongly since. However although today was quite a strong move, it came with very high volume and failed to get past a small high volume level formed during this consolidation, suggesting there is still plenty of supply around at this level.
So there you have it- to me the market seems undecided and for the moment, so am I. Another strong bar tomorrow could change all that so I guess I'll just have to be patient! Thanks for listening everyone.
