PSY TA thread, page-4

Hi McHale, no my boxes are not related to Darvas.

My boxes are based on two different methods plus some extra stuff of my own.
The first & main part is from the book by Ed Downe’s called “7 Chart Patterns that consistently make money” a copy can be downloaded from
http://www.traderslibrary.com/ProductPages/The_7_Chart_Patterns_/634268797027443776.pdf.
Page 61 Fig 10 Consolidations, shows something similar to what I try & do with boxes & tells you how it works to predict a price target.
His theory on trading consolidation breakouts is extremely good I think & I doubt if what I am doing is better than his ideas,

The second is from a book by Bill Wormald called “Trends & Tripwires. He talks about the influence that historical trend angles and historical support / resistance levels has on future prices & using them to predict areas were a share may find support, retrace or rebound etc.
The trend angle is the usual angle of the trend line that a share will usually follow in the short, medium & long term time frames..
You obviously need charting software that lets you draw them, its easy enough to verify that these angles and price levels have worked historically.

Initially you have to find a stock that’s consolidating & draw in the box range. I draw a line in the center of the box as that is nearly always a short term support / resistance & is a handy place to buy or sell.
I draw in the historical support & resistance levels & the trend line angles (usually the long term & a shorter one both rising & falling & see how often the sp follows them & extrapolate them across the chart both back into the past & to future. The shorter term trend angles are added as the sp fluctuates & the trends form & placed at a high or low.

After drawing in the box I copy the box outline & use it to look backwards to where it has consolidated in the past & if the range was similar. Not all stocks consolidate in a predictable way.
I then place a box outline above & below the active one to try & predict the future price when the sp breaks out of the current range.
The target prediction is for a minimum distance of the range of the active box & an eventual price twice the box size after a breakout.
Resistance / support is often at the center & quarter points of the box & is a historical support, resistance & trend angle intersecting the box & usually. In larger range size there are often more levels of support resistance that seem to keep causing a reaction.
It probably all sounds like a crock of whatever to a lot but it seems to work on most stocks & indicies & I think that PSY has been a very good case study so far.
Its also very addictive & can become dangerous if another method to verify your bias is not used before making a decision, that’s why I also use a momentum indicator to watch the overbought/oversold state & also to pick up on divergences. My favourite confirmation tool though is the inverted chart, that changes the perception quite a bit.
I also like to look at the other consolidation patterns such as flags, channels & triangles etc, they are all predictive& work in well with how I do stuff.

The good thing about drawing your own charts is that they stay there forever & you can see when your anaylasis was incorrect and hopefully correct your methods.
Go one step further & post them here with your diagnosis & see what reaction you get back.
TA is a great topic to discuss & you will usually get some feedback.

Anyway that’s pretty much it, I hope that makes sense. It is really a simple concept that I have borrowed from somone else but it does not always work out the way I see it.