That’s terrific DoubleUp. Looks like I’ve found a friend. I should have better picked the pattern you were onto.
I normally hang about on the XSO small cap thread because it’s more active and I like the posters there. Also I started buying a few small caps more recently. This thread was a bit of a spin off from that forum as the mid-to large caps I wanted to talk about didn’t really fit with the XSO theme and so Jako set up the XMD last year. It’s a quiet thread with only a few people about but a great place to discuss technical, fundamental and macro issues on the larger stocks that is missing a bit elsewhere on HC. Sounds like this is the place for you, but it’s been a bit quiet for the past few months so will be good to see you put a few trading ideas about.
As a general comment about my trading, I see technical analysis a bit like an experienced carpenter or other tradesman. You have your normal everyday tools plus a few special tools in the bottom of the toolbox. You also then need to apply them with experienced judgement and maybe sometimes in unconventional ways, just as you see a carpenter using say a screwdriver to leverage something open and jamb the handle of his hammer in to keep it there.
The “Harmonic patterns” you are using (Gartley, Butterfly, Bat, Crab, etc there’s a few) are as a class a sort of special tool that are very powerful when you see them, but I don’t go looking for them all the time, just good when you spot them. A bit like when you see a Head & Shoulders reversal on the weekly, you need to recognise what it is when it occurs, but maybe something I’d trade once a year.
The normal tools I apply are all classical charting techniques: Elliott Wave, Price analysis (levels of the All time High/Range, support/resistance), Trends and trendlines, Counter-trends, Bar analysis (including certain candlesticks), Pattern analysis and the like. The sort of stuff you could have hand drawn on a chart in the decades before the computer age. Volume I use but it’s a minor consideration for me.
The modern computer-generated technical indicators (Movings Averages, MACD, whatever) are mostly stuff I don’t use and don’t really rate. (I only check Volatility measures for Option pricing, not TA). RSI is in that category, although it does have a grounding in sound principles. If you can make that work for you in combination with your harmonic patterns then great.
I also normally only analyse Monthly and Weekly charts as the more powerful and predictable scale, so good to see you doing that. Most of HC seems focused on Daily and hourly, even 5mins charts. Similarly I agree that mid to large caps with their large numbers of transactions are far more reliable for TA. I apply very limited TA on small caps and specs, and consider these need to be traded on more FA, the theme, who's behind it and other factors.
I did also trade that MQG short in November you mention, but I recall I did it on a counter-trend time count I think rather than a pattern. I'd have to go back and check.
I think the break on the Dow overnight is finally the big one. Volatility is back. Great for technical trading again and I’m well set with shorts. Sounds like you are too. The critical support lines on my charts have broken down, and besides the large scale Butterfly pattern we have both been monitoring, there is a shorter term weekly rising flag over the past 9 weeks that broke overnight, so I think that’s it. There could be a bounce next week, but doubt it will hold. I have been arguing that the butterfly is a year-long reversal of the 7 year bull market, so the drop from here should be a major bear market as the pumped up equities from central bank liquidity unwinds.
Look forward to seeing some of your future trading ideas.
Although not relevant now, just for interest as you analyse these I’ve put up a chart below a good example of a harmonic “Bat” pattern that occurred on Telstra when it reversed and ran from mid $2's to $6.74.
(20min delay)