Ask a Technical Analyst

[thehun69]

After the whole "my analysis is better than your analysis" broohaha in the "Please recommend a book" thread, I thought,why not open up this place and start a technical thread.

Please note, I am not responsible for any and all recomendations that I post or advise. What YOU do with your money is YOUR responsibility. I'm just offering some advise.

So, does anyone have any questions, or would like an opinion from a technical point of view? Additionally, I would add, that I will only advise on stocks with a minimum daily volume of over 1-2 million, there and up. I don't play the small small caps, and find that TA works better on stocks that have a wider field of play. As well, no penny stocks, the applicability of TA of TA to those stocks is suspect.

Let's begin.

THE HUN.

[stinkypete]

what's your track record

[thehun69]

Last 5 year average approximately 35% annual return.

[thehun69]

and no, I'm not showing personal statments.

[Objectothis]

Which technical analysis patterns or indicators do you believe work?

[thehun69]

[ QUOTE ]
Which technical analysis patterns or indicators do you believe work?

[/ QUOTE ]

A considerable portion of my analysis is based on Japanese Candlestick charting. If you want to make the best investment of your trading career, go out and buy Japanese Candlestick Charting Techniques by Steve Nisson. Learn the patterns in that book, you have to put in a lot of screen time, but doing that will reap HUGE benefits. Those patterns with very simple momentum indicators like Stochastics or RSI, (I just use slow stochastics to keep things simple and clean, the best is to use as few indicators as possible), will identify high probability trades.

I will give an example of a charting pattern that you can use RIGHT NOW to find on any chart. The best free site for charting is Stockcharts.com (by the way, I don't know how to post links, so if someone can show me how, that would be great). This pattern is called a DOJI. Every candle that you see on a chart represents the open, close, high and low. If the candle is red, it means that it closed lower from where it started, if it is white, it means it closed higher than the open. The open and close represent the body of the candle, the "wicks" represent the high and low of the day. The DOJI is a unique candle in that it opened and closed near or about the same point. So, essentially it looks like a cross. But what does this mean? Like anything else ...context is key, and this is where most academic analysis gets it dead wrong. Most analysis will say, well after this pattern it produces a profitable trade only 20% of the time, so TA is useless bla bla bla. They neglect the context of the pattern. The pattern by itself is meaningless but in the broader perspective of the other patterns, it now has meaning. So what does the Doji mean? If it closed and opened on the same day it means that the bulls and bears pushed the stock up and down all over the day, and agreed in the end at the same price that it started. Now, if for the past 7 days, the bulls were running up the price like a freight train, well they have that momentum, but now, you have a doji. This now means, that the huge momentum that they had has been siginficantly weakened because the bears were able to stop that force. All throughout the day, the bulls have been fighting to push it higher, but the bears foought back and held their ground. Now, the next day is crucial, if after a doji, after a huge price run up, the next day is a downward closing day, now the bears have control, you have a good price reversal, and a nice swing short.

Example: http://stockcharts.com/h-sc/ui (again, need help here) Ok, take a look at May 22, there is a CLASSIC DOJI pattern. From the beginning of May to around May 21 the bulls had a stronghold and pushed that stock right up, but on May 22, what happend to all their strength? They managed to push the stock up as high as 47.50, a relative new high...but they couldn't hold it, the bears fought back and held. The next day, the bears really stepped in. That is where you would want to place your short, once you see that confirmation the next day to show that the bears really now have control. Using stochastics (find indicators, click on slow stochastics, add that in )and you see a nice confirmation to show how that momentum has changed.

Again, that is but one powerful pattern among many.
With candlesticks, always keep the context in mind. I don't use the head and shoulders, or flag patterns, that most traditional TA's will use.

There is a start, get the book.

THE HUN.

[gull]

[ QUOTE ]
Last 5 year average approximately 35% annual return.

[/ QUOTE ]

Is this geometric?

[gull]

[ QUOTE ]
Last 5 year average approximately 35% annual return.

[/ QUOTE ]

Is this arithmetic?

[hawk59]

[ QUOTE ]
Last 5 year average approximately 35% annual return.

[/ QUOTE ]

What chance do you think there is that your returns can be attributed to luck? This is an honest question, I ask myself this all the time.

[thehun69]

[ QUOTE ]
[ QUOTE ]
Last 5 year average approximately 35% annual return.

[/ QUOTE ]

What chance do you think there is that your returns can be attributed to luck? This is an honest question, I ask myself this all the time.

[/ QUOTE ]

It all comes down to that old saying in golf, something along the lines of "I guess I'm just lucky when it comes to golf, the harder I work at it, the luckier I get" (I've seen that line attributed to at least 3 golfers) But that applies here. It's not about luck, I couldn't be this consistent with mere luck alone. I worked my ass off to get to this point.

THE HUN.