|
|
| |
|
 March 3, 2004 Commentary
(mid-week edition)-
Today I'm going to show a potential
trade that I am watching, as it develops, in BCC. I chose this potential trade
as an example because it is in keeping with the context theme. Let's start with
a look at the daily chart, and what first caught my eye.
I spotted this nice looking potential 5-point
pattern, and that incited me to look further. Backing the chart out, though,
and adding more data in, gave me pause. Let's see what the additional data
shows us.
Wow, this looks like another case of a
pattern trying to call the end of a long trend on the traded timeframe. This
is exactly how I don't want to trade with these types of patterns. So, is
it over at this point? The next step would be to move up to the next higher
timeframe, and see what that shows me.
Even if it looks hopeless at this point for a
potential trade in here, I still want to see what the next timeframe up shows
me, in this case the weekly chart. Let's take a look at that, and see if
anything interesting pops up.
Now, that's curious. There's a very large
weekly 5-point pattern that completes at the very same point that the smaller,
daily 5-point pattern completes. I've highlighted the smaller, daily pattern on
the chart also, but it is very difficult to discern in the upper right hand
part of the chart. I have only shown the .886 retracement for the weekly
pattern and the 1.618 external retracement of the daily pattern on this chart,
for clarity. So, am I done now?
The problem here is that the same procedure
must start all over again. How do I know I would want to consider this weekly
potential trade? I need context. I need to move up to the monthly chart and
make an assessment to see if the weekly trade gets red flagged. Let's look at
the monthly chart.
I've highlighted the weekly pattern on this
chart. I see multiple tops in the general area of the pattern completion, and
no reason the discard the weekly pattern. The trend is straight up on the
daily, but that is to be expected in the last leg on a weekly pattern. I also
see multiple major tops on this chart up another level from the pattern
completion point.
This implies to me that if this current area is breached, there is
significant overhead resistance. It's an added plus to consider a short trade
at a resistance area that has another, major resistance area just above it.
Many traders may bet against the current area holding, but that massive
overhead area should exert an additional downward pressure, in my opinion, and
scare off some long traders.
The bottom line, for me, is that I'm looking to trade
the weekly pattern here, with a trigger on the daily, using the pattern forming
there. I will likely be watching for a 60-minute trigger for the daily pattern
to set the whole thing off. This is a situation that I see somewhat frequently
and I find it can be very productive, that is, using patterns to trigger
entries for larger patterns.
Now it's all about waiting to see if BCC gets to the
area and gives me an entry trigger, just as I'm waiting on AMZN right now. I'm
seeing a lot of things starting to set up. If you are a stock trader on the
daily and weekly timeframes, this is a time to do some extra work with your
scans.
The next commentary will be the weekend edition, posted on Sunday.
I'll see everyone then.
|
|
|
| |
|
|
 NOTE: Reading this page or any page on the Kane
Trading website, or utilizing this website and any material
contained herein in any way, shall constitute an acknowledgement
that you have read, understood and agreed
to all the
disclaimers,
terms & conditions, and
policies of this site.
|
|
|
This website is best viewed with
MSIE 6.0, text size set to medium, and screen resolution set to 1024 by 768.
Copyright © 2003 Kane
Trading. All rights reserved.
|
|
