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 March 14, 2004 Commentary
(weekend edition)-
This weekend I'm going to review
the status of some of the plays that I have been watching and discussing here
in the column. I'll start first with the NDX comments that I made in the
mid-week column. I pointed out that there was a potential alternate ABCD
pattern shaping up, and I wanted to watch this for a possible trade. I was
especially interested in how bearish all the talking heads were.
The NDX
continued on down the following day, but then hit the last stop, the 1.272
alternate ABCD grouping just below the grouping I had highlighted in the
mid-week commentary, and bounced up hard. I almost put the next grouping on the
chart and explained how I'm watching this 'layered support' for reactions, to
help me in my trading decisions. I decided it was a bit too much writing for
this short column, so I only showed the one grouping.
It doesn't
seem to pay to try and make things too simple just because this is a short
column and I have to be 'short-winded'. Those that have read Kane Trading on: Trading ABCD
Patterns understand why I need that other grouping, and why trying to
pick one grouping like I did is not the way to use the methodology.
Let me add the other grouping onto
the chart, and let's look at the NDX and how it reacted.
Notice how the NDX showed no respect for the
top grouping, but reacted vigorously to the lower grouping. There is no way to
tell if this is all the reaction there will be, or if this will be the start of
a sustained upmove. All I can say is that the 1.272 alternate ABCD area is the
last chance for a trade for me, using this pattern.
Watching the
NQ, this was a gap up move with a very tradable pullback. If one wanted to take
a trade based on this pattern, keeping in mind that it's a daily traded
timeframe, the lower timeframe charts gave plenty of possible chances to get
in.
I
noticed that I had messed up the time projection calculation that I put on the
mid-week chart for the NDX. (I have no clue what I was thinking, or how I
missed it on the proofread. I guess I really am pushing myself way too hard.) I
have corrected that here, and added a few more interesting calculations. They
converge in the general area that we are now in. I'm still watching this area
for a potential reversal. But I'm also watching it for a failure, as that will
tell me a lot.
Let's move on to the AMZN play.
I'm still waiting for AMZN to hit the
potential trade area. It's acting like it really wants to reverse. A few times
I almost jumped the gun on this one. I'll be patient, but the price action
keeps egging me on to jump early.
Let's move on to SUNW. Recall that I
mentioned I'm watching the area around $4.40. Specifically, from about $4.25 to
$4.40. Did you figure out what I was looking at?
I noticed a confluence of two sets of
Andrew's pitchfork lines with two key Fibonacci retracements, an .886 and an
external 1.902. That's a lot of things coming together in this one area. I was
able to calculate this area well over two weeks before SUNW hit the area. Even
if no successful trade results from this area, notice how SUNW plunged into the
area and stopped dead. This is not a random occurrence in my opinion!
I'm watching
what happens in here. I think there will likely be a potential trade in
whichever direction SUNW decides to go from here.
Let's take a look now at
CI.
CI almost gave me my breakdown and retest. It
didn't go down as far as I had hoped it would on this first move down here. It
then bounced back up above the line. I'm still in a watch and wait mode here,
but this one is under my constant surveillance.
Let's finish with a look at
SCH.
SCH hit the grouping, gave me an entry
trigger, and then gave me a small burst up. I was very encouraged by the
initial reaction. SCH then rolled over a bit with the additional market
weakness, but the area of the grouping held, and my stop wasn't threatened. It
then jumped back up, and is residing above the grouping. I will give this one
time to play out.
Here's an interesting observation. This chart looks very similar to
the NDX chart, doesn't it? There are a lot of charts out there looking like
this. We are still in a very critical area for the market.
On another
note, my book Kane Trading on: Multiple Timeframes and 'Context' is
coming along very, very good. I am also dabbling with Kane Trading on: Trade Management,
but I am focusing on the MTAC for the most part right now, since I'm 'in
the groove' on that one. I think it is going to be a very useful book. I can't
even guess when I might be done. When I get closer I will give a projected
date.
On yet another note, for all of you readers who are following
along, still trying to decide if you want to buy the books, I have
finally figured out how to do the excerpts. Now it's just a matter of
doing the work and getting them all posted. I'll do it, but I'm in such a
groove on the books that when I'm not trading I'm writing. I hate to take the
time from that. I'll put a comment in the 'What's New' section when I have
them up.
The next commentary will be the mid-week edition, posted on
Wednesday. Remember that Tuesday is Fed meeting day.
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