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 December
12, 2004 Commentary (weekend edition)-
Today I'm
going to repeat a few business items, and then we'll get to some charts. As I
have said more than a few times already, after the upcoming mid-week commentary
on Wednesday December 15, I will officially be 'on break' until the first of
the year.
If you are planning on ordering any books or eArticles and would
like me to ship them out before I go, please try to do that this weekend, or at
least before the last minute on Wednesday. Although I will check my e-mail
right up until Wednesday evening, I'd rather pack up any orders before then. As
I mentioned, you can order during the time I'll be gone, but I won't be
checking any e-mail, shipping any books, or writing any commentaries until I
return. If the wait bothers you, please wait until I return to order.
Please take
this time to read through some of the one hundred and forty or so archived
commentaries and the free articles that I have on the site. And lastly, as I've
also mentioned, when I return I will start back with the weekend commentary on
January 2, and I'll be going to a once a week format, on the weekend. I will
follow up on my idea of collecting feedback and thoughts about a possible
members section at that time, but in all honesty, I just don't think I want to
make that type of commitment at this time. I will listen to what my readers say
and take that into account, though.
I found it a little difficult to choose
today's topic. Every time a get an example in mind, I quickly realize just how
much time and space it would take to even touch on the topic in a decent
manner. I know I could show a few potential trade setups, maybe do a few quick
follow-ups, and make it easy on myself. I try to do too much and really show
some detailed material in here, but it really isn't that realistic for this
venue. I guess that's why I keep getting tempted into considering a members
section.
So, what brought this up right now? Well, I want to look at an
example in INTC. The problem is there is so much going on that I really feel I
could spend an entire mentorship day just discussing the
things that I see. To try and cover that in here with four or five charts and a
couple of pages of discussion, well, I almost feel like I'd be better off not
even getting into it.
Most of my readers know how I have recently
been talking about how many people like to ignore my concepts with regards to
entry techniques. I have been
saying how that aspect of my methodology is seemingly very poorly understood,
or I don't think so many people would choose to ignore it. I find a somewhat
similar situation with my ideas on Multiple Timeframes and
'Context'. Although I don't have anyone telling me they are going to
ignore these ideas, I wonder how well understood the main concepts are.
I was
beginning to think that I'm ready to write Volume 2 on Multiple Timeframes and
'Context' when my better half reminded me (quite loudly I must admit) that I'm
not going to be writing any more books for a while. I decided that all of what
would be in volume 2 would be reserved, for now, for any mentorship students.
But I can sketch out, in brief, a few ideas.
As those that have really studied
my books know, my use of multiple timeframes is not at all, in any way, like
what others out there have shown under that heading. In a way I wish I had come
up with some other, unique name for this, so as to avoid confusion. The fact
that I use no indicators for this process should be enough to distinguish what
I do as totally separate and unique, but it doesn't seem to be.
What I'm
trying to do with the multiple timeframes is not only look for 'context' and
entry triggers; it's also to determine the best traded timeframe. This is key
because it lets me use that with the 'context' to decide on my trade premise
and subsequent management plan. I can't have any 'context' unless I know my
traded timeframe and what my potential trade premise(s) may be.
Many times I
see different opportunities in the same setup, and they are based on different
premises. The 'context' tells me things about each possible scenario. There are
many times I may appear to be taking a countertrend trade. It depends on the
traded timeframe, though, and the 'context'. I just don't know how to describe
this any better than I am. This is a fully integrated and interdependent
methodology, and has nothing to do with lining three timeframes up so
they are all in sync, or anything of that sort.
It has to do with knowing what my
trade premise is, what timeframe it is based on, where and what the perceived
opportunity is, and what the 'context' tells me about various possible
premises. I think a critical point is that, for my trading, there isn't just
one pattern and you trade it, and that's that. It's an assessment game. If I
change the traded timeframe, I totally change where I might place my stop, and
how I might manage the trade. Same pattern, same issue, but what I do totally
changes if I change the traded timeframe.
I think what I do with timeframes
and 'context' is not only totally unique and key to my methodology, I think it
is perhaps my strongest area. I say this not to 'brag', but to point out that
if you think I have something to offer as far as teaching my methodology, and
you feel I 'know what I'm doing', then you might want to take into account just
how important I feel this is to my 'Trading Plan'.
Let's look at
a few charts, where I'll only be able to scratch the surface on all this.
Perhaps I will follow up on this example a few times in future commentaries,
and try to fill it out a bit. Today's look is going to have to be not much more
than a 'teaser'.
I'll start with a daily chart on INTC.
INTC is setting up as a pullback in a smooth
uptrend, using the techniques right out of Kane Trading on: Advanced Fibonacci
Trading Concepts. I will just show the most salient retracements and
such on the charts, as we focus on the 'context' and timeframe concepts. I see
some structure to the pullback, so let's drop down to a 60-minute chart and
look at that.
Right in here INTC is pulling back in a
nice-looking alternate ABCD pattern. How do I know to use this particular
alternate? I don't. I set up all my numbers and look for the 'harmonicity'. This .786 alternate is
within one cent of that .486 retracement of the uptrend. When I lay out all my
numbers I can see if there is a high degree of 'harmonicity', and where the
groupings are. All I can show here is the key areas. If you want to see all the
detail, set up your own groupings and study all this at the level it
deserves.
Now given all this, what's the bigger picture 'context' of this
setup? Let's look at a weekly chart.
Now wait, that's a 1.0 ABCD, and INTC has
already reacted off of it. What happened to my alternate ABCD? Where am I?
Exactly. This is a different ABCD. The one we just looked at is in those last
few bars on the far right hand side of the chart. That tiny little dip. Now
that gives some perspective to the situation. INTC has run up off the '02
bottom, had a major ABCD correction which it is now just starting to get going
off of. We were looking at a small pullback for that first thrust up off this
pattern.
Let's look at how INTC reacted off that smaller alternate ABCD,
back on the 60-minute chart.
INTC came right off that alternate ABCD. But
it then formed a smaller ABCD, set up to continue the downtrend of that larger
alternate ABCD. I highlighted that smaller ABCD with an arrow. So, are you
long? Short? Why? Based on what timeframe and what 'context'? INTC rolled over
at that smaller ABCD completion point, for a while. Then the 'good news' hit,
and it gapped up big.
Given the 'context', is that a surprise? Look
at the charts and tell me why you would have taken that smaller ABCD trade. Put
on some retracements like a .618 and .786, and tell me, if the 'context' said
up, why you wouldn't see that the odds started to stack up against you in
there.
I'm not saying this wasn't worth a trade in there, but it would be
on a 30-minute, or a 15-minute chart, and it would be with the knowledge that
it could reverse hard at any time. If that suits your plan, as long as you
understand the 'context', then a possible opportunity might have been there.
But, wouldn't you have been long already? Or long and just stopped out?
And now what?
INTC has formed another, extended ABCD at an .886 retracement. The 'context'
may say up, but the way INTC reversed off the area is surely cause for concern.
It may be a 'wave 4' that is unfolding (of the thrust up on this 60-minute
chart), or that may be it. It has a look of a public trap to me,
though.
Let's see what happened from here.
INTC continued to drop after it reversed
within three cents of that .886 retracement. It even gave a good start to a
'wave 4' before it failed miserably. So, were there opportunities in here? I
think there were more opportunities than I can count in what I've shown. And
they were on many different timeframes. I can't remember the last time I saw a
stock talk to me so much. And I haven't even shown any median lines, or any
other things that I like to add to the mix.
Part of what
I want to try to show here is how many different opportunities are arising in
succession, with some opportunities overlapping, and actually going in the
opposite direction at the same time. If, and how, I might play these totally
depends on my choice of traded timeframe and my interpretation of 'context' for
these setups. This will affect my stop placement, expectations, and management
plan.
And if you think all that is something, this will probably blow
your mind right out of the socket. It's possible I may be long and short at the
same time. How can that be? Perhaps I am long using an option (or even the
stock) off the weekly chart, with a set management plan for that. Should that
preclude me from taking a short setup on a 15-minute chart that is counter to
that longer-term chart, if the 'context' supports that trade? No, it shouldn't.
Long and short at the same time, and making sense doing it. It's all about
timeframe use, management strategy, and 'context'.
Let me finish
with another look at the weekly chart, this time with enough data to show the
bubble top.
Now, how's that for perspective? I can't even
begin to get in to what this chart may be showing me, as I've run wildly over
my time and space on what I have done already.
I am trying to get the reader to
see how what I am doing, and how I am looking at things, is not like any other
'version' of multiple timeframes or 'context' out there. I explain the nuances
of this in great detail in the books, far, far more than I could ever begin to
present in this commentary. And for the few students I mentor, we go one-on-one
discussing this type of thing in far more detail than I could ever convey in
the books. It is in this area (among others) that I feel I have come up with
things I have never seen discussed anywhere.
The next commentary will be the
mid-week edition, posted by Wednesday evening (but probably by Tuesday, as I
prepare for my 'break'). I can guarantee it will not be as extensive as
this one. I wish I had saved this one to post for the 'break', but I didn't
think of that until it was too late.
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