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 November
24, 2004 Commentary (mid-week edition)-
Today I'm
going to update a few recent plays, show one that triggered recently, and then
finish up with something I'm watching in GOOG. I'll start with the QLGC
play.
QLGC turned out to be a 'home run', and is
still in play. This one is a perfect example for studying the management
technique I presented in the last chapter of the new book Kane Trading on: Trade Management.
For those of you that have that book, I would suggest you take the time to set
this one up and see what the technique is (and has been) telling me. QLGC may
be forming a small ABCD pattern in here, and very well may be close to the end
of this run, but I just let the management plan unfold regardless.
Let's take a
look now at gold, which has been on a tear.
When we left off gold had reacted nicely off
the larger bearish pattern we had been watching, but then started up strongly
and triggered all my scale outs. It gave every impression to me that the
pattern was only going to produce a 'bounce' once it began to reverse. (I call
quick, sharp reactions 'bounces' whether they occur on the long or short side.)
Since the pattern was very significant in my opinion, a 'blowout' of the
pattern would be even more significant.
I then discussed a small ABCD that set up for
the long side, as a play for the pattern blowout. This produced another nice
tradable bounce, but then rolled over. The first arrow points to the small ABCD
pattern. The second arrow points to where aggressive scaling out was triggered.
The scaling was fully triggered in a very short time. This was the 'shake-out',
and it fully 'got' me. All the scaling was triggered above the entry signal
price, though.
The significance of what was about to transpire was quite big in my
mind, though, and reentry, if an opportunity presented itself, was foremost in
my mind. The gapping moves further confirmed what I suspected was happening.
Once the initial excitement was over, gold settled down nicely and gave
multiple opportunities to get on board. The second gap close (or near close,
depending on your definition of a gap close) was a real 'gimme', with many
fantastic small swings on the lower timeframe that were useful for potential
entry triggers. Gold has really been 'in play'.
Let's move on to that 4-Point Continuation Pattern in
ATG that a reader pointed out to me. I'll highlight that on a daily
chart.
If you have the article the pattern is likely
quite clear to you. The arrow shows the completion point. I didn't like the
consolidation before the pattern, but it wasn't a deal killer. The really
curious thing is that they had just priced an offering, and the stock dropped
like a rock right to the offering price, which turned out to be the pattern
completion point. I fully expected a gap up the next morning.
I would not
consider a fade entry in a case like this no matter what, as I discuss in Kane Trading on: Entry Techniques,
but I was ready to watch the price action the next morning. I have a gap entry
technique I have developed just for cases like this. I was considering writing
this up in an article, as it is pretty good in my opinion, and I see times for
its use quite a bit, but I'm done writing for now. It was this technique that I
was watching way back on the FDX example that
gapped.
This one really started to run the next day, and the only early
entry I saw was a modified version of the gap technique. Let's drop down to a
15-minute chart.
The arrow points to my entry trigger. The
long bar up doesn't really represent prices where a fill could have been
expected. The area of the arrow may seem a long ways away from the PTA, but
keep in mind this is a much lower 15-minute timeframe, and the traded timeframe
is the daily.
There is seemingly more risk taking an entry like this, but I could
see pretty quickly that it was likely here or not at all, and I did feel a lot
of factors were coming together. I was also seeing more of these 4-Point Continuation Patterns in
many issues all at about the same time. Something was definitely going on, in
my opinion. So far ATG has moved nicely off the pattern, and is now in
management mode.
Let's finish with something I'm watching in GOOG.
GOOG may be forming a very large ABCD
pattern. It's still in the early stages, and it may not come together at all.
It's just something I'm watching. I have drawn in a trendline, showing how GOOG
would have to roll down here and head towards the completion point for the
pattern to have the right 'look' to it.
It may be okay if GOOG goes up just a bit
higher, but not by very much. I don't like to see ABCD's in the CD leg of a
pattern, as I explained in Kane
Trading on: Multiple Timeframes and 'Context'.
Let me point
out, too, that I will have groupings built around the alternate ABCD patterns
for this, as outlined in Kane
Trading on: Trading ABCD Patterns. I have only shown the single 1.0
price projection on this chart to lay out the potential pattern. If and when
the time comes I will have a full analysis ready to go. (Note that the two
alternate ABCD's beyond the 1.0 would close the gap.) In the meantime I wait,
as I am with the many setups like this that I am currently watching.
As an aside,
the arrow in the lower left hand corner of the chart is where the initial
pattern play I started with came together, for one of the biggest 'home runs' I
have seen since the bubble.
The next commentary will be the weekend edition, posted
by Sunday evening.
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