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 December
18, 2005 Commentary (weekend edition)-
I'll cover a
few small items of business, and then we'll got on to some charts. I updated
the What's New page with
some information, and I'll just mention that instead of covering it again here.
As I said there, I will follow up, in detail, in this commentary some time in
the first few weeks of January as to what I plan to do. I think the changes
will be worthwhile. I like to experiment around and try new things and keep it
fresh for me. I won't be making any big changes, just things to make some
things more user friendly, and to lessen my workload.
As I said, I
like to change things up to see how my ideas work, and to not get too bored
with things. This time I was 'spurred on' by a realization I came to, though.
Don't worry, I won't be going on any tirades, as we all know I'm prone to do.
If you are in the group who dislike my straight shooting, ram it down your
throat approach to things at times, you don't have to skip down to the charts
now, as I'll remain calm. I have been noticing a 'trend' if you will, and it
has been increasing over the last year. I'm not sure what, if anything, it
means, but it is interesting.
To start, I checked the postings for a very
well respected non-commercial forum I follow that is geared towards very high
level traders. Last year at this time there were approximately two hundred
posts for a one month period. The last current monthly period had about ten
posts, six of which were asking if the forum was still in operation. This isn't
the main point, though. I have been getting more and more e-mails about trading
services of various kinds than ever before. I have seen an enormous growth in
these services, especially among one-man operations. Most have the most
outrageous claims I can imagine. They are advertising in all the online
magazine and brokerage places that send out legitimate e-mails to people such
as myself.
Now, here's what I started to realize. The market is
truly glutted, and I mean really, really glutted with people who offer to teach
one to trade, or to give one trade picks. I don't want to stray from my point,
but I feel just about all of these are not very worthwhile services. I can tell
just from the 'track record' they claim, complete with 'proof'. I already did
that long commentary on how I would differentiate potentially worthwhile
educational websites from the charlatans, so I am not going to repeat that here
at all. I got fantastic feedback from that one, as well as a few saying I am
far to aggressive in shoving my ideas down people's throats (I can't please all
the people all the time). I started to think about this in another way this
past week.
When a market gets glutted in the extreme it takes away
market share from everyone, even the established ones. Imagine if there were,
all of the sudden, 5,000 colas on the market, all slickly packaged with nice
television ads, and all price slashing each other. No way I can imagine this
wouldn't cut into the main cola producers share. Sure, it wouldn't take it all
away, but it would have to dig into it a bit. This is standard when markets get
glutted, especially if there is 'dumping' (selling at below cost), which is
easy for a one-man show that doesn't really need to make a profit for some
time.
I feel the number of retail traders, us off floor guys trying to
earn a living in a home trading office, has whittled down to barely a handful.
At the same time product vendors have skyrocketed in number. At times I wonder
if there aren't significantly more vendors than potential customers. Here's the
point for me, and Kane Trading. I don't want to try to 'compete' with all these
people. There is nothing I can do beyond what I have already done in this
commentary (such as show a lot of my methodology in one hundred and ninety free
archived commentaries) to convince anyone of the merits of my work.
Why should anyone pick me out as
their educator among say forty thousand possibilities? The answer is they
wouldn't. To top it off, I make no claims and I am not about to start, so
perhaps I'd get picked last. By then, the potential buyer has no money left.
Now, I don't do this website to make big money, I do it for me. I like to meet
people who share my interest. Some I meet are right at my own level, and some
become students. Perhaps I really make a big difference for a student, and they
go on to become a colleague. That's why I do it. If it wasn't for that I would
simply fold the website today, as it isn't sensible to try to be one among a
vast sea of 'competitors'.
In January I will explain how I will make the mentorship
program a bit less purposefully 'intimidating' and more user friendly. I want
to focus more on that program, because that is where I meet the high-quality
people that go on to become colleagues and potentially life long friends. Read
the latest testimonial I just posted and you'll understand what I mean. I think
what I am getting at is that I am not really happy with what has become of our
profession, and my answer to that is not to get upset, but to just accept it as
the normal progression of things in a post bubble era.
I will sell
my books because I put a tremendous amount of work into them, and I feel they
are very worthwhile contributions to the trading literature. I feel they are
filled with outstanding trading insight and practical tools for building a
'Trading Plan'. If my work in the commentaries is adequate to inspire someone
to buy them, and then to train with me, that's great. If not, that's fine. I
have my small core group of mentor students, and as they 'graduate' new ones
always come along, keeping me satisfied as far as what I am contributing, and
as far as meeting new traders and developing associations with potential
colleagues.
Going forward, sort of as my New Year's resolution, I will focus on
that, the 'good' part, and just not worry any more (as you all know I do, way
too much) about how glutted the market is, how phony the claims are, how almost
impossible it has become for people to see who truly has material of value,
what our profession has become, and on and on. It's always been a big
frustration of mine to feel like I am one of the few who really is sharing
great material, only to see it diluted by all the quick buck artists with the
trumped up claims. I work with a mentorship student and they are generally
awe-inspired, and I want everyone to see and feel what they feel, and I accept
that is not going to happen. I want everyone to see what I see.
I've reached
the point now, as I slowly work my way back to full focus on my own trading,
after a very long and distracting road to get my all material put together and
available, where I no longer need to have people see what I've discovered, or
see the charlatans for charlatans. In doing both my trading work and the work
for this project I have pushed myself way too hard for too long, and I am
expecting a lot better year coming up as I get back to just the trading, a
small amount of mentoring, a weekly free commentary, and then some time to
enjoy my life and my family. That should produce a lot happier and mellower
Jim. Those that want to work with me will come, as they always do.
I hope this
all makes sense. I like to share with everyone a bit about myself and my
'mission' here at Kane Trading, and how that changes over time. As I work my
way into my third year with this project I want to see it continue to develop
and be a solid resource for traders, and continue to be enjoyable for me. If
you have any suggestions as to how I can better serve the trading community
please feel free to send them to me.
With all that off my chest, let's move on.
Today I will draw from some work I did in the members' area this week. First,
let me briefly discuss last weeks ZN chart from Jim's Chart of the Week. The ZN
decided to bounce once again from that lower line I highlighted, and not break
to the downside. It took out the upper line instead. I knew it was going to
break out of that coil soon, I just didn't know which way. The bounce from the
lower line was the first clue. Now it has a nice-looking ABCD pattern right
here, so that's what I am watching next. This may have been a fake break to the
upside to run stops before a roll over. Price action at this ABCD will tell me
a lot.
I'll start with that BZH setup I discussed (in advance, of
course).
BZH had this fantastic ABCD setup at a
division line for one of my 'adjusted' median line sets. There was a tight
grouping and a key swing-high point from a previous all-time high. BZH jumped
right off the area. I highlighted the area of the arrow to the members
beforehand. BZH rolled right off that spot. Now it sits at the division line
again. This is a key time for this stock, in my opinion. Watch rates closely as
you watch this one.
I'll show a series in EBAY and quote from the members'
area, as posted on Thursday. EBAY did go up a bit more from here on Friday.
This setup was discussed in advance for the members.
"Let's move
on to that EBAY setup. I hope everybody has been following this since I
mentioned it.
EBAY formed this nice looking ABCD with a
'flat' ABCD in the BC leg. It had time symmetry, and it hit right at a ML lower
// from a slightly different type of set, one where I did an 'adjustment' based
on the current move, ignoring the (deleted for the free commentary, sorry) in
the middle there. This set came in right at my pattern area, so I kept it on
there. I also added a second .382 on there, which you can see above the
grouping (although this 'sub-grouped' into two, I still see it as one area, as
the spread was barely 30 cents). I will discuss this shortly.
Let's see
what EBAY did from here.
Looks a bit like BZH, huh? EBAY came right
off the area, and is close to that ML. This is a typical setup and reaction,
and just as I said with BZH, maybe this is it, and maybe it's barely getting
started. Can you see the uselessness of talking about 'where EBAY is going'?
I'd prefer to talk about how I would manage this trade.
Let's drop
down to the 130-minute timeframe for some more detail.
That's just classic action right there. I
hope everyone got right on this and put some work together. Now, let's get to
the point of this exercise. I had another .382 off a different swing-low that
came in higher. Why did I ignore that for my groupings, and why did I leave it
on there? I had my line, which directed me a bit lower, where the .886
alternate ABCD came in. To use the higher .382 I would be at an even lesser
ABCD. That is all right, but not preferred. Also, I wanted to see the reactions
and base it to an extent on that, too. I did put the grouping together for this
upper .382, but I only showed the one number for our purposes here. Notice
there was a reaction there, just not a sustained one.
Let's go to
the 15-minute timeframe, and see what that shows us.
There's my standard line on there. Even if I
put the line on there earlier, to watch that upper .382 area, it would only
slope down a slight bit from this one. Look at the reaction dead off the upper
.382. It approaches the other possible line, rolls down to a lower low under
the .382, jumps up to the area of the line (slightly through that other one),
and rolls down. This is where I anchor my final line. Point is, no way did this
take out the line and violate a swing-point, especially after setting a higher
low. A trigger wasn't even close. Now look at the other area. It stops dead on
the area, breaks the line, and breaks the four swing-highs I highlighted in one
shot. If I want in, this is the first place I'm looking. See the difference in
behavior?
Let's see what happened from here.
That was it right from that spot. Now, if you
look at the ones I point out you can see the same repeating pattern of how I am
using this, and how price action behaves in the areas. Many of these I mention
or point out in advance, so these are not 'well-chosen' after the fact
examples. Some 'work', and some don't, but when they 'work', this technique
usually has me in in a very good spot, a nice balance between confirmation and
cost of entry. The flow change here is incredibly obvious. The setup defines
the potential area for a flow change for me, and a trigger like this defines
when the flow change has occurred. I want to see this happen at the same time
and place."
This series shows a bit about my trade logic and some entry
technique philosophy. Understand that this is just one piece of the puzzle and
is a bit 'out of context' if you haven't read all my material. Nonetheless, it
does show some of what I am doing as I set up a potential trade and follow the
price action into the PTA.
Let me finish with one more thing from the members'
area, again, just as I did last week: "As I close, let me again mention the
commercials. They added a bit more to their shorts, and are now net short just
over 70,000 contracts. This really is worthy of great note. They are building a
massive position as the year end draws near, and I have to be wondering why. It
seems like a first of the year slam may be in the plans, or they may continue
to build, expecting the 'bull' to wrap up, and a sustained bear to start. I
have no idea, but I do know that the commercials have a 100% track record to
date when they take extreme positions. This is not a prediction, just something
I am acutely aware of. I trade the flow, but I sure know the flow could start
down hard on the higher timeframes at any time, and I am very wary of long
portfolio exposure when the commercials are acting this way."
The next
commentary will be next weekend's edition, posted by Sunday evening, December
25, 2005, or since that's a holiday, maybe just before or after then.
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