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EWZuber
1,373 posts
msg #40577
Ignore EWZuber
1/22/2006 2:55:24 AM

guru_trader
IMO, fundamentals are important for sure, but they must be complimented by technicals that indicate accumulation (for a long position).
You said,"....I have noticed how earnings announcements have often resulted in a gap-up/gap-down in a stock's price that my technicals didn't hint at. Aren't long-term investors motivated by earnings announcements and fundamentals? "

Holding a unidirectional position over an earnings an anouncement is just gambling. IMO, the only way to play earnings announcements with consistent success is with an options spread or a combination stock position with put options as insurance (or some variation ).
Investors are motvated by the quality of earnings but say a fund has been holding a huge position in stock ABC and decides it's time to realize some profits. When good earninbgs are posted they may take advantage of the increased buying volume to sell into it. The price will drop but usually recovers over time with this scenario.

Insider activity is not necessarily a good indicator to use. It is important to investigate how accurate the particular insider(s) that is doing the buying or selling has been in the past. Some insiders are terrible traders even in their own companies stock.


nikoschopen
2,824 posts
msg #40603
Ignore nikoschopen
1/23/2006 3:44:18 AM

"It is an old maxim that accidents usually help the bears. Thus when prepared for the worst, the best will take care of itself."


While there is no way of telling when the top of an advance has been reached until some time after such top has been made, a halt in a bull market almost always starts with something which lessens the confidence in credits. When credits begin to shrink, business begins to contract, and as this throws labor out of employment
, the vicious circle is established and generally runs until self-correction takes place. Not only is credit the basis of business, it remains the basis of speculation and the foundation on which values rest. It should always be remembered, however, that credit falls as rapidly as it rises and that it is possible for credit resources to be swept away not only by decreases in actual values, but by loss of confidence which restricts operations on a large scale.

In a relapse, after a large advance, there are usually two stages; first, a quick decline due to bear attacks and the execution of stop orders, and second, a slow fall on the preponderance of selling over buying orders. The decline is often very irregular, full of minor rallies in the making. When the market stops going up and momentum is lost, a selling pressure builds that gradually brings declines. At such time, it is always wise to endeavor to sell when the market is very strong and not when it is weak. Rallies frighten timid bears at the top of an advance, just as a bull is always weakest at the time when he ought to have most courage.

Buyers belong to two classes: those who trade on impulses without much regard for values or prices whenever the market is active, and those who always try to buy when prices are down as opposed to when they are up. A powerful undercurrent of the market will try to involve both classes of buyers by encouraging a market rally to goad one set of buyers and permit reactions at another to spur others.



EWZuber
1,373 posts
msg #40606
Ignore EWZuber
1/23/2006 4:38:28 AM

When the market hits some form of resistance in an overbought condition a topping pattern will form at resistance. One of the first time frames where this pattern will be observed is on the 5 minute charts. This is the first opportunity to take a short position. If the maintains a downtrend then the position can mature naturally.
It's really not a big mystery.


nikoschopen
2,824 posts
msg #40618
Ignore nikoschopen
1/23/2006 2:19:30 PM

EWZuber,

Thanx for the comment. However, for the viewing pleasure of your readers, I ask that you quote the post to which you're replying. In response, I can only say that the excerpts are taken directly from the book.

On a side note, using the 5-min charts to base your entry/exit is quite useful, but this should largely be complemented by charts of longer duration. Also be mindful that you can be whipsawed out of the trade should the stock be in a rangebound rut, especially when it's at or near resistance level (not so much at the support).



TheRumpledOne
6,358 posts
msg #40643
Ignore TheRumpledOne
1/23/2006 7:14:06 PM

Thanks again for posting!


nikoschopen
2,824 posts
msg #40648
Ignore nikoschopen
1/23/2006 7:36:05 PM

Thanks for stopping by.


nikoschopen
2,824 posts
msg #40649
Ignore nikoschopen
1/23/2006 7:58:29 PM

Today I'm revisiting "Analyzing Bar Charts for Profit" by John Magee (1994), wherein he outlines a few dont's himself for financial safekeeping.

WHEN A STOCK COLLAPSES: CRISIS OR OPPORTUNITY? (Originally published in Selected Market Letters of John Magee, March 16, 1985)

In recent weeks, holders of several big-name technology stocks have been subjected to the agony of a "delayed opening - news pending" announcement followed by a severe decline in the market price of their shares. It all began four weeks ago when Data General announced that "current quarter earnings could be below expectations of Wall Street analysts." From its Monday closing price of 72 7/8 DGN collapsed to an intra-day low of 56 1/2 before recovering to close at 58 3/4, off 14 1/8 for the day.

On Tuesday, holders of Wang Labs were subjected to a spine chilling decline of approximately equal proportions, as were holders of Computervision on Wednesday when that company predicted "breakeven results on less-than-expected sales" for the current quarter. For Wang, the drop amounted to 9 3/8 points. The one day 9 3/4 plunge in CVN amounted to an astounding $270 million reduction (one-third) of that company's market value.

While the above events constituted a crisis for existing holders of Data General, Wang, and Computervision, they represent unfolding opportunity for the balance of the investing public. Just as computer and technology stocks were the "darlings" of the 1982-83 stock market rally, and are today its "black sheep," many of these issues will undoubtedly score large advances from current levels. In Wall Street, the wheel turns.

Technical analysis is unusually well-suited for such occasions. First, no technical tenet would justify bottom-picking, or buying into a decline, such as those currently underway in DGN, WANB, and CVN. Often such declines are precursors to substantial further declines. What technical analysis requires after such a jarring decline is a settling down or cooling-off period. Typically, these last a minimum of three weeks and as long as several months. And typically, the Bottoming process after such drastic declines involves a series of recognizable events -- a rally of 30% to 50% of the preceding decline followed by a low volume test of the "crisis" low. The final configuration of the basing process -- Head-and-Shoulders, Rectangle, or Double Bottom -- cannot be ascertained in advance. One thing is clear, however, most of today's fallen angels will be available at current prices or lower for some time to come. And when the Trend is about to reverse, that fact will be evident on the daily price and volume chart. Corporate announcments, as so clearly shown this week, simply do not occur in time to be useful for investor decision-making.


nikoschopen
2,824 posts
msg #40885
Ignore nikoschopen
2/2/2006 2:54:06 AM

THE DANGER OF OVERLEVERAGING

Other than my insignificant other, I felt this to be the most pressing issue that pertains to me in particular. Hence I shall begin with the concept of overleveraging, which will either make or break ure bank account in due time should you not be careful (usually the latter in most cases). Here's a brief snip from the book.
____________________

There is a great difference between seeing "what might have been done" in the past and undertaking to do something for the future. Almost any man can show profits in stock by assuming that he would do so and so at various conditions of the market. He succeeds theoretically in this way because there is nothing at risk and his judgment is clear. The moment, however, that he has a risk which is very large in proportion to his capital, he consults his fears instead of his judgment and does in practice exactly opposite what he would have done had his transactions been purely academic.

The remedy for this is to keep transactions down to a point, as compared with your capital, which leaves the judgment clear and affords ample ability to cut loss after loss short. In other words, you should trade only within your means, which allows you to act easily and fearlessly instead of under the constraint that inevitably comes from a knowledge that the margin of safety is so small as to leave no room for anything except a few anxious gasps before the account eventually blows up.

If people with either large or small capital would look upon trading in stocks as an attempt to get a reasonable yearly return (e.g. 12% per annum) on their money instead of some preposterously unrealizable sum (50% per week), they would come out a good deal better in the long run. Those who successfully run their private business know this in its application, for they are the one who make important decisions based on reason and prudence. Yet, when it comes to trading, these same people lose all perspective and resort to methods completely alien from the usual course of actions that have defined their success.


nikoschopen
2,824 posts
msg #40936
Ignore nikoschopen
2/3/2006 2:02:26 AM

The maxim "buy cheap and sell dear" is as old as speculation itself, but it leaves unsolved the qestion of when a security is cheap and when it is dear. There is no way of telling when the top of an advance or the bottom of a decline has been reached until well after the fact is known. We all know that the public, as a whole, buys and sells at the wrong time. The reason is that markets are made in part by manipulation and the public buys on manipulated advances. Manipulation of stocks is a process by which force, in the name of persuasion, is exerted on other people to buy or sell a given stock. Where force is used once, persuasion is probably used at least twenty times. That is because it is relatively easy to induce people to buy or sell something by making them "think" that their actions are justified. Thus the public buys at the time when manipulators wish to sell and sells when manipulators wish to buy. All this points to the sound principle of buying a security when the general public is disposed to sell; or sell when the general public thinks it a time to buy. Hence I resort to a more fitting principle, "cut your losses short and the profit will take care of itself".


alf44
2,025 posts
msg #40938
Ignore alf44
modified
2/3/2006 10:16:16 AM

niko,

Reading every word !

Those '85 quotes from Magee could've been made yesterday.

They are as relevant now as they were then !


Regards,

alf44





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