Thursday, October 2, 2008


Today was another meltdown day. But it was coming. In previous posts, I did mention the importance of triangles and that a breakout or breakdown would be significant. In this case, we broke down right at the open.

The green circle was a great timeframe to go long the agriculture/fertilizer stocks I despise so much. My signal for always going long is if a higher low has been made. That means we've climbed out of the ditch. Below is an intra-day chart and you can see the head-and-shoulders form at the end of that rally. That was my signal to go sell and go short again.

There's a difference between these type of rallies and power rallies that spike upward till the end of the day. First, notice the numerous corrections in the rally and how irregular and more frequent they were becoming. A healthy rally should exhibit strength, not frequent corrections. This failure at the top signaled that we would not fill the gap (although my IPI long did very well and nearly filled the gap). We hung out for a bit until at 2:30PM we broke intra-day support. It was completely over by then. You can see a previous post (several down) where I actually commented on my actions throughout the day.

Technical analysis is not a crystal ball, but it does help you in assessing what is happening now in relation to the past. Best of all, TA provides clear cut entry & exit points like I've demonstrated today.

Don't forget to try out the Free Trend Analysis. It's FREE, so give it a shot!

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