Before I knew anything about TA, I would have sold both my October and Jan calls and made a nice little profit yesterday.
I think you let the finer details of this new experience take you away from some basic trading practices that have worked for you in the past. Good TA should not take away your ability to make a profit, it should make your profits more reliable. I cannot stress the importance of being willing to take profits early. As you get more experience reading the "tape", you will be able to discern better when to ride the price gyrations through and when to take profits. But when it doubt, it is always better to take profits off of the table than wait for a loss to develop. Matter of fact, this is one of the most common mistakes made by traders and investors alike.
What do you mean by basic tape reading skills? I assume you are talking about upticks, downticks, volume, etc. If not, please elaborate on this.
By basic tape reading skills I mean being able to follow the short term (10 minute for example) price action on a stock a determine when it may correct after moving up or rebound when it has moved down. I can determine alot by the price ationitself, but volume can be important too. I could tell just before I sold that the upward price action was "softening" and may start to drop away from its attempts to break through 61. So I sold just before the price dropped over one point and closed there for the day. This skill is important to time exits on my option purchases. In this way I have been able to pick tops within about 1/2 of a point like I have with PHYC and WMT in the recent past.
How do you actually determine if a resistance level has been broken. It's obviously not just because the stock traded above this point and I am just not sure.
It is difficult to tell if the price broke through on a intaday basis. It is best to wait for at least two closes beyond 61 before considering it a break through. However, if you closely watch the tape, you can tell by volume and price action. For instance, if the price after moving to 61 7/8 were to back off and respect a intraday support that is at about 61, and then move back up under volume, then I would consider this evidence that the price broke through 61 at least for the interim. The price spread on the stock can confuse matter too. Also, it is very helpful to follow the large block trades. If when it bounced from that support, there were large block trades while the price moved back up, I would consider this further evidence of a breakout. But it is usually difficult to tell if the breakout will remain on a larger time scale like a day or two later. A look at the technicals at the end of the day may help here.
What you are saying here is also that the 50 day MA is a key average.
The 50 day moving average is usually very important with stocks. You can see the price action of the stock verify this by treating it simular to a resistance line. When the price of the stock moves through it and closes with the volume up and an elongated trading range for that day, the 50 day MA is validated to have significance and can also help determine the near term price behavour of the stock. I can go more into MAs on a later post. There is alot more to learn here than most beginning TAers realize. Matter of fact, IMO one of the important concepts of TA is to understand what the price action of the stock can tell you when it meets resistance which can be a MA, a trendline, a support or resistance line, for examples. And it is also important to understand how OB/OS conditions and momentum of the stock's trend relates to this.
I now have Quotes Plus and when I put in the ma's, 50 and 200, the 200 day average doesn't go all the way back to the beginning of the chart.
The charting software with QuotesPlus has a few bugs. One of them is what it does with the 200 day MA. I also have had this problem. I also have found on occasion erroneous funamental information and price updates. But I think the problem price updates is the result of a bug in the Metastock utility that comes with the package. But for the most part, I have found this package to work well.
Your messages are extremely helpful I am sure not only to me but others and I hope you will continue.
No problem. I enjoy doing this when I can. I think you are very smart to go through your learning curve to give yourself a very useful set of investment tools which includes TA. As an aside, I remember meeting a person at a restaurant where we ended up dining together. She was very interested in the stock market, for she was taking alot of finance and investment classes at college. I related to her that experience is very important to succeed in the stock market and the academic books in this area are not that helpful. I offered her the opportunity to learn abou thte stock market if she would help me with some research. She obtained my number but never got back to me. Oh well. I could of used her accounting and finance background so this would of worked for both of us. I am happy there are people such as yourself that are really interested in learning this stuff.
I think what happens is that the more you realize how much you don't know the more you are afraid to do anything which isn't good either. i would actually consider paying real money for a TA class if one was available. Do you know of any?
I think you are going through a necissary phase in the learning process that for the most part cannot be avoided. Classes by competent teachers of TA could help, but I do not think this would be necissary. Remember it has taken me years to get where I am now. Experience is very important and cannot be replaced in the use of TA or anthing else that pertains to the stockmarket. And there are othes who have been using TA for over 10 years and are still learning new things with this tool. There is simply no way for you or anyone else to pick this up in one month. There are simply no "shortcuts" in this type of learning experience even though good books and access to experienced people help alot. So I think it would help your anxiety level if you were to accept this. :)
Now I will go to the Thai restaurant that I have recently found where most of the dinners are under $6. My stomach speaks to me!
Bob Graham |
