Thankyou for your feedback, Jerry. I do think much can be done using the basic tools that you previously described, much more than many people think. S&R = support and resistances, fits much better with what you werre saying than Stoch and RSI. Should of guessed.
I think that many do not spend enough time with the "basics". It evidently takes some experience to derive applicable trend lines and S&R and MAs, all of which I call different forms of resistance lines, for an individual stock. It is easy to read into the stock price pattern resistance lines, particularily if they are the "weak" form that does not provide obvious evidence of its existemce, like a price "bounce" off of the line. Choosing the appropriate MAs for the stock IMO requires even a little bit more creativity and multiple attempts to come up with the best "fit". The best "fit" can turn out to look wrong at first glance, particularily if there are other MAs and resistance lines that help describe the stock's price action. Then there is a danger of "curve fitting" here. Any feedback here?
I look for evidence of a resistance line, whether it is "fitting" an MA to the stock's price action, or discovering R&S lines. As mentioned above, one type of evidence is the "bounce" of the price where it suddenly changes direction. Another type of evidence is where the price seems to "jump" forward with perhaps an elongated price bar and an associated spike in volume. Still another is where the price seems to "bump" up against something and even follow what appears to be an invisible line for a few days or more. This is a little more tricky. This is simmular to what I think you once said about other people being able to read price patterns into the stock that are not threre, like a head and shoulders formation.
I have two theories. One is that those same trendlines that are of the "weak" form, where there is the more subtle price action around it of the price of the stock moving up against the resistance line, can turn into the more classic support and resistance line where for instance the price can begin to bounce off of the same trendline. I also think this may be helpful for intraday traders where this type of price action may be more apparent than what can be seen on a daily bar chart. Perhaps it would be more revealing to see a stock's price action on a minute by minute chart that spance a few days.
Also, I have been wondering if there is a way to determine wether a price movement will bounce off of or move through a S&R line. This can be useful information in order to predict the short term future direction of the stock. There are two things I *think* I have noticed that relate to this. One is that if the ROC is high, there is a greater likelihood of the price bouncing off of the S&R line. Second, the higher the volume is (relatively speaking of course), the greater chance the price will move through the S&R line. Have you or anyone else noticed this correlation of ROC and Volume to the price's behaviour with a S&R line? I may be off on this one, but I think I have seen evidence of this which I have not attempted to prove yet.
The unfortunate part about trendlines is that they cannot be mathematically described in a sufficient way in TA software to suite automated handling of the price action of the stock, like stock scans. I heard of "regression channels". Does this tool privide a simmular function as trend channels do which allows parameters to be given to a scan for instance? |
