Hi Wolf and tech fans: Gaps Williams%R and EW
I had a good chat this afternoon about gaps. My thoughts are that Japanese candles (windows, Tasuki) and western gap trading strategies align. That is they align short and long term with 'support and resistance' views and short term trading views.
On the short term timeframe, my view is we do not need to close the windows every time, as it appears many people believe (gap trading predictions as posted on chat boards like SH or SI.) There seems to be an overwhelming desire by some (many) to close the window otherwise 'something bad is going to happen' perhaps in the longer term. Perhaps popularity with the saying 'trade towards the gap' has displaced traditional gap rules.
People who do not follow gap trading rules will then be prey for those who do. Scott McCormick defines four types of gaps and eight related gap trading rules. Nison also defines different types of windows, like the upside and downside Tasuki gaps, the gaping plays and side-by-side white lines, and three windows theory. Again, each of these types of windows have their own set of trading rules.
This past Monday's gap openning and the subsequent two trading sessions, formed a near tasuki. 'A White candlestick gaps higher and is followed by a black candlestick. the black candlestick opens within the white real body and closes under the white candlestick's real body. The close on the black candlestick day is the buy point. If the market fills in the gap (closes the window) and selling pressure is still evident, the bullish outlook of the upside gap tasuki is voided.' This Nison example, is one gap pattern with two rules.
On the negative, the RSI and stochastics look stretched.
The Williams%R is trying to break through the top of
the chart.
Re Williams%R, nothing negative with yesterday's reading. We want it plastered to the top (or near 0) for as long as possible. Another way to look at it, we'll then get many white candles! Other indicators have not confirmed overbought yet, and given moves can continue overbought over a long period (relatively speaking), William%R can stay that way.
Alas, nothing moves in a straight line, but in waves. Final thought, we are still in the first impulse wave since the trend reversal and UK NR. The bigger this first wave is (too bad with TD selling) the bigger the 3rd impulse wave is going to be. I'm betting the 3rd wave coincides with UK partner, payments and probably other EU announcements. Yes folks, its only a prediction but there is a magic number that can be calculated. After competing 5 impulse waves does not mean we cannot move higher longer term. |
