ajtj99: This can fool even the most experienced traders. I know LG thought the drop in August was accumulation, but we know it was distribution. Normally when you see the markets rise on lower volume like we have lately, it's distribution.
Hello ajtj99...I hope you don't mind if I disagree a little with you...<gg>
The boyz accumulate or distribute in two basic ways one is a low key approach which is accomplish via basing periods (narrow horizontal trading ranges) or during narrowing rising or falling consolidation patterns or narrowing rallies or declines each with declining volume (IE: wedges). The other is more dramatic and more in your face, which is via price action induced buying or selling which often occurs near or at pivot points.
What was in progress for instance, for the COMPX last August was a falling wedge which originated from the May high. Falling wedges most often portend at least a partial retrace of the formation, which requires an eventual break to the upside. As we both know, chart patterns are not 100%. Heck, sometimes the boyz use the patterns to their advantage by moving the price action contraire to the normal break briefly to induce selling or buying prior to allowing the pattern to resolve to the norm. And sometimes the patterns just fail. The boyz know TA...<gg>
This is what I believe happened last year using the COMPX price action for example. After the COMPX March 2000 high the boyz accumulated at various drops and distributed into the following countertrend rallies. I believed that the accumulations were large enough that some of the inventory was still being held from accumulations at higher levels. That is why I expected the wedge to break to the norm. (And that is why I think this rally is not complete.) Well into the Mar01 Falling Wedge, the boys dropped the price through the support line of the falling wedge creating price action induced selling as they tagged the support line of the 1974 Rising Megaphone for the second time. I believe that would have been "the" retest of the megaphone support line producing a major bottom on Sept 10th.
We will never know for sure because as we all know, 9/11 came along. Even the boyz had not planned for what happened. So, the boyz made lemonade from the disaster and dropped the market dramatically after the markets started trading again, adding to their inventories as the price action induced selling took place.
The price/volume told the story, IMO it was a pretty easy read going into Sept 21st...
investorshub.com
The reads are rarely as easy, as misdirection is the name of their game. There is always a certain amount of accumulation and distribution that occurs on a regular basis, but the significant occurrences are what signal pending direction shifts. Learning how to discern when those are occurring is a ticket to better profits in the equity markets. Although learning to recognize these occurances alone without additional timing tools is not enough.
Most often, accumulation as done near pivot lows and distribution is done near pivot highs, but when you know where the markets are heading, close is good enough, think about that and always remember to “Think Like A Criminal”.
My WOW COMPX (NASDAQ Comp) Chart can be viewed at the link below. Click on Chart 1
lgscharts.homestead.com
Good trading and the best of “good buys”…have a great weekend!
Regards,
LG
Disclaimer: The above is my opinion only and I reserve the right to be wrong. An overall market expectation is just that and should not be used in exclusion of the evaluation of individual equities or other investment instruments. Do not base any investment decision solely on any one person's views or analysis, especially an anonymous message board poster such as myself. Do your own research and take responsibility for your own investment decisions. |
