<< Also, I would like to add that Rex Takasugi, Editor of "Technical
Disciplines" has another twist for using the false bar on the
weekly bars. He would have to explain just exactly in what instances
that it adds to a trading signal.. >>
With that kind of intro, it's pretty hard not to respond, Ross!
I think Ross is referring to some of our e-mail discussions concerning the use of the Stochastic Bar in a contrary fashion. I am a Type 2 trader, so generally, when I want to go long and make an entry, a Stochastic Bar will be present, confirming that what I want to do is truly contrarian. It is a very minor item within my trading checklist, but something I check nevertheless. It's probably worth discussing in detail in a future edition of the newsletter.
Maybe an example would help... I recently recommended BOST as a contrarian play, looking for a short covering rally, or a EW4 in Elliott terms. (By the way, this recommendation was quoted in the latest edition of the Dick Davis Digest). If you look at a weekly chart, and plot a Stochastics indicator using virtually any set of parameters, you'll see that the Stochastics Bar is present. According to the GET manual, you should not take a long trade here. As a contrarian, I'm saying you should, based on other factors. It's not that the Stochastic Bar is deficient or inaccurate, it's just that at the bottom of an EW3 or EW5 or a C wave, I find that the Stochastic Bar is generally present. Since I don't know the formula behind the Stochastic Bar, I just accept it for what it tells me, concerning the wave patterns in which I'm interested in taking a position. If I enter a trade and it turns into a nice EW3, I will heed the Stochastic Bar and not regard it in a contrarian fashion until I think we're near the end of the EW3 move.
As described in the May '96 edition of my newsletter, I also use the XTL indicator in a contrarian fashion similar to what I've described above.
Having said all this, trying to be a contrarian in a momentum driven market hasn't been the most pleasant of times. But investing styles go in and out of fashion, and I'm sure the momentum style will run out of steam at some point and the contrarian style will come back into vogue (hopefully soon!).
I'll try to check into this message board a little more frequently...
Best,
Rex S. Takasugi, President
Technical Disciplines
Investment Advisory & Management Services
(253)639-0436 Tel & 7806 Fax / RexTak@aol.com
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