>>Zebra your post was very well written. I have a few questions: At this point the chart seems (at least to me), a little confusing as to what direction is next. If you want to apply some theory, I would say that we are getting "compressed" and (given the fundamentals, as they are "expected" to play out), there may be a resolution of this compression, to the upside, possibly with lots of power.
If I understand your theory correctly, why is it not a given that the move to the upside would be with lots of power?<<
O. k. second try.. (first one was eaten by the goblins of cyberspace)
I will caution you to ever assume that anything is a "given" in the market. Nothing is, even if tomorrow FTEL could come with the biggest news ever thought of, there could be a weird event half way across the world that could cause the entire market to tank. Remember the big demo in NYC. I believe it was the day the market tanked 550 points. yes?
So no assumptions, nothing is a given (until, of course, it actually happens).
The way I see FTEL is that there seems to be some selling pressure the minute we approach the $5.00 level. At the same time there is substantial support if we near $ 4.00
Initially, I thought that our consolidation would have occurred at higher levels, (around $6.00 to $7.00). For a while it looked that way, and then we broke support and slid all the way to $3.625, from there, we bounced to current levels
Why? Possible scenarios are two (in my opinion), One we have a boat load of shares being converted and "cashed in" from a number of sources, primarily early investors, possibly employees (including former, possibly). Alternatively, we have a bunch of "mercenary warriors" (day/short term traders) that as soon as we go near $4.00, and then approach $5.00 they "buy and sell".
Example: one buys say 5,000 shares at $4.25, and then sells at say $5.00 (or thereabouts). Profit, about $3,750.00 before commissions and taxes.
Markets will rise, according to Dr. Elder if the (greed) buyers are more aggressive than sellers, and/or (fear) sellers are AFRAID that they will not get "enough" and therefore demand a "premium".
The bulls are going to have to come on strong for us to go through resistance, ($5.325), and then break away to higher levels. There seems to be no conviction among the bulls.
What would cause the buyer of FTEL to be aggressive? And What will cause fear in the seller, that he/she is not getting enough?
The absolute "conviction" that this time FTEL, is for sure rocketing very high. Remember we have had already two "failed" attempts to go higher on a continuos basis (the attempt at $10.5 and then at $7.00, both NOT on a closing basis, since we closed slightly lower than the highs).
It seems to me at least, that FTEL has discounted all kinds of projections, fluff news, and other minor events. It seems to me that the market is seeking some BIG confirmation of the hope and "speculation" of the last three or four years, it seems that it is "demanding" such confirmation.
At the same time, the market realizes that there is tremendous value in FTEL at these prices so it does not allow the stock to slide lower.
We need some kind of "resolution".
I know that the fundamentals are there, but the real question is, do the market participants realize this? May be they are waiting for the NASDAQ listing? (new participants may be waiting for such event). Bottom line I am only speculating. I do not know for sure.
>>I agree with your last paragraph which you stated. I do, however, have a question on your last sentence So at this point, I am grasping to find a solution for my "puzzle" with little success: Is it not the "speculation" that is the substitute at this point for the last puzzle pieces?<<
What puzzles me is that there seems to be no resolution to the above "trading range". Why is there no "confidence". The comment about how come so and so is $20.00 and look at them, they are loosing money!. Well, they probably are allied with some big company that it is giving the market confidence to plunge $20.00/share, no earnings.
FTEL, while it has advanced, great strides is not at such level yet. Therefore, in the eyes of the market it needs such "alliance"
In my opinion the speculation "phase" has taken place, or we are about to enter a different "phase". When FTEL was $0.85 Cents three to four years ago, that was pure speculation, since then FTEL has delivered, but expectations are now even larger than before. These expectations, (reasonable and otherwise), are there, the market is hungry for a "big" order, a "strong" alliance.
In other words: market is saying: "I want a bases loaded home run, never mind that other techno-shit, that I do not understand anyway, let alone comprehend"!! (Sorry Mr. Klimpl, Mr. Smith, et all, merely relating my graphic impression of the corresponding market's own take on things)
Unfortunately I do not have a clear picture of what is next. and in so saying we come to your question:
>>Could you please explain the concept of ADX, and the significance of the number 20?<<
ADX (Average Directional Movement Index) is an indicator of "long term" nature. It serves to identify trends (up or down), and it also helps identify "changes in existing trends.
The main advantage of using this indicator is that it attempts to reduce risk, by first identifying the existing trend, and then it lets you know (sometimes well in advance), when the trend is about to change.
The disadvantage of this indicator is that it is rather "complicated" because in order to get all the benefits of its function you must combine it with other indicators under different sets of circumstances.
The ADX line has a scale of its own (in a chart), usually right below the stock or commodity main chart. In general, when the ADX line "rises" it tells you that a trend has "strength", if it is falling, the existing trend is weakening.
When the ADX line "turns down" it tells you that whatever trend is prevalent, is about to change and therefore you should be getting ready to do likewise. I.e., if there has been an "uptrend", and you are "long", then the ADX line turns, then you should consider liquidating long positions. If the other circumstances and signals warrant it you may even consider not only closing long positions but further, "go short" (in case of an aggressive trader).
Now, if the "turn" takes place at a higher point than "40" (in its own scale), the signal is stronger than otherwise.
When the stock or commodity in question is merely, on a sideways market, without a definitive trend, the ADX will slide slowly towards 10, at any moment if it turns up, it means that a "trend" is beginning to develop and further rise will tell you such trend is getting stronger.
Usually in these instances, it means that after a period of "consolidation" or "side ways" action, a strong trend could be coming. The longer the consolidation (or the lower the level of the ADX line), the stronger the potential trend will be. However, the ADX, (upon turning up), will only tell you that a trend is taking shape, it will not tell you in what direction it will go. (either up or down, you will need other indicator(s) or analysis to determine its direction.
The relevance to FTEL about the comment of the ADX turning up from about the level 20 is that it would tell me that a strengthening of the current trend (at present slightly up) is taking shape, and given the fact that we have been "consolidating" may mean that some credible strength may be the case. (while not "technically" pure, the fundamentals that have been mentioned, appear to be in agreement with the chart).
Another indicator I use in conjunction with the ADX is the DMI (Directional Movement Index)
Between the two, they help me determine:
1. The trend of the stock in question.
2. The strength of such trend
3. When to get in or out
4. When is there going to be a change in such trend.
Quoting from the book "Technical Analysis from A to Z" by Steven B. Achilles this explanation follows:
Begin Quote: ****************
"The basic Directional Movement trading system involves comparing the 14 days "+DI" (Directional Indicator) and the 14 days "-DI". This can be done by plotting the two indicators on top of each other, or by subtracting the +DI from the -DI. (J.Welles) Wilder suggest buying when the +DI rises above the -DI and selling when the +DI falls below the -DI.
End of Quote ******************
In addition I will copy the following from the Trade Station help menu explaining the DMI further and how it relates to the ADX: (unfortunately I can not copy the patterns shown for the explanation below):
Begin of Quote:***************
The DMI indicator deals with the trending quality of a market. This indicator has three lines: DMI+ (DMIPlus), DMI- (DMIMinus), and ADX. If the DMI- is above the DMI+, this indicates a downward trending market while a DMI+ above the DMI- indicates an upward trending market.
DMIPlus is the equivalent of DI+ in technical analyst Welles Wilder's formula. DI+ is the quotient of something known as DM+ divided by the True Range for a defined number of bars. DM stands for directional movement and can be negative (DM-) or positive (DM+). The directional movement is determined by looking at the current and the previous bars.
***********Sketch of trading bars, could not copy it*************
However, you can use your imagination
(Kaufman, page 70-71)
In pattern #1, the current bar's high and low are higher than the previous bar's high and low. Therefore, the directional movement is positive. In pattern #2, the current bar's high and low are lower than the previous bar's high and low. Therefore, the directional movement is negative. In pattern #3, the high and low of the current and previous bars are identical, therefore there is no directional movement. Pattern #4 is an outside bar pattern. With outside bars, there can be either a positive or negative movement depending on which value is greater. In our example, "DM+" was greater than "DM-". Pattern #5 is an inside bar pattern. All inside bar patterns have no directional movement.
"To obtain the DMIPlus, all DM+ values for x (LENGTH) bars would be added together and divided by the sum of the true ranges for x (LENGTH) bars. The true range of a bar is determined by choosing the largest of the following:
The distance between today's high and today's low
The distance between today's high and yesterday's close
The distance between today's low and yesterday's close" (Kaufman, page 78)
End of quotes**
Essentially these measurements establish the "trend" that one is interested in identifying.
Luckily (for me at least), we have computers, so all this calculations are done instantaneously from day to day.
Do not forget that: in my eyes, T.A. (particularly applied to penny-stocks is:
1/3 science, 1/3 Art, and 1/3 Voodoo.
For further reference: Read:
"Technical Analysis from A to Z"
by Steven B. Achilles (good reference and quick refresher of indicators.)
"New Concepts in Technical Trading Systems"
by J. Welles Wilder
you can buy these books and others at:
amazon.com or
elder.com
And if you want to further explore the idea of trading based on trends, there is this site that has lots of information:
turtletrader.com
Lastly, I am not a member of any of the above organizations, I simply thought you might be interested.
Hope the above helps. |
