Position Trading Account: IBM Example
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This chart may seem a bit more intimidating, but if we break it down it should be understandable. On the top e again have the major trading channel drawn with upper and lower trendlines. Additionally, I have marked out where the stock went 'horizontal' for three weeks.
Also, at the very top right corner, the most recent couple of weeks show the minor channels that occurred within the major channel. What this tells us is that as long as the stock stays above the lower major trendline, we are still moving up. It may correct down to that number, and since IBM moves in generally smaller intraday ranges it actually creates minor trading channels for the waves up and down. This is important on more volatile stocks, and it easily presented here. However, since the % delta is small for IBM, it's not terribly useful for day traders.
The bottom chart overlays the closes for IBM in blue over the S&P500 closes in red. This indicates that IBM has a beta of about 1 - it moves in concert with the general market. Thus, if the market futures are down, and the general near term trend is down, IBM will probably make it all the way to its lower channel in a few days. The real importance of this is that if IBM penetrates the lower channel ahead of schedule, then the general market will probably follow and one should exit long positional holds and look to short.
One last thing to note is that when IBM broke above its horizontal movement, it continued up all the way to the upper trading channel (from 172 up to 189 - almost 10% in 5 days). note that the S&P500 also moved up 10 points (7.35%) and that the S&P500's movements are amplifications of IBM's - to the point that it could be used as a leading indicator. If the S&P is down, then IBM will follow, and vice versa. (TA Note: I have normalized the S&P index as a ratio for this chart - as I do for all comparisons)
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