Sean,
Well I sold half of my longs on Wednesday and Thursday and on Friday they came back strong. It is true that there are none of the classic signs of a trend reversal--penetration of the trend line, test of the high, lower highs, break of support, etc, so perhaps I did jump the gun. In fact, I have a tendency to sell too quickly.
I place a lot of importance on the RSI(14). Both the RSI and the MACD are showing a bearish divergence and the RSI crossed below 70 on the twelfth. In addition, there was the gap on the thirteenth(which, technically was not a gap as the shadows overlapped, however, I take a liberal view and consider it a gap as the candle body opened considerably below the prior candle). Perhaps I should have waited for some confirmation, some Trader Vic type reversal, and I will wait for that before I put on any shorts.
Looking at charts of some stocks I have traded this year, I see similar retracing patterns as above. These stocks just consolidated for awhile and then blasted off. As I think this through, I believe I may have to change the way I value the indicators I use. Isn't learning fun.
The bullish divergences in October of last year occurred several days before the breaking of the trendline although they occurred with the formation of a double bottom. A the time the same patterns where apparent in many individual stock charts.
What do you think?
Bob |
