It looks like you are doing well with the charting. You may want to add a 10 day smoothed moving average to help with buy and sell timing. Also, in your local area if they have good business radio programs listen out for technical and charting classes and seminars. A lot of time they are free and you get good advice. Learn about cup and saucer patterns and triangles, flags, islands the power W, tops, bottoms, resistance levels and other key indicators.
In your post you wrote about drawing your line from 8 OCT. The key thing about the chart is to back up and look starting at August.
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Note the 1450/1470 level which represents support. It is broken and the chart hits a first bottom at 1300 on 1 Sep. On 8 Oct the 1300 level is retested. From there time is spent at upper resistance once again 1450 or so. By 1Nov you clearly see upside resistance is broken and we are off to races right up to this week in April.
This is the power W and it the charts on the DOW and NAZ look just like it. This is perhaps one of the most powerful indicators in Technical analysis of a break out. You can bet that every trader and every Wall Street firm worth a dime knew we would head up strong. Add on a 10 day moving average and the buy signal hits about 14 October for the more aggressive investor. The less aggressive would wait till 1 November.
Just using tech analysis per se would not allow you to pick up what transpired the second half of this week. But as you continue to learn some of the indicators listed below will help guide you.
1. Last week starting about Wed/Thur the four horsemen of the NAZ stopped making new highs.
2. The triumvartate of the INET also stopped making new highs. Yet, the other Inets continued to rally - a classic blow off top was developing.
3. The smart money was holding back while the individuals were running to a different beat.
4. It doesn't happen often but other charting/cycle styles were in concordance signaling top/inflection point. Elliot Wave 5, T-Wave.
5. In terms of seasonality, the first half of April tends to do well but as the tax man commeth the second half of April is often down.
6. First day of rotation Dow up, S&P down. However, a five point move in S&P=50 point move in DOW. This relationship was broken big time and the rest is history
Yet it was all there in black and white. It is a rare occurrence but when things line up so strongly you simply take a deep breath and position your risk capital to max advantage.
On buy and hold vs market timing vs best sector.
this is an analysis I saw for 1987-1997
a. Buy and hold simply buy a basket of stocks and hold
b. The perfect timer. On the first of the month buys options on the S&P if he can close out the last trading day of the month at a profit greater than what he would earn in a money market fund. If he/she cannot do better than a money market fund that month the patient just gets the money market return. Thus the investor has perfect timing moving in and out of the market twelve times a year
c. Best Sector. This person simply buys the best performing sector on the first trading day of the year and sells it on the last trading day of the year.
Alternative a,b,c each start with $10,000 in 1987.
The profits in 1997:
a. 11,000
b. 73,000
c. 115,000
Of course many holes can be shot in this. clearly someone with buy and hold in MSFT or INTC would have done a lot better and all types of other things can be said. However, it does demonstrate that there can be a role for expanding ones options. Money is rolling into the Oils and Transports and Manufacturing and others right now. Yes, continue to hold the techs and invest but don't overlook opportunity in other sectors that can spice up your returns at least in the short run.
Regards |
