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Strategies & Market Trends : Trading the SPOOs with Patrick Slevin! -- Ignore unavailable to you. Want to Upgrade?

To: SE who wrote (1233)11/18/1999 5:10:00 PM
From: Ms. X  Read Replies (1) | Respond to of 7434
 
Not a problem. Here goes a more visual explanation...

A shakeout pattern is when a chart gives a sell signal in a defined
up trend. This is a pattern with higher bottoms etc. The chart gives
a sell then immediately reverses back up (which is where one enters
the trade). It is called a shakeout because the "false" sell signal
gets rid of all the weak knees in the position then turns around
and gives a reversal up and eventually (a very good percentage anyway)
takes off.

Here is a shakeout.
115.75
115.50 X X
115.25 X O X O
115.00 X O --------X O
114.75 X O X X O
114.50 X O X O X O
114.25 X X O X O X O
114.00 X O X O X O X O
113.75-X O X O ----B O O
113.50 X O X O X O Today's break of support.
113.25 X O O X
113.00 X O X

115.75
115.50 X X
115.25 X O X O
115.00 X O --------X O
114.75 X O X X O
114.50 X O X O X O
114.25 X X O X O X O ?<--This would be the completion of the
114.00 X O X O X O X O ? shakeout pattern. When the stock reverses
113.75-X O X O ----B O O ? up from the "false" sell signal.
113.50 X O X O X O 114.25 is the entry to the trade
113.25 X O O X
113.00 X O X

115.75
115.50 X X
115.25 X O X O
115.00 X O --------X O Let's say it does reverse and you
114.75 X O X X O enter the trade on the shakeout pattern.
114.50 X O X O X O at 114.25.
114.25 X X O X O X O X
114.00 X O X O X O X O X ?
113.75-X O X O ----B O O X ?
113.50 X O X O X O ?
113.25 X O O X ? <--Your stop would be here if the
113.00 X O X pattern didn't work out and the chart
reverses down.

If this does not create a shakeout pattern...
115.75
115.50 X X
115.25 X O X O
115.00 X O --------X O
114.75 X O X X O
114.50 X O X O X O
114.25 X X O X O X O
114.00 X O X O X O X O
113.75-X O X O ----B O O
113.50 X O X O X O Today's break of support.
113.25 X O O X ?
113.00 X O X ? <--If the stock continues down it negates
the possibility of the shakeout pattern
and you have the chance of the chart
breaking down further.

This is why we wait for the reversal up. That way we know that the
pattern is a shakeout and that the reversal down is over. Also, a
close stop is a good risk reward situation which you should always
look for in trades.

Hope that helped. If not, let me know.

Ha!
Another excellent grub. 1234 for 1 and 2 and 3 and 4 charts!
:-p


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