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Strategies & Market Trends : MDA - Market Direction Analysis -- Ignore unavailable to you. Want to Upgrade?

To: John Pitera who wrote (62722)	11/17/2000 1:44:37 PM
From: HairBall	Read Replies (1) \| Respond to of 99985

John Pitera: A few remarks about patterns from my perspective. First, there is not always a pattern in play. Second, too many patterns are being incorrectly identified. Third, when you identify a pattern, plotting the trend lines imprecise can make it difficult to take advantage of the expected outcome. (Same goes for imprecise plotting of trend lines.) And last but not least, all pattern lines, trend lines and or horizontal support/resistance areas once identified correctly and precisely plotted should be used in tandem with real time intraday indicators to help determine course of action as "price action" nears or intersects those lines... Of course, all IMO... Regards, LG

To: John Pitera who wrote (62722)	11/17/2000 5:36:21 PM
From: KymarFye	Respond to of 99985

John P. and Fun - Even if such patterns are still tradable (remember, I'm agnostic), I think that, at the very least, the traditional methods have to be related to particular market conditions. Hardly anyone anymore, for instance, seems to follow the relationship of the Dow and the Transports very closely for the sake of determining the total direction of the market. It used to be considered critical. Likewise, and as less technically inclined investors and traders have also been discovering of late, many assumptions and methods that were highly profitable in '98 and '99 (or '48 and '59) have been dysfunctional where not disastrous in 2000. It would seem likely that the same considerations apply to chart patterns: Even if you could demonstrate that a 5% breakdown of an x-sloping neckline of a such-and-such-defined h&s would have been very profitably tradable from April to November of this year (bigger total wins than total losses, after slippage and commissions, regardless of actual win/loss percentage), there'd be no guarantee that going forward you wouldn't need bigger breakdowns to be confident in them, or, on the other hand, might miss them entirely if you waited too long. One approach might be to adjust the size of your confidence zone (and stop levels) according to volatility readings on the particular trading vehicle and on similar trading vehicles in similar positions: Seems to me that waiting for a ca. 5% breakdown on QQQ or SUNW (much less KO or MO) is obviously a lot different than waiting for a ca. 5% breakdown on, say, ARBA or some other vomit comet. (Worth noting also that if we were having the same discussion a year ago, we'd reflexively be discussing breakout patterns.) If a couple of months (or days) from now, the whole universe has decided that there's just no action in tech stocks, volatility levels might die off again, and, presuming there was any profitability left to trading any patterns on the "same" stocks, you'd have to re-jigger all over again.