Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Gold/Mining/Energy : Big Dog's Boom Boom Room -- Ignore unavailable to you. Want to Upgrade?

To: gregor_us who wrote (40885)	3/27/2005 7:08:56 PM
From: chowder	Respond to of 206319

>>> I was wondering if you noticed the rise in both Short Interest and OI in the Put options on the XLE, very recently? It appears the Majors too have seen a good rise in Short Interest as well. <<< LP, I haven't looked at the short interest figures. I can tell by looking at a chart if short interest is rising or not, in most cases. I know a lot of people will buy long positions in anticipation of a short squeeze but if one wants to have an idea of where the odds are high of that squeeze coming, they would need to have some, not necessarily a lot of technical skills. They would need to know at what price range the sell set ups appear. That usually comes off the 20 day and 50 day moving averages, sometimes off a new price low and of course, off an upgrade or news related event but we can't anticipate the last two with any consistency. Someone posted an article earlier today about how some think the oil service stocks will see peak earnings this quarter. Obviously a lot of folks don't. This uncertainty is what stops Stage 2 stocks (uptrending) in its tracks and develops into Stage 3 stocks (consolidation or trading ranges). Once a stock enters Stage 3, (this is where a pull back sets a lower low than the last pull back), it usually takes something unknown, yet powerful enough to create enough interest to kick the stock into an uptrend again. The above analysis only applies to short term trades at this time for the stocks we are talking about. Short term traders focus on the daily charts. Longer term holders are still in an uptrend and should focus on the weekly or monthly charts to confirm if a stock is still in a Stage 2 uptrend. 80% of a stock's price rise usually presents itself in a 20% time frame. That 20% of the time, comes in the form of what is known as Stage 2. The 4 stages include: Stage 1. The basing area. Stage 2. The advancing stage. Stage 3. The top area. Stage 4. The declining phase. Stage 2 turns into Stage 3 when the price drops below the 20 day moving average and in essence, sets a lower low than the last pull back. The first break below the 20 day moving average is usually a result of profit taking by the institutions. They are usually the first to sell. Following this stage, any rally is one that is usually sold into and where you will see the shorts pick up the action. So in the example of COP, since this is one you own, when the price dropped from $112.91 to $103.03 the chart is confirming the sell off was institutional selling. I know this from the huge volume that showed up when the price was falling. The price closed under the 20 dma for the first time. The price then moved back above the 20 dma and rallied to $111.00. This is where you saw institutions selling the rally and this is where the shorts started picking up the action. Again, the volume bars suggest what is going on here. This was the second attempt to get back to the old high of $113.97 and it failed. You now had 2 lower highs which indicate a consolidation phase. There has been a change in character in the buying and selling patterns and strongly suggest that one protect part of their profits. Professional traders take 1/4 to 1/3 of their positions off the table when this chart scenario becomes apparent. They don't mind buying those positions back if the price can get back up and set a new high. Or, they will wait for the price to test the 50 dma where you normally see some short covering and people adding new positions. Too many people have the wrong impression of technical analysis. Some think it predicts future price action, others think we base the future on past events. That isn't how TA works if one wants to be consistent with the results that come from using TA. I use TA to show me where the odds are best that we a change in character between buying and selling. I monitor the buying and selling habits of everyone who is in the market and when those patterns change, I try to take advantage of them. So again, using COP as an example, I see that the sellers are in control at this time. Assuming I own COP and want to add to my position, I would wait until I see a change in those selling patterns before I buy. To buy why the sellers are still in control is where we get the "catching a falling knife" phrase. Where might the buyers start to gain control? One place is off support levels. Since we have broken the 20 day moving average, price usually falls to the 50 before we see a rally. So I would place an order just above the 50. If the price doesn't come down to the 50 or if the 50 doesn't come up to the price, my next price range buy target would be just above $111.00, the last price high on the last attempted rally. You should see some short covering just above $111 because those who shorted this last step down would all be holding losing positions at that time and would want to cut their losses. stockcharts.com[h,a]daclyiay[d20041227,20050327][pb50!b20!f][vc60][iut!Lah10,30,5!Lc20]&pref=G So TA is about finding bus stops on a map and determining where to get on or off the bus. Off course, if some news related event comes along in the coming days, then you put your analysis aside and adjust as the news may warrant. Absent any news, I continue to watch the map. dabum