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

To: quehubo who wrote (43217)	4/30/2005 8:56:45 PM
From: chowder	Read Replies (2) \| Respond to of 206339

>>> Focusing on today's gains may suit you. Several of the people I know here have been focused on tomorrows gains and the day after's. If you are in the correct companies in the correct sectors sooner or later the money will fall on you. Of course the trick is to pick it up and walk away while you still have the gains. <<< ------------------------------------------------------- OK, let's talk about that. Regardless of what method one uses to enter a stock, the bottom line is everyone needs money flowing into the equity of their choice if prices are to rise and present a decent profit. Someone must be willing to pay a price higher than the price you entered at. Your fundamental analysis looks for a reason to attract money flows. By attracting money flows, prices will rise. So, while you may focus on the reason "WHY" a stock's price may rise, I simply focus on the money flows and could care less what is causing the price to rise. This message isn't about the method you or I use. It's about the money flows themselves, regardless of reason. Common sense should dictate that if money is flowing into the sector, prices should rise. If money is flowing out of the sector, prices should fall. Let's take a look at a 2 day chart of CHK. I'm using CHK because I know you have an interest in it. In the following chart, each candlestick represents 2 days of trading. It provides an easier to see picture than the daily chart does. In the lower window, I have an indicator called MS (money stream). It is applied to a moving average that says 20 but since it is a 2 day chart, it's actually a 40 day moving average. The grey horizontal line represents a zero line. If you'll look at the money stream indicator starting in January 05, as it started to rise, so did price. As MS moved above the 40 day moving average, price really took off and established a Stage 2 uptrend and created a new price high. In March, money started flowing out of CHK and other energy stocks. I made note of that here at the time. When money flows drop below the moving average, you have confirmation that the uptrend is over. On the ensuing rally in early April, note how money stream never got above the moving average and it dropped to the bottom of the chart. Money flows are now well below the low point in January 05. This is known as a bearish or negative divergence. There is no way that I can imagine CHK getting back up to the recent highs with money flows this poor. It just won't happen. So, when I look at money flows, I ask myself if this environment is conducive to a successful trade on the long side? Now if one is day trading or looking for a 2-3 reversal, that's different. We should use different parameters. But this chart is screaming that institutions are dumping and until you can attract institutional support, price isn't going very far to the upside and may even fall further. ttrader.com Now to further illustrate the technical damage done with regard to money flows, let's look at a MONTHLY chart. As you know, the monthly chart represents the long term view, something most people here might be interested in. The monthly chart is also showing money flows below a 20 MONTH moving average and now coming up on the zero line. A drop below zero becomes even more negative. In fact, money flows are so negative, you have to go all the way back to 2003 when the price was between $8 and $10 to see money flows at this level. ttrader.com The bottom line is, there isn't a single time frame that shows where money is flowing into CHK. Until those money flows level out and start to rise, I would say this environment is not conducive to adding long positions if looking at more than a day or swing trade. In fact, these money flows are so negative, it's the first time they have been below the 20 month moving average going all the way back to 2000. There's nothing wrong with trying to focus on tomorrow's gains or the day after. However, when doing so, I would think one would prefer to see a better environment with regard to money flows before leaping. Just trying to add another perspective. dabum