re: Jack Chan's GDM Resistance Line...
Message #13853 from A Horse With No Name at 12/11/2008 2:18:06 PM
slider check this GDM long term chart(you might have to scroll
down a bit.) its at a huge resistance right here.
stockcharts.com[s135882415]&disp=O
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Hello Horse,
Support and resistance lines are guideposts.
Think of them like the lane markers on a superhighway. They're
meant to guide you, but not meant to restrict, or limit
you.
Sometimes you need to cross those lane markers to break out
of slow moving traffic, and accelerate around them in the
passing lane.
Trend lines and trading channels are much more important
than support & resistance lines.
For instance, on the GDM chart you cited, if you honored the
incredibly powerful overhead resistance line of 2004-2006
shown in blue on the chart below, and took profits into that
resistance line... then you missed an immediate, parabolic,
+60% breakout rally.
And the first part of that move, from GDM 800 to 1100
(a +37% move), occurred in one continuous move - with
no pullback, or opportunity to get back on the train.
There was nothing technical (other than an interim trading
channel) that indicated that resistance was about to be
broken.
Now tell me, what was the more important technical indicator,
the blue resistance lines, or that red-dashed trading channel?
And that's why technical analysis in a vacuum, without
fundamental analysis -- is worthless.
You could take an average 6th grader and teach them to draw
support and resistance lines in about 90 minutes.
What you can't teach them, and what no chart, and no "system"
can ever do -- is interpret the fundamentals.
Here's the rules I apply to resistance lines...
"If the fundamentals remain neutral, or negative -- then
honor the resistance lines.... and sell into them.
But, if the fundamentals have turned for the positive, then
ignore the resistance lines - and follow the trading channels."
(as shown in the HUI chart below)
The reason I said "give Ole' Yeller some leash & let 'em run"
is because the trading channel (the trend) is up.
Now that doesn't mean that you don't take "some" profits off
on days like yesterday (ALWAYS take "some" profits on all big
gap up opens), or at the margin on some stocks today that may
be showing some individual topishness along the top of the
trading channel.
But, given the recent positive turn in the fundamentals...
gold rallying from $698 to now over $820, and silver
from $8.77 to $10.45, along with the US Dollar weakening,
and the ongoing rate cuts, bailouts, and stimulus packages
from virtually all the global central banks -- WHY, wouldn't
you give gold stocks "a little leash" and let 'em run!?!?
I've taken some large profits in my big breakout stocks like
AEM which exploded from where I added some more at $26 on
Friday, to $39 yesterday... a +50% move in a large cap, major
in just 4 trading days!
FIFTY PERCENT! in a large cap major in 4 days -- that's iNsAnE!
No stinkin' way I'm leaving that much money hanging out
in the wind in THIS volatile environment.
But, I didn't dump it all... I just sold what I added last
Friday on the dip, and let the rest run... but, with tight stops.
I also sold a few calls and bought a few puts yesterday
and today, as "insurance."
Didn't short anything... but, did add insurance.
I also moved stops up tight, and have a game plan "in writing"
on where I will stop out of the individual stocks I hold (in
waves), as well as what I want to add, aat varying price points.
Right now, the bollinger bands are starting to tighten. And
that can lead to EITHER a sharp break out, or a sharp break
down. And that's where your trading channel trend lines come
into play, giving you levels in which to set your trailing
stops.
With the bollinger's pinching, the HUI is either getting ready
to break out and make that "W" Double Bottom run to HUI 320ish
(if gold continues to rally & holds $800+)...
Or, if gold fades, the HUI will either re-test the bottom
of it's trading channel at HUI 215ish, or it will re-test last
Friday's HUI 191 support level,from where this break out began.
...it all depends on the direction, and the price of gold, the
US Dollar, and major events.
Fundamentals drive technicals.
NOT vice versa.
Don't be afraid to take "some" profits off here, as the
HUI has now made a 110 point, +69% run from HUI 169 to 270
in just 14 trading days!
...give 'em some leash -- but, don't give it back.
Mo later,
SOTB |
