Yesterday’s price action exhibited textbook characteristics of a ‘trend day,’ and analyzing the action can help you spot the conditions that lead to a trend day earlier and trade more effectively as a result. First, let’s discuss what a trend day is and how we might detect it early. We define a trend day as…
For those of you who have attended, or plan to attend a Traders Expo or MoneyShow conference, I wanted to create a series to help you make the most of your time at the convention and maximize your investment in attending. In this first installment, I wanted to discuss how to divide your time into…
Previously, I discussed the Descending Triangle breakout in the Dow Jones Index during the year 2000. Following that breakout, the Dow Jones experienced two downthrusts in price that are more commonly known as “Measured Moves” which have occurred twice this year (July to August and then August to October, 2007). Knowing what a measured move…
In the interest of Technical Analysis Education, let’s quickly look back at the year 2000 when the Dow Jones Index resolved a descending triangle to the upside. In technical analysis, traders often expect descending triangles to resolve to the downside and ascending triangles to resolve to the upside. StockCharts.com defines Descending Triangles as bearish formations…
Many traders use different forms of analysis for moving averages, and understanding basic facts about moving averages can add new potential for profit in your own trading. While there are ‘hard and fast’ rules to using moving averages, the best results often come from novel or unique interpretations of basic concepts, or variations on ‘old’…
Trendline analysis is one of the oldest and most basic forms of ‘quick,’ top-level technical analysis possible. They are often easily ‘spotted’ yet frequently hold significance in terms of price inflecting off the trendline in a continuation of the current trend. What are some quick tips to assess the validity of observed trendlines? While there…
Excluding Island Reversals, there are three major types of gaps that occur in technical analysis. Amazon.com does a great job of teaching us the difference between these gaps, as price has presented a near textbook example of the normal progression of the three gap types. Let’s look closer. 1. Breakaway Gap Breakaway gaps occur after…
While there may be an unlimited number of potential price patterns in the market, most popular price patterns fall into two broad categories in relation to trends: Reversal Patterns or Continuation Patterns. Knowing more about specific patterns may help you determine which resolution in price is likely to occur. Without delving too deep into the…
I wanted to share a little levity to the recent market action, and give a comic from WeBlog Cartoons a little ‘market spin.’ This reminds me of the ‘battle’ successful retail traders have with unsuccessful retail traders who base their trading decisions on the financial news networks (especially from ‘colorful’ commentators) alone. “I bought XYZ…
Many market participants, as well as many oscillating indicators, are calling the recent market action “overextended.” By definition, price is overextended, but does this always imply a price correction because price is overextended? Absolutely not. What does overextension mean? By definition, a price overextension is evidence of extremely strong and sustained buying or selling pressure,…