3SOF

Do you think NVLS is just consolidating right now at the resistance? It seems as if it is probably going to continue testing the resistance until a spike in volume occurs which in effect explode it pass the $34.75. Quite possibly right after the Holidays when everyone gets back into the buying mood. Just a thought...

Quote from: Melf Elf on December 28, 2006, 04:40:26 AM
I did, too, and I also expected to see the W-Bottom target of 35.05 get MADE.

Yesterday's high was 35.00 even.  That's close enough to consider the W-Bottom target of 35.05 MADE.  They aren't always exact.

Quote from: kpunarc on December 28, 2006, 04:40:49 PM
Do you think NVLS is just consolidating right now at the resistance?

kpunarc,

Yes, good observation.  Applause.

This has looked like a high level consolidation, which is fine, and it has looked particularly good since 33.55 support got validated exactly at the December 22 low.

Quote
It seems as if it is probably going to continue testing the resistance until a spike in volume occurs which in effect explode it pass the $34.75. Quite possibly right after the Holidays when everyone gets back into the buying mood. Just a thought...

Something like that is what we would expect to see, and that would be very nice.

But, as we discussed yesterday, we want to be looking the other way, too, for any signs that we're topping here, "just in case."

Yesterday's candle looks like another Bearish Hangman.  The tail was twice as long as the "real body" (the open and close).  So, we've got back to back suspicious looking characters on the chart the last two sessions.

MACD ticked down from below its signal line yesterday, while the stock itself put in a nominal new high at 35.00, then sold off.  So, we continue to have a non-confirmation and now a refusal at the signal line in this indicator.

Quote from: David Randolph on December 28, 2006, 04:34:30 PM
I don't care much thinking about divergences on technical indicators because they are too short term oriented and I've been burned before trusting those indicators.

I understand what you're saying about getting burned trusting indicators, David.    They aren't always easy to interpret, and I think it's a good idea to use them in combination with what the chart itself is doing.

Someone mentioned that Frederick likes Texas Hold 'Em, which I've never played, but which I enjoy watching.  I view the candles in the charts and the technical indicators somewhat like knowing what my hole cards are, then seeing what's been bet, then deciding whether to fold, call or raise, then seeing "the flop," more betting, "the turn," more betting, then "the river card."

Bad analogy, but somewhat like that. 

What have I got so far in the NVLS trade?

1. I've got a gain.

2. I've got two Bearish Hangmen showing up on the chart, the second one yesterday, after the 35.05 target MADE within five cents.

3. I've got a TRIPLE non-confirmation in the MACD, and now a refusal from below the signal line, which I know "can be" a deadly signal.  Not always, though  (see next post for an exalmple).

4. I know that 33.55 has been validated as support.

5. I know that the bottom rail of the channel (in red) almost is conjunct (at the same data point) the 33.55.

6. I know that a TRIPLE Short Squeeze is on, but that the shorts aren't being pressured higher, as they "should be."

That might get taken care of beginning next week, as kpunarc suggested, when we emerge from thin holiday trading and everyone gets back in the buying mood.

Conclusion: As long as NVLS holds up at this "high level consolidation," I'll "hold 'em," but I'm going to "fold 'em" and take a profit if 33.55 gets busted. 

Next post: an example of MACD negative divergences, and refusal at the signal line.

Quote from: Melf Elf on December 29, 2006, 03:03:58 AM
3. I've got a TRIPLE non-confirmation in the MACD, and now a refusal from below the signal line, which I know "can be" a deadly signal.  Not always, though  (see next post for an exalmple).

What I like about using MACD is that it often serves as a "lead indicator," telegraphing the future direction of a stock prior to a breakout, or a breakdown.

Many of you remember AERTA (symbol now is AERT), a 3SOF pick last summer, and my posts on the MACD back then.

All of our upside targets had MADE.  AERTA was at 10-year highs (if not all-time highs...my charts only go back 10 years), but the MACD histogram had a DOUBLE negative divergence, and then a refusal from below the signal line on June 23, after AERTA rallied that day to 3.66, then closed down, at 3.42.

June 28, following the MACD "lead indicator," AERTA broke down below a Symmetrical Triangle.  It then formed a Bear Flag...broke below that, etc.

Upshot: AERTA tanked more than 60% from the June 23 high to the November 21 low of 1.48.

UGH.

That's not in any way a prediction about NVLS.  I don't predict.  I follow.  If 33.55 support gets taken down on the heels of this non-confirmation and refusal in the MACD, I'll sell it and take the money.

Thanks for the great technical analysis Melf

Quote from: kpunarc on December 28, 2006, 04:40:49 PM
Do you think NVLS is just consolidating right now at the resistance? It seems as if it is probably going to continue testing the resistance until a spike in volume occurs which in effect explode it pass the $34.75. Quite possibly right after the Holidays when everyone gets back into the buying mood. Just a thought...

I agree with that possibility kpunarc. Asian and European markets were up 1.3 - 1.4% today, so probably the US markets will open with a positive spin tomorrow.

NVLS will have the chance to breakout above $34.75 in a decisive way over the start of 2007. Let's give it until the end of the week.

I don't think NVLS will disappoint, I'll keep on holding the stock.

The general market couldn't hold its gains through the end of the session due to "negative" FED minutes. These are just short term gyrations (of course the market can't go up everyday, or every week, not even every month), but we continue to be in a bull market and probably 2007 will end with another 5 - 10% gain on the S&P 500.

NVLS went down to touch its short term support zone around $33.55, but it came back to close the day at $34.16. I adjusted my ascending trendline and it looks like NVLS still closed above it.

I'll keep on holding NVLS.

Sold NVLS at 34.42.

Yesterday's high of 34.97 was a short-term Double Top.  Although 33.55 support held, we've now got the possibility of a H&S Top (neckline 33.55 and 33.58).  With MACD looking so weak, I decided to sell.

this goes to show that stocks are like women....

two great men using the same methods (TA) yet still come up with two opposing conclusions

Quote from: kpunarc on January 04, 2007, 01:40:41 PM
this goes to show that stocks are like women....

two great men using the same methods (TA) yet still come up with two opposing conclusions

kpunarc,

David relies much more on the fundamentals than I do, and then beyond the analysis, fundamental or technical, there's always the question of how different people would play each trade.

Think of it in terms of the Texas Hold 'Em analogy that I gave: different players would play each hand (or trade, in our case) entirely differently.  Some would fold right away, and not play at all (not take the trade).  Some would raise.  Some would raise an amount more than other players would, etc.

And, no individual player "gets it right" on every hand.  Far from it! 

In this case, NVLS hasn't broken 33.55 support, so it still could rally and take out the 34.97 and 35.00 highs, and go much higher without doing anything wrong at all, so far, and David could end up with a much better trade than I had.

That isn't the point, though, to compare our performance to someone else's. 

Just as in Texas Hold 'Em, probably no two traders would play each trade the same, but hopefully, we all can benefit from each other's differing opinions and decisions about buying and selling.

In addition to the reasons for selling that I presented this morning, I had 34.55 IN PLAY from the Double Inverse H&S breakout on this 1-minute chart (below).  Given the weakness in NVLS, I sold a little below the the target, at 34.42 since targets don't always get MADE.

Shortly after noon, NVLS printed a high of 34.54, so that's close enough to consider the target MADE.  Whether or not it has more in it on the upside, I simply can't know that (nor can David).  I sold it as a business decision, so to speak, just as David has done in the past, and will do again in the future.   That doesn't necessarily mean that we've turned bearish on a stock.

In my view, the important thing is to share our DD, technical or fundamental, rather than view anyone as "right" or "wrong."  I have many losing trades, and many trades that I "should have" done better than I did.

I'm not making a bearish call on NVLS.   In fact, I don't make calls on stocks.   NVLS is still bullish.  I just play stocks as best I can, and in this case, I decided to "take the money," so to speak, for the reasons given.

Good luck to you and to others who still are long NVLS.  I'm glad to see that it's rallying back toward the high of the day. 

Hi Melf, you really know how to write and explain things, applaud

I agree with everything you said. Each man has his techniques and opinions and we can all learn from each other, so long that we keep our minds opened.

Of course, I can be wrong on NVLS, but what I've been learning in my 11 years trading experience (doesn't look like much, but it has been extremely intensive learning) is this simple conclusion:

«If you focus too much on short term indicators you will be a short term trader, and short term trends are pretty much unpredictable»

You say the following:

QuoteIn addition to the reasons for selling that I presented this morning, I had 34.55 IN PLAY from the Double Inverse H&S breakout on this 1-minute chart (below).  Given the weakness in NVLS, I sold a little below the the target, at 34.42 since targets don't always get MADE.

1-minute chart? Come on ... do you really think that stuff is reliable?

I mean, I've done that exact same kind of thing for years (too many, I guess), just to find out that ... it doesn't work

The big money, I mean, the only money, is on the big swing, wouldn't you agree? (hehe, I guess this NVLS thread will get even better going forward)

I want to tell you and everybody else that I feel, better, I know, I'm still far away from a sound long term winning strategy. I am. But I firmly believe the path to trading/investing excellence needs Fundamental Analysis.

I've only met one long term successful technical trader, which was an automatic systems trader. He spent a year of his life developing a trading system and then  applied that system consistently for nine years so far. He had a 35% average annual return on his initial investment and is now a rich man (and a very nice man too).

The thing about him that put him head and shoulders above me and others of that stock traders community was that he had a much longer time frame. He made between 10 - 20 trades a year, and caught the majority of the big swings. I wish he was here at Stocks on Fire too ... you know what, I'll invite him to join us

Where were we? So, Melf Elf, I can see you're a hard working man, and a firm believer in technical analysis, have you ever thought of developing an automatic trading system? I would like to do that too ... perhaps we could motivate each other on the developing process.

Coming back to NVLS, the stock closed at $34.82, so close to breaking out above $35. I have no reason to believe it won't do that, fundamentals are attractive and the trend remains bullish. I'll keep on holding the stock. 

i was actually trying to make a joke showing how complex stocks can be. lol. but i appreciate the analysis 

Quote from: David Randolph on January 04, 2007, 06:08:25 PM
If you focus too much on short term indicators you will be a short term trader, and short term trends are pretty much unpredictable

David,

I guess that depends on how you want to play the market.  Some people play in the very short-term, so short-terms indicators are appropriate.  I'm more of a pattern player/support-resistance player, so I generally don't use real short-term indicators, except...

Quote
1-minute chart? Come on ... do you really think that stuff is reliable?

...when I want a short-term strategy for an entry or exit, yes, often it's pretty reliable, like yesterday's DOUBLE Inverse H&S target of 34.55.  I used the very short-term 1-minute chart because I was concerned about the possible H&S Top in the hourly, and the possible Bear Channel in the daily chart, and wanted a short-term strategy, to exit.

We got to 34.44 in the first half hour, then to 34.54, within one penny of the 34.55 target IN PLAY, just after noon, so that was a pretty reliable short-term pattern when I was looking for a short-term rally. 

Nothing "always" works, of course, or at least I should say that I haven't found anything that "always" works.  Maybe someone else has.

QuoteI mean, I've done that exact same kind of thing for years (too many, I guess), just to find out that ... it doesn't work

The big money, I mean, the only money, is on the big swing, wouldn't you agree? (hehe, I guess this NVLS thread will get even better going forward)

I don't have any way of knowing that, David, however CNBC did a segment last year on some young guys who made millions daytrading off very short-term charts.  I assume that CNBC verified their results, but I don't know.  I can see how it could be done, though, given all  that is available now as far as charting software, etc., but one would have to be very dedicated and disciplined about executing a strategy to be successful, I would think.

But, that type of trading isn't appropriate for 3SOF.   It wouldn't be possible to issue the buy and sell signals fast enough, and besides, most 3SOF members don't have the time to be that active in the market, and are looking for exactly what you're offering: daily signals to buy, sell, or hold.

Quote
I want to tell you and everybody else that I feel, better, I know, I'm still far away from a sound long term winning strategy. I am. But I firmly believe the path to trading/investing excellence needs Fundamental Analysis.

The key there is trading vs. investing.  For trading, no, I don't think that one needs to know anything at all about the fundamentals.   In other words, "Here's the pattern....here's the breakout....here's the target....here's the stop...here's the risk:reward on the trade...." 

In that case, one simply is trading the chart, not the company. 

For investing though, yes, I agree with you about the fundamentals being important.

Quote
I've only met one long term successful technical trader, which was an automatic systems trader. He spent a year of his life developing a trading system and then  applied that system consistently for nine years so far. He had a 35% average annual return on his initial investment and is now a rich man (and a very nice man too).

I've spent hours and hours studying Metastock's Expert Advisors.  They give you automatic buy and sell signals, but so far, I haven't found anything that looks good.   

Most of them look awful, in fact.  A lot of whipsaw signals; the kind you don't like.      

Quote
The thing about him that put him head and shoulders above me and others of that stock traders community was that he had a much longer time frame. He made between 10 - 20 trades a year, and caught the majority of the big swings. I wish he was here at Stocks on Fire too ... you know what, I'll invite him to join us

If I were a younger man like you, I think that I might take an approach like that.  Focus more on the weekly charts of companies that have good fundamentals.

Quote
Where were we? So, Melf Elf, I can see you're a hard working man, and a firm believer in technical analysis, have you ever thought of developing an automatic trading system? I would like to do that too ... perhaps we could motivate each other on the developing process.

I've thought about developing an automatic trading system, but it hasn't gone any farther than thinking about it. 

Quote
Coming back to NVLS, the stock closed at $34.82, so close to breaking out above $35. I have no reason to believe it won't do that, fundamentals are attractive and the trend remains bullish. I'll keep on holding the stock.

That was a very, very nice close! 

Basis this daily chart, the bottom rail of the Rising Channel (in red) came in yesterday at 34.07.  NVLS opened at 34.05, a hair below it, rallied to 34.44, then it tanked to 33.74 and looked like it was going to bust the 33.55...33.58 neckline of the H&S Top.

Nope!

NVLS came roaring back in the afternoon and had a very strong close.  That was what I've been wanting see, given that a TRIPLE Short Squeeze is on.  The shorts haven't been pressured as they "should have been,"  but hopefully they now will be, on a takeout of the short-term top, at 35.00 and 34.97.

A print of 35.01 is a Rectangle Pattern breakout, which would put a short-term target of 36.36 IN PLAY as long as NVLS trades above 35.00.

Math for the Rectangle:

34.97 - the more conservative of the 34.97 - 35.00 highs

33.58 - the more conservative of the 33.55 - 33.58 lows

34.97 - 33.58 = 1.39 Points + 34.97 = Target: 36.36

Good luck, David, and to everyone who still is long!

Quote from: kpunarc on January 05, 2007, 01:00:25 AM
i was actually trying to make a joke showing how complex stocks can be. lol. but i appreciate the analysis 

kpunarc,

Oh-h...okay, I misunderstood your comment as one of frustration, that I had sold, and that David hadn't. 

Yes, stocks can be very complex.  Rotten little devils!   

MACD has continued lower, but on Wednesday's selloff in the stock and a new low in the MACD, the histogram made a "higher low," and on yesterday's rally, the histogram ticked higher.

That's called a Bullish non-confirmation, meaning that the histogram isn't confirming the new MACD low and is, in fact, improving in strength by ticking higher yesterday.

As with any indicator, the most important thing is for PRICE now to confirm what the indicator is telling us, by printing 35.01, which would be a breakout  above the Rectangle pattern.

QuoteAs with any indicator, the most important thing is for PRICE now to confirm what the indicator is telling us, by printing 35.01, which would be a breakout  above the Rectangle pattern.

Will you buy back the stock if that happens today? Thanks, have a nice day

Quote from: David Randolph on January 05, 2007, 06:26:55 AM
Will you buy back the stock if that happens today? Thanks, have a nice day

David,

No, because I can't structure a good risk:reward on the trade.

If I "pay up" and buy the 35.01 breakout, and sell at the indicated 36.36 Rectangle target that would be IN PLAY, my gain on the trade would be only 3.85%.

If I buy the 35.01 breakout, then get stopped out at 33.54, below the 33.55 low of the Rectangle pattern, my loss on the trade would be 4.2%.

NVLS certainly could rally well beyond 36.36, but I wouldn't have any target IN PLAY that would indicate that, and I'd be re-entering on a lousy risk:reward.

Have a good day, too! 

Quote from: Melf Elf on January 05, 2007, 05:25:00 AM
As with any indicator, the most important thing is for PRICE now to confirm what the indicator is telling us, by printing 35.01, which would be a breakout  above the Rectangle pattern.

The Bulls weren't able to take the price higher, and the histogram now is back to confirming the TRIPLE negative divergence in the MACD by making a new low, coincident with the new low in the MACD.

Now, it's The Bears who are needing PRICE to confirm the technical weakness, by taking out 33.55 - 33.58 support (next post).