Iterative Refinement

[guavaman]

Today's chart

Got a late start. I am very thankful for the choppy action of late, it is providing fertile ground to practice my M and A (and a little D ).

Lastly, that IBGS, VE with lower volume at 15:50 just freakin screamed change. Am I right Avi8?

I look forward to the forty or so post on Saturday night

 

[Avi 8]

Quote from guavaman:

...Lastly, that IBGS, VE with lower volume at 15:50 just freakin screamed change. Am I right Avi8?...

And screamin' change it did!

Now take a look at your pt3 around 1230, is that a valid pt3 up?

Or are we still looking for a pt2 up after the FTT?

One last question, have you any input on my post about the possibilities someone PM'd me?

 

[guavaman]

Quote from Avi 8:

Now take a look at your pt3 around 1230, is that a valid pt3 up? Or are we still looking for a pt2 up after the FTT?

Perhaps not the wisest choice of channel annotation

One last question, have you any input on my post about the possibilities someone PM'd me?

I think that decreasing black volume that occurs in a retrace of an uptrend most probably indicates a flaw (in which case the new dominant is down) = hold short

or

is an attempt to form a PT3 down (retrace of a retrace) keeping in mind that price must remain below the high of the previous uptrend. Depending on the trader's resolution and = either hold short or reverse long.

In regards to (in a retrace of an uptrend) the increasing red volume that forms an IBGS as well as an outside bar that closes above the tape RTL...how the hell should I know?

Well here's my shot at it. It depends .
What are the clues? Has the bar created a VE? = reverse long. Has the bar made a new high? = reverse/hold long. If neither of these conditions exits I would hold short thinking that this type of bar routinely forms PT3 and is followed by inside bars. Lastly, I would be monitoring closely the next bar for additional info.

Well there it is, it probably ain't pretty, but they are reasons.

 

[gooch87]

Quote from Avi 8:

The following questions I received in a PM.

I am posting them for others to answer first.


Context: Uptrend that transitions into a retrace to RTL. We have decreasing Volume for a few bars. On each bar we are running through the four possible scenarios of WMCN for the non-dominate retrace to continue.
1) Dec. red volume to RTL = hold short
2) Inc. red volume to RTL = hold short (see if missing channel exist).
3) Increasing black volume = reverse long.
4) Decreasing black volume = ?????
5) Inc. red volume that transitions into IBGS and forms Outside bar closing above down tape = ?????

Suggestions?

Hi Avi 8

After decreasing black we get increasing red.= hold short for the potential BO.

 

[Padawan]

Here's my shot...

Avi8: 4) Decreasing black volume = ?????

Spyder: "...If Volume is decreasing, with increasing price, then price will begin to decrease."

Hold short.

 

[Padawan]

"5) Inc. red volume that transitions into IBGS and forms Outside bar closing above down tape = ?????"

Reverse long and know that increasing black must come next.

 

[Haroki]

Quote from LittleMac:

I missed JRJC but I have it as a possible BO of an IT to LT channel(thick brown). You have a similar chart Haroki?

Hey, I thought about your Q a little more and would like to add.

Yes, it was a BO, but Thursday WAS earnings report day. That's why I commented about them having a good earnings report.

IMO, you'd rarely see such a move on a simple BO. I had it on my Hotlist and was keeping a sharp eye on it, since I knew it had a report the previous day.

So we're both correct in our analysis about what happened.

 

[Spydertrader]

You wrote ...

Quote from LittleMac:

Looks like SOHU was the play today.

To which, I responded ...

Quote from Spydertrader:

Since Price broke out of a formation today, you'll need to see additional increasing black (grey) Volume, tomorrow. Otherwise, expect the trend to change.

<img src=http://www.elitetrader.com/vb/attachment.php?s=&postid=1812155>

And did the market provide the confirmation required? If not, what did happen? Did we 'see' what must come next with respect to being on the right side pof the market? Did we see what must come next to indicate we found ourselves on the wrong side of the market? What must come next on Monday in order to indicate Price direction?

- Spydertrader

 

[Padawan]

Quote from Spydertrader:

You wrote ...



To which, I responded ...



And did the market provide the confirmation required? If not, what did happen? Did we 'see' what must come next with respect to being on the right side pof the market? Did we see what must come next to indicate we found ourselves on the wrong side of the market? What must come next on Monday in order to indicate Price direction?

- Spydertrader

The market did not provide the confirmation required. The next day price closed lower on increasing red volume creating a sym pennant. Because we did not see what must come next to be on the right side of the market (which was long), we found ourselves on the wrong side of the market. What must come next on Monday to indicate price direction is increasing red volume on a bar which breaks down out of the sym pennant. On Tuesday we would need to see more increasing red to confirm being on the right side of the market.

Spyder, please let me know if I've answered your questions sufficiently and correctly. I've been following SOHU since the example was posted and would like to make sure that we're "seeing" the right side of the market and annotating correctly. Chart attached. Thank you.

 

[Haroki]

Quote from Padawan:

The market did not provide the confirmation required. The next day price closed lower on increasing red volume creating a sym pennant. Because we did not see what must come next to be on the right side of the market (which was long), we found ourselves on the wrong side of the market. What must come next on Monday to indicate price direction is increasing red volume on a bar which breaks down out of the sym pennant. On Tuesday we would need to see more increasing red to confirm being on the right side of the market.

Spyder, please let me know if I've answered your questions sufficiently and correctly. I've been following SOHU since the example was posted and would like to make sure that we're "seeing" the right side of the market and annotating correctly. Chart attached. Thank you.

Personally, I'd move your pt3 over to 4 days later, when you had 2 days of inc red. Need inc volume to make a pt3, right? Not that it changes the channel much, LOL.

Your new aqua up channel looks not right either, for the same reason. I usually just draw in a support line here, waiting for inc black. When I get it, I'll draw in my LTL.

EDIT: also, I usually make my dec volume annotation yellow, just to match the formation.