Sector Analysis Using Pure Price Action
- Thread starter Gringo
- Start date
XLF: What looked like a RET after the BO, failed, we are back in the TR.
XLP: Looks like we are in the middle of the RET after the BO. No entry just yet though.
XLB: At the top of the TC. Will it go back to the middle or will buyers commit and increase momentum.
XLE: Not sure about this long. Any comments G?
XLI: At the top of the TC. Will it go back to the MP or will buyers commit
XLY: Long is still working just great
XLK: Broke above the top of the TC, Long at the RET.
XLU: Broke out of the hinge and even had a nice RET to take the long, if taken the long is still valid.
XLV: Long is still working, look for congestion around the middle of the TC.
XLP: Looks like we are in the middle of the RET after the BO. No entry just yet though.
XLB: At the top of the TC. Will it go back to the middle or will buyers commit and increase momentum.
XLE: Not sure about this long. Any comments G?
XLI: At the top of the TC. Will it go back to the MP or will buyers commit
XLY: Long is still working just great
XLK: Broke above the top of the TC, Long at the RET.
XLU: Broke out of the hinge and even had a nice RET to take the long, if taken the long is still valid.
XLV: Long is still working, look for congestion around the middle of the TC.
The materials sector has breached the overbought line a second time. It doesn't take a genious to see what transpired after the first breach. So far price is hanging in there and pushing upwards. The DL is slightly breached and price could turn down here prompting an entry for the daring. I prefer to enter after a drop and a retracement.
I have tried to draw a mini trend channel with a pink and blue lines. It better shows the greater angle of ascent, although doesn't change much in the analysis overall. Some may have been a bit overwhelmed by all these, and feel a bit repelled. If you are one of those who are finding is less helpful to have all these lines, then focus only on the last demand line (DL). If that breaches convincingly and a retracement comes we'll be in business. It's better to keep it simple and I am guilty here of unnecessarily making it complicated.
Keep an eye on it as XLB is at an interesting area where the chance of something exciting happening is higher.
Gringo
I have tried to draw a mini trend channel with a pink and blue lines. It better shows the greater angle of ascent, although doesn't change much in the analysis overall. Some may have been a bit overwhelmed by all these, and feel a bit repelled. If you are one of those who are finding is less helpful to have all these lines, then focus only on the last demand line (DL). If that breaches convincingly and a retracement comes we'll be in business. It's better to keep it simple and I am guilty here of unnecessarily making it complicated.
Keep an eye on it as XLB is at an interesting area where the chance of something exciting happening is higher.
Gringo
Some observations:
The swings from late Feb to mid April and from mid April to late June show a sort of balance. Price goes from one side of the channel to the other.
In comparison, the swing that started in late June has not shown any of that balance since there wasn't enough selling to test the lower channel boundary. There was some consolidation from July to end of August. This base building led to the first thrust above the channel boundary. The Reversal of this thrust bounced strongly off the mp of the channel in early Oct and we are currently still riding the trend off this bounce.
If I had been unaware that the overall market has been in a 4 year strong trend with price at the upper boundary of the long term channel, I would be more inclined to view PA in XLB as a sign of strength and looking to buy once the anticipated mean reverting Reversal wave showed signs of stalling.
The swings from late Feb to mid April and from mid April to late June show a sort of balance. Price goes from one side of the channel to the other.
In comparison, the swing that started in late June has not shown any of that balance since there wasn't enough selling to test the lower channel boundary. There was some consolidation from July to end of August. This base building led to the first thrust above the channel boundary. The Reversal of this thrust bounced strongly off the mp of the channel in early Oct and we are currently still riding the trend off this bounce.
If I had been unaware that the overall market has been in a 4 year strong trend with price at the upper boundary of the long term channel, I would be more inclined to view PA in XLB as a sign of strength and looking to buy once the anticipated mean reverting Reversal wave showed signs of stalling.
You're right. The longer term bias is up. Most waves have been moving 3-5 points during the up moves. The current up move has already achieved most of that move and has an overbought condition on top of that. Ideally, one would wait for a drop and then re-join in the direction of the major trend. So far, we haven't gotten that drop to re-join. For now the only real option is to sit out if not already a long, or wait for a temporary reversal. The bull market could go on for however long it can go on for. We don't know whether this is the end. All we know is that so far price is going up but but is in an overbought territory, making the longs riskier. The longs could be taken if we had another new high. The really swift and daring might be able to do that. As for the rest they might have to join the shorts if weakness develops or wait for the drop and the move back up to go long. It's all about the risk tolerance and the personal preference of the speculator.
Gringo
I have been seeing a lot of this in the NQ intraday swings. Once a swing turns into a dominant trend for the day (say up), it is better to wait for the Reversal and then go long again as the Reversal fails. If the dominant trend is finishing, there will likely be a prominent re-test, so one could always go short on the retest. But this way, the trading is always weighted towards the trend.The overbought condition can be used to scale out of the position if one is already long.
I am unclear on your use of words like 'daring'. The way I am seeing it, decisions should be based on probabilities. While these judgments of probability are only approximations, they do provide a somewhat clear framework for making decisions. As such, the meekness or daring applied to a situation should correspond to position size and not whether the trade should be taken or not. It is either a positive expected value trade or it isn't.
Edit: I have been using the word 'aggressive' too liberally as well. There should be nothing aggressive or docile about entry, but only about position sizing.