Trading Support and Resistance

ddefina, nice example.
regarding the overbought, oversold, I am much less enthousiastic. in my experience these indicators don't help much (well like most indicators anyway).
something oversold can get more oversold and then some.
I understand the argument of probabilities : something oversold, might have a better chance of breaking out upward than to continue down. still you miss nice moves when you really use this filter. and you may even (depending on your parameter) get killed when the buy stop is triggered and it is only a retrace in the ovesold DOWNTREND ! :eek:

I am not saying you are wrong. maybe you have a way to use this indicator to optimize your system (channel break outs, again, are very fine with me!).
But I always choke when I hear maria on CNBC telling how 'oversold this market is, poised to rebound!' for 18 months now !

overbought/oversold does not mean much imho. on the contrary. an oversold market is clearly telling you its trend : DOWN. so trading against (even on a break out) is like believing the trend is reversing right at this moment (without proof yet).
of course, trading against the trend is possible and may be profitable, after all, nothing goes straight to zero. so the rebound is OK. but that's it, the oversold condition told you the trend direction and the trade should be placed with this in mind (again, maybe that's what you do, I am only illustrating my point here for everyone's benefit).
and that's a good example of why, in another thread several mentioned the limited use of 90% of indicators in successful trading. after some time traders tend to forget them and go to price and patterns like the nice example you illustrated.

neo
 
TNTNEO,

Just like you say on determining a trend, I've never been too successful at it so I always hedge. If I buy long and it doesn't work out, I've got stops going the other direction. For a slight advantage, I look for stocks to trade that don't consolidate that much (even though the example I showed was of one that did for a short period), so I don't get into the whipsaw problem. CLS is a good stock for either going one way or the other for a small to medium profit.

For me, not guessing the trend is the best way to trade and letting the stock/commodity tell me which way it's going with support/resistance.
 
ddefina,

When a stock is consolidating, I don't know if its overbought/oversold so I place stops on both sides.

I thought you were using the underlying current of the daily chart to determine whether your stock was overbought or oversold. In that case you would have a good idea, whether or not the stock was consolidating intraday.

I guess I'm still not following you. First you said that you put buy and sell stops on both sides of a consolidation. Fine, that's playing for the breakout or breakdown. And you then say that when a stock is consolidating you don't know if it's overbought/oversold. And that's true on an intraday basis as I mentioned above, although you may still have a good idea on a daily (or weekly) basis. But then you say that you prefer stops on oversold/overbought stocks.

So if you're strictly going by the intraday overbought/oversold indicators, and stocks consolidating are neither, then how do you prefer stops on overbought/oversold? Sorry Dave, I'm missing something here.

[Edited later as we both posted around the same time: now it makes more sense to me because you tend to not play channel breakouts, so in that case you would have a clearer picture of the trend]
 
Originally posted by Magna

So if you're strictly going by the intraday overbought/oversold indicators, and stocks consolidating are neither, then how do you prefer stops on overbought/oversold? Sorry Dave, I'm missing something here.
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I'll clarify how I trade. I use only daily charts to enter trades using the High and low of the previous day as S/R. I exit using intraday 60 minute bars. If I'm long and a stock can't hold it's open (below open) the next day, I look to close the position when it drops below the previous 60 minute bar of the day, and I'll reenter long if it breaks above the high of the opening 60 minute bar, (IF. it's above the close of the previous day). I never trade short if the daily bar is above the previous day's low, but will if it penetrates the previous days' low.

So I like overbought/oversold stocks on a daily basis rather than consolidating stocks on a daily basis, but I take them if they come because I follow the same 10-15 stocks (like CLS). In good breakouts, like which occured on 10/3, I was filled on 10 stocks to the long side and exited all of them on 10/4. Monday I may be short all the same stocks depending on what happens.
 
Good conversation...

sup/res trading is fine in trending markets, in choppy markets new traders will get whipsawed.

I still use s&r in choppy markets, the keys are:

1) Develop successful "filters" to avoid entering false breakouts/breakdowns

-compq, 2d charts etc
-time & sales action for specific stock as you're looking to enter
-nasdaq trin (TRINQ) and sector charts' relative strength/weakness
-trade expectancies of trading within 10-15 minute max windows, prior to reversals

2) Use a couple of monitors worth of large closeup 1-min candlestick charts in conjunction with time & sales so you can really get a handle on the micro sup/res lines.

Temper all of this w/specific market indicators, eg compq making new high? sectors just chopping? trinq too close to 1 or is it yielding a trade signal? etc..


3) pattern recognition: get books by tony oz, barry rudd & steve nison; drill it over and over, what they're seeing, that you should too.

By the way, our trading volatility looks much better now, so I'm looking to trade hard the next few months. Chips (QLGC NVLS KLAC..) software (CHKP SEBL PSFT ADBE) and biotechs (IDPH HGSI AMGN ...) seem to be providing the best intraday trading ranges.

The SECs 25K rule seems to have dried up some of the liquidity provided by the "daytrader lite" crowd, so we are seeing larger & faster intraday movements, these can be both more profitable and more risky.

Whenever any major "systems change" occurs within the trading market (eg decimalization, 25k rule etc) I've found that it's helpful to work out new patterns and trading strategies, as trade setups tend to change.

Any other post-Sept 28 observations out there?


Hope that helps.


Ken
 
Hi Ken

sup/res trading is fine in trending markets, in choppy markets new traders will get whipsawed.

I prefer to use sup/res in choppy markets like the last few weeks...
Breakouts are fine in strong trending markets, IMHO.

Do you agree?

Greetings from cold germany

DEM
 
just another note regarding pivot points...if you're using Real Tick3...pull up an intra -day chart ( 5 min or 10 min are good for this exp) , now right click on the chart...go to "attributes" then click on "show pivot points"...and there you go, pivot points, just another reason why I love Real Tick....I've been using these lately as support and resistance lines and they're great....just using simpl support and resistance lines work well too...
anyone know another charting service that puts pivot lines on intra-day charts? I may have to leave my beloved Realtick behind soon.
Peace:cool:
 
uptik,

When I used TradeStation I programmed it to display them. Probably MetaStock and Ensign can do it, but I've never used them so can't say for sure.
 
what a load of terrible answers to your question.
I like to look at an end of day chart and establish where the main support/resistance levels are, i then whatch those levels intraday for patterns forming near those levels e.g flags and breakouts.
half of you lot don't have a clue.
 
I would never program software to display support and resistance because they always get it wrong, The best way is to look through the charts manually.
 
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