Where'd I go wrong; Any thoughts?

Shorty,

My only thoughts are I was trying to trade against the trend
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Possibly.

I do see specific formations on both stocks.
VVI, I see your triangle, but I think a rising wedge seems more appropriate.

CMNT, I see a rounding bottom.

But I think you rushed into these trades. We all do this from time to time.
Confirmation, of your analysis, is key. (Spent a good portion learning that one)

yk
 
cmnt looks fine. If I were you, just strap a moving average onto it, and you'd be fine. A 25 day ema is fine. IT's just overbought short term. VVI honestly looks like many stocks do now, and that means It looks like a great short. I have no idea what you were thinking there.
 
MAGNA,

I've read everything on TA I could get my hands on and the only thing that emperically and statistically seems to hold true is S/R. I know a lot of traders use SMAs, EMAs, WMAs, etc. Is it your experience that MAs actually hold any predictive power?

One other subject I'd like to bring up:

Are there any traders here, like myself, that can't watch all the interday data, S/R, market direction, breaking news, etc. Can you still make reasonable returns in the long run trading this way. BTW, I have made great gains in the last three months using almost exclusively short positions but am not convinced I can continue with this type of performance in the long run. If I thought I could, I'd be handing in my resignation tomorrow.
 
Originally posted by SHORTY
Is it your experience that MAs actually hold any predictive power?
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moving averages don't predict anything. they are actually in the past.
 
There were many good points about where you went wrong (holding into earnings etc.), but I'd like to add this:

When the market closes at the bottom 10% of it's trading range, there is an 85% chance of making a lower low the following day. This does not mean gap down or close lower, but it means that you have an 85% chance of buying the market at a better price than the low it made today.

All three indexes made lower low (Dow Naz and S&P).

I did not look at the individual stocks you held, but just wanted to point out this stat.

Trade Smart!
 
shorty,

Is it your experience that MAs actually hold any predictive power?

Not sure what you mean by predictive power, since all indicators are mathematically one or more levels removed from price, and based on so-called past performance. But can they be of value? Sure, particularly if they are commonly watched by many people. There's nothing magical about the number 50 as opposed to 47 or 56, but most charting programs default to certain standard values for moving averages. For instance, DailyGraphs (the online data end of IBD) has all it's charts standard with 50 and 200 da ma's. So all the institutional investors who subscribe to that service are using those as guides. I like referring to them because I know the big boys refer to them.

Stocks can only get so far extended from their 50da ma (although this varies in the amount from stock to stock). As I mentioned, the last time CMNT got that far above was over a year ago in September 2000, and the time before that was November 1999. In other words, it doesn't happen that often and when it does it's a bright red flag waving at you.
 
Originally posted by SHORTY
MAGNA,

I've read everything on TA I could get my hands on and the only thing that emperically and statistically seems to hold true is S/R. I know a lot of traders use SMAs, EMAs, WMAs, etc. Is it your experience that MAs actually hold any predictive power?
More...

You answered your own question in a way the only thing that emperically and statistically seems to hold true is S/R. And the 50 DMA and 200 DMA are another support and resistance point.

Next, the deviation a stock has from it's normal trading. Take a look at the expansion of the bollinger bands and how far the stock is from its 20DMA and 50DMA. Upside will normally be somewhat limited.

Also, the fact that the candle was black signaled a potential reversal and the close at the bottom 10% of the trading range suggested 85% chance of lower low the following day.

In conclusion, this was a very LOW probability trade on the long side. This is not criticism, but an educational post, and I hope it comes accross this way. Please don't take this the wrong way.

Trade Smart!
 

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Tony,


When the market closes at the bottom 10% of it's trading range, there is an 85% chance of making a lower low the following day.

Do you crunch statistics like this on your own or do you "order out" for them? If you investigate them yourself, do you use commercially available products or have you developed your own tools?

Having this type of objective data is something I could really use in my trading. I am sure there are dozens of market tendencies like the one you mentioned, which if know could make a significant difference in profits.

Thanks!
 
Tony mentioned the close being in the lower 10% of a stocks range results in a high probability of it following through to the downside, this is also true the other direction. Have you ever watched a good market rally and at the end everyone scrambles to get in on the close? They know its a good percentage play for a gap the next day if a stock closes at near a high or low. Especially with market confirmation. And you'll see many of them selling on the open the next morning taking profits, not chancing the stock filling the gap. But even without a gap, intraday there's a high probability of a higher trading range.
 
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