Overshoots and Overreactions
One of the features of financial markets is that they often react to new information with emotional volatility, and overshoot extremes. Understanding this element of price behavior can give us…
Free bars: little patterns after big moves
Bands or channels are usually set up around some type of moving average. They define what is normal for a market, so excursions outside the bands are potentially interesting. There…
A short trade in silver: dealing with oversold levels in trends
A few lessons from a simple short trade in silver. First, a little bit of history. I’ve been trading gold fairly actively this year, and have published five trades in…
Trendlines in the DJIA: What Can We Learn About Market Structure?
A quick lesson on trendlines and what they can tell us about market dynamics. Take a look at a fairly long-term chart of the Dow Jones Industrial Average (below) with…
Trading lesson: copper futures
Recent action in copper futures gives us some market lessons. These can be adapted to other markets and timeframes (so if you just trade stocks or currencies, don’t skip over…
MarketLife Ep 22 – Acts of God: managing market extremes
This podcast episode looks at trading around market extremes, Acts of God, and very large market moves. From market history, some examples might be 9/11, 1987, Fukushima, Katrina, etc. Today,…
Visualizing USD trend strength
The US Dollar is in a trend of historic proportions; the strength and rapidity of its advance has shocked many other currencies as they scramble to adapt to the new…
To buy or not to buy…?
We can simplify many of the problems of technical or tactical trading to one question: assume that a market just made a large move. Do we want to fade (go…
Technicals for everyone: overbought / oversold
Continuing from yesterday's post, I wanted to dig a little bit deeper into the idea of what happens when markets go too far, too fast and snap back. This concept…
Toil and Trouble
Double, double toil and trouble Fire burn, and cauldron bubble. -Shakespeare [dc]B[/dc]ubbles seem to be the theme of the day. Headlines like "Why Stocks Are Undoubtedly Experiencing a Massive…
Too Much of a Good Thing
A simple pattern often marks the end of trends.
Chart of the Day: Russell 2000 Index
I tend to believe it's usually counterproductive to do too much in-depth technical analysis on different market cap or sector indexes. Everything is so tightly correlated anyway, so differences often…
First Principles in Technical Analysis (4/?)
Trends end in one of two ways [dc]T[/dc]he last lecture looked at the power of an intact trend. Of course, trends do not go one forever. They do end, and…