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Saturday, April 04, 2009

Longer-term charts

Posted by Tom C.

At the beginning of the year, I made a post about watching for longer-term setups.

"With many stocks closing near the [2008] low, I will be watching for them to rally off those levels. I plot my Fibonacci lines over the previous year's high to low*, and look for price to break through the retracement zone. The idea setup is price breaks through that level and pulls back to test it as support before rallying to the previous year's high (and hopefully the Fibonacci extension)."

Many stocks are moving up as anticipated. I already had several good trades, and I expect more setups to materialize in the coming weeks.

I wanted to post a couple of charts of trades I made where price moved off of the 2008 lows. Both of these were great trades, with offsetting bars (or piercing line candle formations) and a clean move up to the halfway point between the low and the 50% retracement of the previous year's range. AEIS was a 20%+ move, and ALB was a 25%+ move.

My entry was a break of the bar indicated by the yellow arrow. I closed both positions at the end of the day yesterday.

*To give credit where it is due, I learned this method from Kernan at TRADEthemove.com


AMIRKE said...

hi Tom c
thank you for the post.
how do you find those stocks?
which stocks do you prefer,i imagne there a lot hitting 2008 low ?

Zen said...

Thanks for the charts Tom. I have considered looking at the tradethemove.com book, but the price is steep at $125. What distinguishes it from other Fib books? I'm reluctant to dish out that kind of ching without some idea of what I'm buying.

Tom C. said...

Amirke - I have a universe of stocks I watch on a weekly basis, and my longer-term trades come out of those. I used Worden in the past (TeleChart), and it is a great product. You can write scans for just about anything, such as stocks near the previous year's low. I am sure there are a lot of free Internet scanners too - I just don't use them. Try Yahoo - they have a free scanner. Or finviz.com. Or prophet.net.

I am sure other readers can chime in with some free tools.

Tom C. said...

Zen, if you are well versed and experienced with Fibonacci and using it to make money, then tradethemove.com may not be a big benefit. But if you are looking for simple ways to apply basic Fibonacci, it is well worth the money. As far as getting an idea of what you are buying, there is a ton of info out there on it - there webiste, comments here, other blogs. And the $125 is relative - we lose more on a bad trade, so if it gives you ideas that help you avoid bad trades, it is worth ten times that much.

Todd-O said...

Zen, I bought the Tradethemove manual at the end of 2008. I can say it is well worth the money if fyou are trying to figure out how to use Fibonacci. It is also a great tool for swing trading, even more so than intraday in my opinion. Good luck.

Charles said...

I give ttm two thumbs up.

Michael said...

The manual from Tradethemove is well written and the information is easy to digest and apply. If you study it and the Fibonacci principles here and on Trader Jamie's blog, you will be on your way to successful, profitable trading.

Randal said...

Thank you Tom C. I always enjoy your swing trade posts. Have you ever thought of re-starting your blog and just focusing on swing trades?

Regarding tradethemove.com, I too recommend it. You easily get $125 worth from it.

Tom T. said...

Maybe I am the only one who found this post not very informative. First, why bother plotting the fib lines - I missed it - seems all you are doing with those two examples is buying based on candle reversal formations off of the yearly low - I missed where the fib lines factored into the trade since I do not see them marked in the chart. Also, what is the "retracement zone" - this is never defined. Third, Amirke's question was really a filter question - what parameters do you use to find these candidates? I was wondering how this system of swing trading is also used if price is now well above 2008 lows but not yet at 2008 highs - for your candidates. Where does your trading go from here? I do not mean to sound negative - I just want to learn and there is a lot missing for me - thanks.

Tom C. said...

Tom T., I am sorry that you didn't find it informative. To me this blog is a continuing process, not a read one post and learn to trade. Over time I have outlined how I trade, as has Trader-X. Things like "retracement zone" are defined, discussed, and explained on the blog. You have to do a search if you are new...or Trader-X has links at the top of the blog to take you to important posts. But it is not possible to explain everything ever discussed in each new post.

Regarding Fibonacci, I use it to frame price action. So on these longer-term trades, my Fibonacci lines are plotted over the previous year's high and low. Entries can be at key levels, and targets are at key levels, be that lows, highs, fibonacci extensions, or the retracement zone.

Regarding parameters used to find these candidates - the trades are based on setups at the key levels mentioned above along with candlestick patterns. I don't do scans anymore - I have a universe of stocks I follow. So I am not going to take the time to describe how to scan for stocks moving off the previous year's low. You can find that elsewhere. For me it is all about studying/analyzing charts and making high-probability trades.

But in the end, if my posts are of no value, I respect that and don't expect you to read. There are a lot of quality blogs out there and I am sure you can find a fit.

Kevin said...

Tom T. - I always find Tom's posts informative. I think if you view this blog and others as sources of information to incorporate into your personal trading, you will be better off. As opposed to trying to find the holy grail and have someone tell you how to trade. Which, imo, will never work.

There is a wealth of information here. Take what you can use, and ignore the rest.

Doug K. said...

I will say that instead of criticizing someone who freely posts to help others, if you don't find anything helpful in this particular post then you should just remain quiet. Why go to the effort to be negative? Just don't say anything, and check back tomorrow to read something new. Or if you don't find value on a consistent basis don't read this particular site anymore.