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Friday, October 31, 2008

A few notes from Kernan at TRADEthemove.com

First, an update to my "Tracking the Dow chart" series:

It was a good week for the Dow, as price re-took the 9,000 level and moved up towards the Retracement Zone (RZ). Given this week's action, most people probably forgot about 8,000...not to mention sub-8,000 levels!

Again, no predictions from me...I am just enjoying the volatility. But I will make one observation - there is a lot of resistance overhead with the RZ and Dow 10,000. Unless we gap over the resistance, odds are good that we will see a monumental battle of the bulls and bears.

Kernan from TRADEthemove.com sent me an email yesterday, and I thought it was worth sharing. I included charts below outlining his points (note that the charts are mine, not his).

If you are a longer-term trader (which I am not), you will find his second point and my associated chart interesting. Tom C. (who once contributed to this blog, and maybe one day will again?) focused a portion of his equity on swing trades and he would plot his Fibonacci lines in a similar manner to catch these kind of moves.

Note - use the Google search box at the top of the page to search for posts by Tom C.

"X, good to see you back in the blogging world. Here are a few thoughts on your posts regarding the Dow chart. You are free to share them with your readers if you see fit.

1.) You mentioned breaking the low and a projected move to the 1.382% extension of the high to low marked on your chart. It is interesting to note that there are two probable levels of support between here and there - the low of 2003 and the low of 2002, 7416 and 7197 respectively, both of which left lower tails on the weekly charts that signified a reversal. Actually the 2003 low was a successful test of the 2002 low and started the run from 8,000 to 14,000.

2.) The selloff this year was telegraphed at the end of April when price could not close above the 50% retracement of 2007's low to high. If you look at the weekly chart, you can see that it provides solid resistance, with price never being able to close above it. From that point the Dow fell perfectly to the 138.2% extension, bounced, and then collapsed. You can also draw a trendline across the lows of 2007 and see that it was breached in January. Price pulled back to that area which - along with the 50% retracement noted above - provided additional resistance.

I wish you the best of luck in Nov and Dec, and in 2009.




Anonymous said...

Great information. Thanks.

Anonymous said...

Do you still talk with Tom C.? Does he plan to continue his short lived blog, or come back to yours?

Anonymous said...

Nice charts and I wish I had caught that Dow move!

I 2nd the move for Tom C. to come back.


Anonymous said...

Amazing to see how the 50% provides resistance. I need to incorporate some longer term analysis into my trades.

Anonymous said...

Interesting stuff. Thanks for sharing. I am enjoying your return to blogging as well.