Hey all,
A quick question for James - on Clester's post, wondering how there can be a high, Bullish PO, while still being under the red, declining resistance line?
Doesn't this seem counterintuitive? :blink:
VR
It is possible to get a reversal, (from a bearish price objective to a bullish price objective) within the boundaries of the red and blue lines. The red and blue lines represent something different. A red line overhead means a "Bearish Resistance" line, meaning that when we hit up against it, we tend to encounter significant resistance. Likewise, if we have a blue Bullish Support line, that is an indicator of the overall trend, and serves somewhat (but not completely- ) as resistance underneath.
So how can you have a postive price objective (PO) when you are still under red? The answer is that it depends on the overall trend, and the RATE of change, whether or not the price objective changes. How many units are you reversed from the trend, and how rapidly did it happen? Those influence either a negative or a positive price objective. The trick is, when you see a change- is it a solid change, or could it be a one-day wonder? I've seen one or two day reversals that suddenly peter out. I am cautious- but at the same time, I also have a personal risk tolerance that is very high, so I try and grab opportunities myself. Others may not be so risk tolerent.
The red and blue lines can help you decide whether or not you are willing to take certain risks. One of the hardest things to decide when dealing with the stock market is deciding when to bail out and take the profit. Perhaps a Bearish Resistance line might be one factor, but not the only factor, that you take into account, when trying to use the P&F charts.
More information about P&F charts, and those trends, is found earlier in this thread, and also at
http://stockcharts.com .
Here is some discussion of the relationships between those lines, and when one might expect to see a change in "Price Objective". Price Objectives also take into account the RATE of change, as well as the direction.
Here is the link:
http://www.tsptalk.com/mb/showpost.php?p=133392&postcount=19
Read from that one- then about the next 10 or 15 posts, and it makes it a little clearer.
I am still not convinced we are out of the woods- although friday's action eased my concerns about the possibility of a sudden setback anytime soon.
Then again- ALWAYS remember this- P&F shows where we have been. It CAN show where we MIGHT go, if ALL OTHER THINGS ARE EQUAL. But the biggest thing to remember is that ANY OUTSIDE ACTION CAN SUDDENLY SHIFT SENTIMENT- AND WITH IT, THE DIRECTION OF THE MARKET. I.E. Outside factors- a sudden flair-up in Korea, a bank failure, a GM Corporate bankruptcy, a hurricane in New Orleans, can all suddenly break the expectation set in a P&F chart. So watch out, nothing is ever certain.
Hope that helps.
