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February 19, 2004
Commentary- Today was another fairly boring day for
intraday trading. Until the late day sell-off the market basically just traded
around in a narrow range. It's a tough time for intraday trading when the
action is like this. My solution is to just sit tight and wait for
opportunities. In the meantime, let's look at something very interesting in AMAT.
This stock recently completed a bullish pattern on the daily chart, and has
been rising nicely. My question was: is there anything shaping up to put
pressure on that run, or perhaps imply a reversal? In other words, were there
any clues that could have been spotted beforehand to hint at today's strong
reversal? Let's start with a look at the daily chart, showing the gap and
trap action.
That was one big gap up and sell-off, I'll
tell you that. I was looking at a few things that I had on my chart before the
open. Let's take a look at what I saw.
There was a nice pattern setting up at a
tight grouping that had quite a few significant numbers in it. Not only that,
there was a trendline from the last two significant swing-highs coming right in
at the same area. And look what happened. I also went up to the weekly chart
to see what that showed me. Let's look at that.
The weekly chart had a very significant
trendline that came right down to the area of the recent swing-high. And not
only that, the .786 and .886 retracements from those two swing-highs that
formed the trendline fell in the same area. This is what I mean by context. The
weekly chart pointed out that this area might be some serious resistance. But
there's something else. Let me add that to the chart.
There is a nice 5-point pattern on the
weekly, hitting right at that trendline. From an Elliot wave perspective, this
has all the look of a wave 4 in here, though, implying another thrust up,
taking out that trendline and weekly pattern completion point. A smaller
pattern that 'tested' this recent swing-high weekly pattern completion point is
a pattern that I would consider for a bearish trade. There are some interesting
things to note in here, though. First off, this recent price action had formed
a very nice bullish 4-Point Continuation Pattern. The issue, though, is did I
consider that pattern for a trade? The answer is no. As a part of
my context viewpoint, I don't buy at resistance. The weekly chart clearly shows
that the pattern formed at an area that was just too significant for me to
consider a long trade right there. But that also leads to my second point. We
have a series of patterns forming here. There was a bullish 5-point pattern that
formed and triggered in the second half of that bullish 4-Point Continuation
Pattern. That was followed up by another 5-point pattern, this time a bearish
pattern, right at the trendline. And all this is happening at a large weekly
pattern completion area. But this is an area that really looks like the area of
an Elliot wave 4. There are a lot of things happening right in this area. This
doesn't mean, though, that I'm looking for a longer-term short, since
AMAT is in a very strong uptrend and the weekly resistance, although pointing
to an area where I wouldn't want to get long, has enough factors to make me
wonder about the short side (Elliot wave and 4-Point patterns). What does
that leave me? A short-term intraday trade on the 15-minute today, and a
possible failed pattern trade setup, if this area is taken out to the upside.
The latter is what I'm really watching carefully. This market seems to be really
struggling in here as far as making a decision on what it is going to do. It's
just acting to me like it is about to fall off a cliff. That probably means one
of two things. It is going to fall off a cliff, or they are getting
ready to blast it off again. This is of no help, as far as my trading, it's just an
observation for the fun of talking out loud. I just wanted to mention that it
sure seems like something is about to happen, and I'm going to be ready to move
quick in here if the volatility kicks into gear.
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