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DOW JONES - May 2001
Saturday, May 19, 2001 10:27 AM, PST
May 9, 2001
Interesting situation:
We're clearly against massive resistance. We've resisted, now we have a daily MACD sell. The market should back off. That's the way we have to play it -- to the short side. I'd advise close stops as this market is not backing off fast. It's hanging up here.
More detail for the more advanced:
I'd be ready to reverse to the long side at the first chance.
We could explode above resistance, though I don't know what fundamental reason would cause this. The fact that we're not backing off, is what gives me the apprehension on the short side. Watch the MACD half hour confirmed signal for such a reversal up. Remember however, we're still against resistance. If we don't push through old highs quickly it will be a false rally.
If this is confusing to you just stay out, or see above. Otherwise, take quick profits--hold tight stops. Looks like the quiet before the storm.
May 19, 2001:
The "explosive rally" I cautioned about occurred 4 days after I made the call.
The reasons I expected this as a strong possibility are detailed above. (Read "More detail for the advanced). You should learn from it!
Congratulations for those of you that I know participated--
The following series of charts will detail how you implement the simple procedure described for entry. ( Joe DiNapoli 5/19/101 10:49 AM)
For now, check out the accompanying chart of the DOW.
Least you misunderstand my intent…
I'm not trying to pat myself on the back for this trade, rather detailing how the trade could have been implemented real time following the procedures in the book and the suggestions posted on this forum (www.fibtrader.com).
Look at the chart below.
Click chart below for enlargement.
Late in the day on May 9,
I suggested the 1/2 hour MACD confirmed as an entry context.
See my post quoted here " Watch the MACD half hour confirmed signal for such a reversal up." Why the half hour? Well, since an explosive move was expected I wanted a low enough time frame to be pretty sure I'd get in. More aggressive players could have chosen a lower time frame less aggressive traders an hourly.
Look at the chart below.
Click chart below for enlargement.
Here's the buy signal on the half hour DOW. Entry by minesweeper A or B is as shown…
(See Chapter 11 around p225, Trading with DiNapoli Levels)
I like profits, and I would have exited at the OP shown. Why? There's an explosive rally expected but no explosive action at the point of the OP…just a nice profit. Why not grab it? The point is whether or not you took a profit and repositioned before the big move up or whether you got stopped once or twice. IT DOESN'T MATTER!
You should have been there for the big up move if you were taking this trade.
Note: the MACD was almost consistently positive since the initial entry point!
Look at the chart below.
Click chart below for enlargement.
If you are wondering why I chose the DOW cash index to show you,
instead of say the NASDAQ or one of the mini's, it's because you-all are trading every conceivable instrument from QQQ's and options to DOW's and mini's, and even mutual funds. I chose the DOW, because it has been a mover.
I had to show some index to show the application of the theory behind the trade as posted on May 9, 2001. I could have as well chosen the S&P, as it's been a mover lately too. I expect the NASDAQ to take out its recent highs, but there's an OP just above the current market. I'd be careful sticking with that index too long.
I have more thoughts about where this market is going but no time to post. You'll hear from me if there is something urgent. (Fibtrader.com members)
Be careful of a wash and rinse up here. It would be very negative if we dropped back down below the resistance we just broke above!
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