Opening Position
September 2007
Breaking News: Stocks Have Biggest Drop Since February 27! Markets Plunge Due To Worries About Subprime, Housing And Credit Markets!" ... and that's all I seem to be hearing as I write this. The subprime market has been an ongoing concern, but it finally hit on July 26, 2007, and it hit with a bang.
It just takes one bad day to throw all your charting techniques and trading systems out of sync. A trendline you thought would act as a solid support level could break down easily (certainly easier than you expected!), and it can take just one trader to make that happen. A good trader would be in tune with the market and have cut their losses when he or she saw that the market was not going to honor their support level. Is that what you did when you watched the market plunge? Or did you try to analyze other unknown variables to justify staying in the market?
IT'S a good habit to observe the behavior of markets, especially on a day when the market plunges. Only then will you be able to recognize patterns, many of which you will find tend to repeat. When I say "repeat," I don't mean that the patterns look exactly alike; I mean that the sentiment behind those moves will repeat. Once you are in tune with these patterns, you will gain an understanding of where the market will go. Patterns are powerful charting tools, and I firmly believe that understanding them is what will give you an edge in your trading. But since studying patterns is subjective, it's not easy to recognize them. So how do you learn to recognize patterns in the market?
IN the Technical Analysis of STOCKS & COMMODITIES interview this month, technician Hank Pruden discusses a very effective way to recognize chart patterns; implementing the classic Wyckoff method in his trading has worked well for Pruden. He also has some interesting thoughts on the future of technical analysis. The interview starts on page 60. In addition, we have included an article on a less common charting method known as the ichimoku kinko hyo. It's an interesting charting method from Japan and is useful for forecasting price movement. That article starts on page 34.
As always, we have attempted to bring you articles that will help you
meet your trading goals, which I am hoping is to make profits. During the
production of this issue, S&C was faced with a great loss. Sharon Yamanaka,
who was with Technical Analysis, Inc., for over 10 years and did her share
of writing useful articles for us, passed away on June 26, 2007. She was
a valuable member of our team and a great trader. Her last two articles
can be found in this issue.
Jayanthi Gopalakrishnan,
Editor
Originally published in the September 2007 issue of Technical Analysis
of STOCKS & COMMODITIES magazine. All rights reserved. © Copyright
2007, Technical Analysis, Inc.
Return to September 2007 Contents