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Park I agree with ya on that. I don’t think that anything is magical about the 50 or 200 day moving average other than many people watch it. I guess if the masses watch something it may be worth watching. I think PRICE shows where support or resistance is located.
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Very few stocks are bucking the trend the last 3 days. Most are small or regional banks (which I typically disqualify via my breakout screen), with a few acquisition targets, and otherwise miscellaneous teflons. Two stocks I mentioned recently in a previous post, LNDC and ACTS, are still found in today's list of new 52-wk highs:
If their RSI is holding (or at least not transitioning into a new downtrend) and their volume is holding up, then these guys are showing laudable relative strength and should do just fine if/when the overall market turns up (such as after tomorrow's options expiration).Comment
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That is what I would think. However, there could be investors with enough money that do not care about the MAs.Originally posted by RunnerComment
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Does anyone around here know whether any of the free stock screener sites includes Bollinger Band Width as a search parameter?Comment
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If you discount the value of moving averages, why do you care about Bollinger Bands?Comment
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May Be Of Interest
This isnt really my cup of tea but may help you :
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Grebnet, that is a cool site!Comment
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Originally posted by DSteckler
I don't look to BBands to identify support and resistance. You know the importance of an indication of a pending major change in price volatility, which is what BBand width can do.
The point of my comment about moving averages was to critique their use to identify points or zones of support and resistance, not the general point that they are "merely" statistics. Identifying points or ranges of support and resistance is best accomplished by identifying the combinations of price and volume that indicate decisions of market participants that move the price to or from a "boundary." A moving average doesn't give you that information, for one reason, because it doesn't reflect the volume aspect of the transactions at all.Last edited by Guest; 05-19-2006, 01:14 AM.Comment
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One of the most enlightening discussions about trading that I have read so far is Jack Schwager's interview (in "Market Wizards") with Bruce Kovner. Here are some Kovner quotes from that interview:
"The first rule of trading--there are probably many first rules--is don't get caught in a situation in which you can lose a great deal of money for reasons you don't understand."
"Tight congestions in which a breakout occurs for reasons that nobody understands are usually good risk/reward trades. ... If everybody believes there is no reason for corn to break out, and it suddenly does, the chances that there is an important underlying cause are much greater. ... The more a price pattern is observed by speculators, the more prone you are to have false signals. The more a market is the product of nonspeculative activity, the greater the significance of technical breakouts."
"The fact that there are billions of dollars out there trading on technical systems that use moving averages or other simple pattern recognition approaches helps produce many more false signals. I have developed similar systems myself, so that I can tell when the other systems are going to kick in. If it is clear that prices are moving because these billions are kicking into the market, it is a lot less interesting than if a breakout occurs because the Russians are buying."
"Whenever I enter a position, I have a predetermined stop. ... The position size on a trade is determined by the stop, and the stop is determined on a technical basis."
"One of the jobs of a good trader is to imagine alternative scenarios."
"I get a 'guru report' every day. ... I try not to be too much as a wise guy because during major price moves, they will be right for a portion of it. What I am really looking for is a consensus that the market is not confirming. I like to know that there are a lot of people who are going to be wrong."
"I like Marty Zweig. He uses excellent risk control. Unlike some other gurus, he doesn't believe he is predicting the future; he is simply observing what is happening and making rational bets."
"The general rule is: The less observed, the better the trade."
"Whenever a trader says, 'I wish' or 'I hope,' he is engaging in a destructive way of thinking because it takes attention away from the diagnostic process."Last edited by Guest; 05-19-2006, 01:16 AM.Comment
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That's an interesting viewpoint, and worthy of contemplation. It does seem logical that actual volume at a particular support or resistance location should make a difference. Personally, I attach weight to volume by price, especially at price support and resistance areas. Daily volume also weighs in. I think it's a definate edge to appreciate it from that perspective.Originally posted by ParkTwain
But of course, at the end of the day it's entirely about perception.......and price discovery mechanics may act completely detached from our logic....and strong support or resistance may actually be demonstrated at prices where there is low actual volumebut perceived significant resistance, whether it's a moving average, a trend line or a channel or whatever. The volume in many cases is irrelevant and perception is everything.Comment
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I guess I visualize support and resistance as "membranes" that can be "thicker" (more volume was transacted over some range of trading sessions) or "thinner" (less volume was transacted over some range of trading sessions). A thicker membrane is more resistant to the price passing through it the next time a testing occurs. There is also a decay factor for the integrity of a support or resistance membrane. Even a strong membrane seems to decay over time, even when it has not been tested during that time, and even when all other market factors tend toward invariant.
When looking at the integrity of a stock's support/resistance levels, one also has to determine how sensitive (i.e., how statistically correlated) a given stock is to other market factors. If its price behavior tends to be meaningfully correlated to some other subset of the market's stocks, its industry sector, or other external market factor, etc., then the predictability of the integrity of the given stock's support/resistance levels likewise must be examined with respect to the integrity of support/resistance levels for those other stocks.Comment
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Nice little article about using BBand width and Avg True Range in combination:
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Bollinger Bands approach volatility from the perspective of standard deviation. The Bands themselves are plotted a certain number of standard deviations above and below a specified moving average. The most commonly used settings are 20-days for the average and 2 standard deviations of closing price. The result is an envelope of sorts which in theory should contain most trading action.
ATR, on the other hand, focuses not on price, but on total price movement. It takes into account how far the market has moved each day, both up and down, and averages that out over a specified time period (14 days for example). What you get is a measure of how widely the market is swinging as it moves. Markets with small ranges will tend to have low ATR readings, while those with larger ranges will have higher ATR figures.
Because Bollinger Bands and ATR take different approaches to looking at volatility – close to close vs. trading range – they can be used together to provide a fairly comprehensive view of the markets. More importantly, they can be used in a complementary fashion when trading.
The way I use Bollinger Bands is to look at the width of the Bands – the distance between the upper and lower lines. When the Bands are wide apart, it is because there has been a lot of price movement. When they are close together, the market has been range bound. Ranges eventually give way to new trends, so I look for narrow Bands to give me an indication of a market ready to make a significant directional move. (Note: It doesn’t work the same way with wide bands signaling consolidation because of the way trends sometimes progress.)
What ATR brings to the mix is a sense of how aggressive traders are. High ATR readings often mean a lot of speculative trading. They often come about near turning points - especially bottoms – not during persistent trends. Take a look at a weekly or monthly chart of the stock market for the late 1990s and early 2000s with ATR plotted and you can see exactly what I mean.
The way we can use this in combination with the width of the Bollinger Bands is to look for a combination of narrow Bands and low ATR. It is these situations which are most likely to produce sustained moves when the market breaks the range. If ATR is running high, the break might be violent, but it is likely to be short-lived as eventually things will have to calm down. In contrast, a break coming from a low ATR reading is a move that can gradually build without too quickly getting overdone.
At the same time, we can use the changes in ATR to give us an idea of how sustainable a trend is going to be. If ATR rises quickly, that’s a good sign that the move may not last very long. A great scenario is when ATR actually declines during a trend, especially as the Bollinger Bands are widening out. This situation isn’t all that common, but when it happens, the moves can persist for a long time.
As useful as volatility indicators can be in terms of picking out “trend-ready” markets and those likely or unlikely to maintain the current price action, they are not that helpful when it comes to determining direction. The width of the Bollinger Bands can tell us when a break is likely to happen, but they won’t tell us which way. For that we have to use other tools. In my case, I focus on trends and chart support and resistance points. Other people have their own favorite tools.
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Crawling Back in the Saddle
Yesterday's jolt in the markets got my attention. I have not traded since mid-May due to the obvious market weakness (I don't do shorting cause I trade in an IRA). Since then I had been holding less than 1/2 my trading funds in a couple of relatively low-volatility (uninteresting) securities since then. I started freeing up those funds today since they had recovered to a point of less than 10% loss position in total. One of these is LMIA (aerospace subcontracter to Boeing, etc.), which I intend to hold for a while longer. I also just changed jobs, so I've been preoccupied with that situation since late May.
I haven't done a full research pass recently on my preferred data set, but during July out of the corner of my eye I had noticed that AEPI has consistently been strong.
Here is a little screen that I sometimes run (free Java-based screener at Yahoo Finance) when I have been out of the market for a while: trading >50K per day, pps no more than 3% below its 52-wk high, Beta of >1.5, pps between $10 and $75/sh. After today's close here are the results (* = more interesting to me for near-term long trade), ranked in order of Yahoo-reported ROE:
TNP
Greek shipper, pps moved up in late June (news of 6/21?) now at all-time high pps
*ORCL
now trading >15/sh (3rd time since early 2002), chart shows decent strength since pps bounced back in late June
AD
acquisition target, announced 7/6/2006
*RDN
very strong 10-year chart, steady pps increase since it passed 2002 high of mid-50s/sh; announced earnings yesterday with positive mkt response, RSI uptrending again
*AHS
staffing service for health care providers, presently a nice ADX setup, rising RSI, new 3-1/2 yr high pps, next earnings rpt on 8/8
DP
being acquired by Siemens
FFFL
bank in WPB, Fla, flirting w/ new all-time high pps, earnings released earlier this week, looks like imminent brkout to me
AACE
acquisition target at 30/sh
IFCJ
acquisition target
BAY
in marked pps uptrend for the last 3 years!
N
Canadian nickel mining co could be either acquirer or the acquired
BAB
Brit Airways, an airliner, no thanks, but a good-looking chart for 18 mos
NWEC
So Dak. nat gas and elec util, chart shows upward stairsteps (or pennants) in its 18-mo lifespan of trading
*OCN
trading at 7-yr high and showed rel str since May 06 mkt weakness, could be time to buy NOW after pps consolidation since ~6/15
RSAS
acquisition target (EMC)
*ORB
satellite maker's pps recovered well during July, now almost back to year 2000 pps, strong technicals and chart right now
VOL
pps made big move during June (news?) to 9-yr high; WATCH
BMR
REIT, steady pps gainer since mid-2004, recent technical strengthLast edited by Guest; 07-21-2006, 02:06 AM.Comment
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Great to see you back look foward to your postsRay LongComment
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