Trade, Live and Thrive: 03/10/12

Saturday, March 10, 2012

The Dow 30 - Ichimoku Study - Week: 05 March to 09 March 2012 - Bulls have it all.

Preamble:

We shall do a Ichimoku study to complement our 'Triple Screen Technical Analysis' of the US markets - Taking the 'weekly' time frame may be experimental but lets look at the facts..

The standard settings for an Ichimoku Kinko Hyo chart are 9,26,52 and are used on EOD charts. When Ichimoku was created back in the 1930s, a trading week was 6 days long. So we have one and a half week, one month, and two months. Now that the trading week is 5 days, we can use 7, 22, and 44 instead.

However, sticking to the standard settings (as the majority still use them) one notices that there is a case for 'End of Week' Charts where each candle is one week's data. There are 52 weeks in a year, 26 weeks form two quarters and 9 weeks equal about 2 months. We have a longer term view - lets check if that works out in the days to come.

One needs to read up on Ichimoku (see our first post here to start off) and use the link below, as I use the same color code. There are many more studies out there, feel free and get a good one.

http://www.kumotrader.com/ichimoku_wiki/index.php?title=Main_Page

DJI 30 - End of Week Chart - 09 March 2012

The Dow Jones Industrial Average 30 - Ichimoku - End of Week Study.

A: See the green 'a' and 'A' and the green line. 'a' is the 'Senkou Span Cross'. If the senkou span A (black line) crosses the senkou span B (grey line) from the bottom up, then it is a bullish signal. 26 weeks before the cross - 'A' at the green line shows the relevant candle - as you would have read by now - A neutral senkou span cross signal takes place when the price curve is inside the kumo at the time of the senkou span cross. We have a Neutral Bullish Cross.

B: See the orange 'b' and 'B' and orange line. 'b' is the 'Chikou Span Cross'. If the chikou span (purple line) crosses through the price curve from the bottom up, then it is a bullish signal. A strong chikou span cross Buy signal takes place when a bullish cross takes place and current price is above the kumo. See 'B' and candle at orange line - as the candle is above the 'kumo' we have a Strong Bullish signal.

C: 'C' is a 'Tenkan Sen/Kijun Sen Cross'. A neutral tenkan sen (red line)/kijun sen (blue line) cross Buy signal takes place when a bullish cross happens within the kumo as seen.

D: 'D' is the 'Kumo Breakout'. The signal to go long in Kumo (grey cloud) breakout trading is when price closes above the prevailing kumo - as seen.

Bulls would enjoy the above.

E: The last input - we see that the price took support on the 'Tenkan sen(red line)'. One notes that price breaching the tenkan sen can give an early indication of a trend change .. maybe the Bear will get lucky some time soon.

S&P 500 - Triple Screen Analysis - Week: 05 March to 09 March 2012 - Doji'ng the Bears..

Recap: The SP500 was resisted at last year's high and we looked for direction in last week's study (post here). The index had developed a Bearish Harami on the EOD and it was below the 5 EMA. However we had assessed then, that it was not yet 'Advantage Bears'.

In last weeks action the Bulls took the index back above the 5 EMA on the EOD charts and this fightback keeps the Bulls on top - what next?

S&P 500 - End of Month Chart - 09 March 2012

S&P 500 - End of Month Chart (EOM): The MA crossovers we studied last week are still in place, the divergences have vanished as of now. This chart looks distinctly Bullish, but for the hesitation written on the peak - in struggling to move above last year's high.

S&P 500 - End of Week Chart - 09 March 2012

S&P 500 - End of Week Chart (EOW): After 4 weeks of staying above the 5 EMA, this week's candle has taken support near the 10 EMA. The Bulls have dodged the Bears this week with a 'Doji'. So let us read about that - as a refresher from some free resources on the net...

http://stockcharts.com/school/doku.php?id=chart_school:chart_analysis:introduction_to_candlesticks
http://www.candlestickforum.com/PPF/Parameters/12_221_/candlestick.asp
http://thepatternsite.com/NorthernDoji.html

S&P 500 - End of Day Chart - 09 March 2012

S&P 500 - End of Day Chart (EOD): The Bulls were happy to stay within the same channel as last week, and stage a bounce back, to end on top, above the 5 EMA. The Bearish cross of the 5 EMA below the 13 SMA remains - leaving the Bulls with diminished momentum.

Since we are a Study Blog - here is something to mull on...inspired by the last three candles on the chart above..

http://www.moneycontrol.com/technicals/news/candlestick-patterns/advance-block-bearish-reversal-pattern_578785.html
http://www.fxwords.com/b/bearish-advance-block.html
http://thepatternsite.com/ThreeWhiteSoldiers.html

Looking Forward: The long term Charts viz. the EOM and EOW, are in Bull mode. On the EOD one sees some hope for the Bears. If the 5 EMA 13 SMA cross remains Bearish and the price then breaks below 5 EMA, one sees early signs of Bear strength. Staying within the current channel on the EOD keeps the Bull safe for now.

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Welcome Read

The Trading methods used here are suitable for those who (like me) are always Learners in the World Market (never presuming Mastery).

One learns with 'Technical Analysis' using Moving Averages, Channels, Time frames, Pattern & Candlestick Analysis, Fibonacci, Ichimoku Cloud, Oscillators & other Technical Indicators.

To comprehend the Dynamics of any Market, Peer Wisdom suggests, that we show plenty of Patience, keep it real Simple and adopt tons of Discipline.

We therefore use the same framework 'Patiently' every week - 'Simple' Technical Analysis Tools are repeated - The 'Discipline' of keeping a Neutral view is maintained.

So welcome to my notes - posted here for my Friends and Family.

Some Quotes..

There are times when playing the stock market that your money should be inactive - waiting on the sidelines in cash - waiting to come into play. In the stockmarket - time is not money - time is time and money is money. Often money that is just sitting can later be moved into the right situation at the right time and make a vast fortune – patience – patience. Patience is the key to success not speed.

Jesse Livermore.

That's been one of my mantras - focus and simplicity. Simple can be harder than complex: You have to work hard to get your thinking clean to make it simple. But it's worth it in the end because once you get there, you can move mountains.

Steve Jobs.

Discipline is the bridge between goals and accomplishment.

Jim Rohn.

Favorite Quote

"Why do we trade?

To be sure, trading allows us independence, the opportunity to work for ourselves. Trading also offers the prospects of a lifestyle in which evenings and weekends need not be consumed by work. Some of us crave the competitive aspect of trading, doing fresh battle each day. Others approach trading as a puzzle to be solved, deriving a sense of intellectual achievement. Finally, there is income. A successful trader can make seven figures in a year—and many of the traders I work with are living proof of that.

So why do they trade? Once you have the money, all of trading’s lifestyle advantages could easily be yours. Needs for competition and intellectual stimulation could be met in so many other ways. Why do traders remain traders long after they’ve won the game?

The great professions are those that serve as personal playing fields. They are the arenas we choose to express and develop ourselves. In mastering a discipline, we cultivate self-mastery. In writing a poem or placing a large trade, we capture—in a single act—our vision of how we see the world at that moment.

The great occupations are great precisely because they are such meaningful playing fields. Long after we’ve earned fame and fortune, the calling remains to be more than we are, to return to the arena and do battle with our limitations. The profound urge to extend the human grasp is common to all the great callings. To run faster, to capture more beauty, to predict ever better: in no small measure, our work is our pursuit of the godlike, however fleeting.

Maybe it is our different images of the godlike that animate our career choices.In work we find something divine within ourselves. Whether as scientists, monks, or traders, we strive for those moments when we are just a little closer to perfection, a little nearer to immortality. That is why we trade"

.... Brett N. Steenbarger

Inspiration

The Parable of Talents...

14 For the kingdom of heaven is as a man travelling into a far country, who called his own servants, and delivered unto them his goods. 15 And unto one he gave five talents, to another two, and to another one; to every man according to his several ability; and straightway took his journey. 16 Then he that had received the five talents went and traded with the same, and made them other five talents. 17 And likewise he that had received two, he also gained other two. 18 But he that had received one went and digged in the earth, and hid his lord's money. 19 After a long time the lord of those servants cometh, and reckoneth with them. 20 And so he that had received five talents came and brought other five talents, saying, Lord, thou deliveredst unto me five talents: behold, I have gained beside them five talents more. 21 His lord said unto him, Well done, thou good and faithful servant: thou hast been faithful over a few things, I will make thee ruler over many things: enter thou into the joy of thy lord. 22 He also that had received two talents came and said, Lord, thou deliveredst unto me two talents: behold, I have gained two other talents beside them. 23 His lord said unto him, Well done, good and faithful servant; thou hast been faithful over a few things, I will make thee ruler over many things: enter thou into the joy of thy lord. 24 Then he which had received the one talent came and said, Lord, I knew thee that thou art an hard man, reaping where thou hast not sown, and gathering where thou hast not strawed: 25 And I was afraid, and went and hid thy talent in the earth: lo, there thou hast that is thine. 26 His lord answered and said unto him, Thou wicked and slothful servant, thou knewest that I reap where I sowed not, and gather where I have not strawed: 27 Thou oughtest therefore to have put my money to the exchangers, and then at my coming I should have received mine own with usury. 28 Take therefore the talent from him, and give it unto him which hath ten talents. 29 For unto every one that hath shall be given, and he shall have abundance: but from him that hath not shall be taken away even that which he hath. 30 And cast ye the unprofitable servant into outer darkness: there shall be weeping and gnashing of teeth.

The Holy Bible: Matthew - Chapter 25.