No Losing Trades And A Doom Pattern On Tech

Posted on August 25, 2010
Filed Under Nasdaq | Leave a Comment

A very significant pattern that I think you need to check out has happened on the Nasdaq.

Going back to the July period of 2008 you’ll be able to sketch three circles above the highs of a distribution pattern. The key reason why I call it a distribution pattern is that technically, it isn’t really a Head and Shoulders or some other pattern. Through studying the pattern nevertheless, we do identify that it is a distribution pattern that results from profit taking and shorting.

The three circles may be sketched spanning a eerily very much the same pattern that began in January of 2010 and that ended last week.

So if we execute a trade triangle layover you will see that we have had a down monthly triangle. The reason that this is so substantial is that the monthly triangle is utilized to establish the longer term trend that is down. Just how accurate is the monthly trade triangle? Studying the chart you can see that every monthly trade triangle since April of 2008 continues to be correct. Employing my Guerilla Stock Trading system of a 5% to 10% gain including a 5% stop loss, we would have made money on every monthly trade triangle signal since April of 2008!

The weekly trade triangle continues to be up which translates to mean the monthly trend and the weekly trend are in disagreement. The question you need to think about all boils down to if the longer monthly downtrend will pull the weekly trend lower, or if the weekly trend has turned positive first and the monthly trend is soon to follow.

I think the case for a downward swing such as the kind we had back in 2008 when this pattern formed is more likely. The main reason, beyond the truth that the larger trend trumps the shorter term trend, is that the U.S. government came out last week and all but formally reported the economic recovery is now dead.

The newest crises we’ve got is that with the amount of people needing work, state budgets have to be cut. The cuts required are so extreme that in certain government sectors, 50% of the workforce has been laid off.

Perhaps Caroline Baum of Bloomberg News said it best: That which you had was a government-approved course of amphetamines (to keep it up), antibiotics (to prevent infection) and antidepressants (to really make it feel better). It endured regular steroid injections from both monetary and fiscal authorities. And it still has no actual muscle mass.

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