Thursday, May 20, 2010

Tea Leaves, Voodoo & Other Dark Forces (2)

A few posts ago I displayed a tragic example of machines gone wild or squiggly line madness so common to-day. The chart was a study of Teck Resources using candlesticks accompanied by an RSI, Bollinger Bands, three moving averages, a MACD and a slow stochastic. At least 11 squiggly lines to ponder. The chart was a daily plot up to the close at $35.64 May 14, 2010.

The squiggly line signals were mixed with the RSI trying to generate a bullish positive divergence signal, the plot was into support at the lower Bollinger Band and we seemed to be into support at the 200 day MA. The MACD was into over-sold territory and the Slow Stochastic was also trying t turn up and about to generate a bullish positive divergence buy signal.

Let us now look at a pure daily chart of Teck Resources at the close of May 20, 2010. Keep in mind the daily is very short term and for traders only. Investors should use weekly and monthly charts. In this case we are only using a daily bar chart with volume. Note the break to new highs in April that was false because the new high was not supported by an increase in volume. Note now the subsequent correction – an A-B-C followed by an extension for a total of five waves. Note how the volume has spiked. I am a buyer here for a bounce up to $40. I am stopped out on a close under $30

6 comments:

Piazzi said...

Interesting way of counting the correction

you are in effect counting a large zigzag + B + single 5-wave C

under EW, corrections are usually 3+4 structures, i.e. 3, 7, 11, ... waves

can the five wave down be a 1-2-3-4=A? instead of 1-2-3=A+4-B+5=C?


the fact that you say you are a buyer for a bounce to 40 (and not a rally to new highs) tells me that you probably do not think we have seen the entire correction and trying to nail the B wave counter trend

interesting and curious

Kathleen said...

Bill, how are the tea leaves lining up in gold now? Would you be interested in hopping aboard some gold/silver stocks on pullbacks now? TIA

Kathleen said...

Bill, how are the tea leaves lining up in gold now? Would you be interested in hopping aboard some gold/silver stocks on pullbacks now? TIA

Kathleen said...

Bill, would today's action in gold/silver encourage you to enter the miners? TIA

Steve said...

Great posts Bill - Thanks.

Look forward to future posts.

It will be interesting to see where TCK.B goes.

Gettingtechnical.com said...

Hello All

Thanks for the input - I am not a gold bug but I got long several weeks ago when gold ran up with a strong US$ - an unsual happening - I think next post I look at the gold stocks

Bill C