Posts Tagged ‘Technical Analysis’
The Dow Theory: Part II
This article will start by mentioning some of the shortcomings of the Dow Theory, which is explained in detail in: My First Post Examining Dow Theory. For example, the Dow Theory, on average, might miss around 20 to 25% of a move before generating a signal identifying it. For many traders this is too late. A Dow Theory buy signal usually occurs in the second phase of an uptrend as the price penetrates a previous intermediate peak. This is about where most of the trend following technical systems begin to identify the existing trends.
There is never a time when the Dow Theory does not lend itself to presumptions as to questions concerning the direction of the primary trend, because this is an area that is highly prone to misjudgment, particularly at the beginning of each major trend and ensuing for a short time after when the answer given by Dow will usually be prove wrong. There will be a certain time then when the Primary Trend will be up according to Dow, but analysts may advise not to invest at that stage because the looks of the trend are showing on the trend being diminished somewhat and the smart investor better stay out, and the one who is already invested may wish to opt out at this point, being that there is a larger chance that the trend will fail.
However as you see in the Chart below, one can do pretty nicely for himself over the years if he buys and sells only of Dow Theory signals:
Share and Enjoy
The World Is Ready To Break Out!
This is Vanguard Fund Group’s Sector Fund that follows the whole world markets’ trends and situations. Excepting, and this is one HUGE exception, the United States. This fund was formed in 2008 in the midst of the sub-prime fiasco in an attempt to gain investors who sought less affected areas of the world as a general investment. This proved wrong because, as we know, the depression became world wide and Vanguard investors lost about the same as, say, an investor in the Futures Contracts on the S&P 500.
This Fund is now in a long term sideways (resting) pattern called a symmetric triangle. It is shown on the weekly chart below. It seems ready to break out and will probably do so within the next 2 weeks or so. The profit potential at breakout is about 35%. Follow the Chart on a daily basis with the triangular lines drawn upon the weekly chart, and AFTER a break is confirmed, only then buy long if it is breaking upwards, or sell short if it is breaking in a downwards direction. These is generally a pattern with a high percentage of breakouts being fulfilled.
This is the way the Chart looks:
Share and Enjoy
The Euro Is Bottoming Out Against the Japanese Yen
If one gives a brief glance at the Charts of major currencies as they are currently being traded against the Euro, there can be observed a certain change, maybe even a trend-reversal in the making. This is especially true when you see the EUR/JPY cross rates in the Chart below:
The June Double Bottom can be clearly seen as a W shaped bottom built in a classically-shaped pattern. What makes the bottom even more commanding is the long and extremely proving negative divergence that I show in blue from the beginning of May to the start of June. The RSI trend, as shown by the blue line below, is in an upwards trend, while the prices are in a definite downwards trend, as shown by the blue line above. This lends credence to my thesis of a W bottom having formed on this Chart.
All of this is good news for the Euro, which had little good news to smile at lately. And, considering the 6-8 possible bottoming patterns I have seen in Charts depicting trading of the major currencies vs. the Euro, this may be indeed the time to invest in what I see is a relatively cheap Euro that in my mind has been bashed enough and is now in turn for better days.