SureTrader SPDR Advertisement
Home > Boards > Forex > General > FX

The Importance of Basic Trading Tools - Like

Public Reply | Private Reply | Keep | Last ReadPost New MsgNext 10 | Previous | Next
nostinkinc Member Profile
Followed By 21
Posts 7,913
Boards Moderated 1
Alias Born 03/15/04
160x600 placeholder
U.S. Stocks Close Higher For 2nd Day, Show Gain On Week
the so-called "fear index"--as measured by the CBOE Volatility Index fell 14% to 26.10.

A larger-than-expected upward revision to U.S. gross domestic product data, showing that U.S. economy grew at a faster 3.7% in the second quarter (, helped lift the spirits of investors that have been unsettled by a spate of volatility. Weekly data on jobless claims (, which pointed to continued strength in the labor market, added to the optimism.

"Today's revision means the U.S. economy is growing faster and [the] consumer spending portion points to a stronger growth in the second half of the year. With this kind of growth, we expect $135 earnings per share by the end of 2016," said Phil Orlando, chief equity strategist and senior portfolio manager at Federated Investors.

That translates to a 35% rise in the S&P 500 from its current level by the end of 2016, according to Orlando.

Global equity markets rallied following a 5.3% surge in the Shanghai Composite overnight, snapping a losing streak that wiped out nearly a quarter of its value in a week. That jump cheered investors world-wide, as fears about China have been blamed for much of the recent intense selling around the globe.

See: U.S. investors shouldn't fear China's slowdown (

Even so, some China watchers are questioning what drove the move and suggest the Chinese government intervened again. Read more: China's mystery rally (

Investors had fled from stocks largely due to a lack of confidence in the Chinese government's handling of its financial markets, and the perception that the government was spending all its political capital on propping up the stock market rather than investing in its domestic economy, said John Canally, chief economic strategist for LPL Financial.

"They're clumsy and not used to reacting to markets," Canally said. "They're new to this."

The rally in U.S. stocks implies that investors are treating the recent actions out of China much like they did the 1998 Asian markets crisis, when U.S. stocks sold off initially, then bounced back, Canally said.

On Wednesday, the S&P 500 jumped 3.9% as the Dow surged 619 points ( The benchmark S&P stands 8.9% off its May record close, after finishing down 12.4% from that level on Tuesday.

Other markets:Asian markets rebounded (, while European stocks also traded higher (

Crude oil ( settled 10% higher, while gold ( settled slightly lower. The dollar ( strengthened by 0.7%.

Economic news: The U.S. economy grew at a faster 3.7% annual pace ( in the second quarter, up from the initial estimate of growth at a 2.3% clip, the Commerce Department said Thursday.

New applications for U.S. unemployment benefits fell by 6,000 to 271,000 in the seven days ended August 22, the first decline after four straight weekly gains.

Pending home sales rose 0.5% in July after an upward revision to June's numbers, the National Association of Realtors said Thursday.

The weekend will bring the Federal Reserve's annual conference in Jackson Hole, Wyo (, where the central bank might offer fresh clues about a possible interest-rate hike. On the Fed front on Thursday, Kansas City Fed President Esther George said the market turmoil "complicates" any decision to raise rates, but she repeated her long-held call for a rate increase.

Individual movers and shakers: Prominent investor Carl Icahn revealed a roughly 6.8% stake ( in Freeport-McMoRan, Inc. (FCX) late Thursday after the company earlier in the day cut its capital spending plans for 2016 by 29% and said it would also eliminate some jobs. Shares jumped nearly 29% to lead the S&P 500 gainers and also popped higher after in after-hours trade when the stake was announced.

Tesla Motors Inc. (TSLA) shares rallied 8% after Consumer Reports gave the electric car maker's Model S sedan a 103-point score out of 100.

Tiffany & Co.(TIF) slumped 2% after its disappointing quarterly earnings report. Dollar General Corp.(DG) slid 3% following its quarterly results.

.--Victor Reklaitis in London contributed to this article.


Subscribe to WSJ:

(END) Dow Jones Newswires

August 27, 2015 17:06 ET (21:06 GMT)

Copyright (c) 2015 Dow Jones & Company, Inc.
Top Equities Stories Of The Day
Schlumberger to Buy Cameron International for $12.7 Billion -- 7th Update
Icahn Takes a Stake in Copper Giant Freeport-McMoRan
United Continental, Activision to Join S&P 500
Splunk Raises Guidance as Sales Jump 46%
Intel Invests More than $60 Million in Drone Maker
Sprint, Taking Aim at AT&T, Offers DirecTV Subscribers Free Year of Cell Service--2nd Update
Google Rebuffs European Union on Antitrust Charges --Update
USA Discounters Seeks Bankruptcy Protection
nostinkinc   Sunday, 10/21/07 11:52:48 PM
Re: nostinkinc post# 6
Post # of 80 
The Importance of Basic Trading Tools - Like the Venerable Trend Line

Technical Analysis Articles | Written by Jim Wyckoff |

The Importance of Basic Trading Tools - Like the Venerable Trend Line

In some of the educational stories I have written, I discussed my "primary" trading tools and my "secondary" trading tools. I also mentioned that the more tools one has in his or her "Trading Toolbox," the better the odds for trading success. In this educational feature, I want to focus on one of the most basic--yet most powerful--trading tools: the trend line.

As a refresher, I'll reiterate that my "primary" trading tools are basic chart patterns, such as triangles, double-tops and bottoms, head-and-shoulders formations, flags, pennants, etc.--and of course, trend lines. I also consider fundamental analysis a primary trading tool. My "secondary" trading tools are the computer-generated technical indicators, such as moving averages, Slow Stochastics, MACD, RSI, DMI, etc. Volume and open interest are also categorized as my secondary indicators.

I believe that futures and stock traders can still be successful without the aid of computers. Two of the most famous and successful traders never touched a computer--Jesse Livermore and Richard Wyckoff. When I first got into this fascinating business, I had no computer to give me an RSI or DMI or moving averages. I had a weekly chart service that was mailed (U.S. Postal Service, not email!). On the markets I was following, I plotted the daily high, low and close on the daily bar chart and drew trend lines with a ruler and pencil. For the longer-term monthly and weekly continuation charts for nearby futures, the chart service would send out updates about once a quarter.

I'm sure there are still some traders who use a chart service and trade successfully. Certainly, the evolution of computer trading and charting software the past 15 years has made technical analysis much easier. But the point I make here is that while computers have made the chore of technical analysis and charting easier, they have not made trading success any easier.

In the early 1990s the "neural networks" were the buzzwords in futures trading. Magazine articles espoused the wonders of using "artificial intelligence" to virtually do your all of your trading for you. That fad seems to have come and gone--thank goodness! Now, the "back-to­basics" approach to trading has regained popularity. (To many of us, this approach never lost popularity!)

Before discussing trend lines, I want to share with you one anecdote, regarding all those computer-generated, whiz-bang and bells-and-whistles technical trading indicators. Many of them remind me of the Sears Robo-Grip pliers I got for Christmas a couple years ago. These pliers were touted as a break-through wonder tool that does it all. However, in reality, when you've got a tough nut or bolt to loosen, you head for the toolbox and your trusty old box-end wrench or vise-grips. In trading, my box-end wrenches and vise-grips are the basic chart patterns that you can plot (by hand if you have to) on a chart.

Now on to the venerable trend line. Here is what respected technical analyst John J. Murphy says about trend lines in his excellent book, Technical Analysis of the Futures Markets: "The importance of trading in the direction of the major trend cannot be overstated. The danger in placing too much importance on oscillators, by themselves, is the temptation to use divergence as an excuse to initiate trades contrary to the general trend. This action generally proves a costly and painful exercise. The oscillator, as useful as it is, is just one tool among many others and must always be used as an aid, not a substitute, for basic trend analysis."

On drawing trend lines on the charts, the methodologies vary--and there are really no hard and fast rules. Like much of technical analysis, drawing trend lines is more art than science. When drawing an uptrend line, you draw a straight line up to the right along successive "reaction" lows. A downtrend line is drawn to the right along successive rally peaks. It's important to note that the more times the rally peaks or reaction lows touch the trend line, the more powerful the trend line becomes. The rule I use for the negating of trend lines is that prices must penetrate the trend line resistance or support level--and then see follow-through strength or weakness the next trading session. However, if prices make a big push above or below the trend line, then that trend line is negated without needing follow-through confirmation.

John Murphy's book, which I mentioned above, has much more detail on trendline analysis as well as other basic chart patterns.

Public Reply | Private Reply | Keep | Last ReadPost New MsgNext 10 | Previous | Next
Follow Board Follow Board Keyboard Shortcuts Report TOS Violation
Current Price
Detailed Quote - Discussion Board
Intraday Chart
+/- to Watchlist