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clarification of the mis-spelled word clairafication. : )
clairafication
Notes on ADX: *The best time to be long is when both green directional and black ADX are above the red directional and ADX rises.
*The best time to be short is when both red directional and black ADX are above the green directional and ADX rises.
*When ADX points down, it is better not to use a trend following method.
*When ADX falls below both directional lines, start getting ready, because major trends emerge from such lulls.
*The single best signal comes after ADX falls below both directional lines. The longer it stays there, the stronger the base for the next move.
*If ADX rises from 8 to 12 while both lines are above 12 and the green directional line is on top, it indications that a new uptrend is beginning. If ADX rise from
9 to 13 while both directional lines are above 13 and red is on top, it shows a new downtrend is starting.
*When ADX rallies above both directional lines, it identifies an overheated market. When ADX turns down from above both directional lines, it shows that a
major trend has stumbled. It is a good time to take profits.
My trading notes on ADX,
*The best time to be long is when both green and black ADX are above red and ADX rises.
*The best time to be short is when both red and black ADX are above green and ADX rises.
*When ADX points down, it is better not to use a trend following method.
*When ADX falls below both directional lines, start getting ready, because major trends emerge from such lulls.
*The single best signal comes after ADX falls below both directional lines. The longer it stays there, the stronger the base for the next move.
*If ADX rises from 8 to 12 while both lines are above 12 and the green line is on top, it indications that a new uptrend is beginning. If ADX rise from 9 to 13 while both lines are above 13 and red is on top, it shows a new downtrend is starting.
*When ADX rallies above both directional lines, it identifies an overheated market. When ADX turns down from above both directional lines, it shows that a major trend has stumbled. It is a good time to take profits.
Look at a few stocks in both short and long term time frames an you will see that Elder is right on. I'll trade with Elder from this point on.
Merry Christmas and a happy New Year to all. Ed
Same here , 4God. EOM
chichi2 et all,
Try this annotated link for AMAT.
http://stockcharts.com/def/servlet/SC.web?c=amat,uu[w,a]daclyyay[de][pb20!c10!d20,2][vc60][ill14!lg!...
Please make comments as appropriate, TIA. Ed
Thanks Bob, I'll send an e-mail to stockcharts now. My two year AMAT chart was different from the one posted by chichi2. I used all trend following indicators , ADX, OBV, A/D and MACD - Histogram. The ADX looked very different, probably due to the difference in time frame. So let me contact SC and we will get this issue resolved soon, I hope. To be a team we need to look at the same data, obviously.
bob3, Thanks for the fast reply. When I click the link below it takes me to the AMAT annotated chart. It works for me. But apparently not for others.
So just to make sure of the current situation before I contact stockcharts.
When you click this link, http://stockcharts.com/def/servlet/Favorites.CServlet?obj=1345274,2&cmd=show[s22414351]&disp...
it takes you to the log on page, correct? Yes or No
It appears to me that the only time I will be able to share thoughts in a graphical sense is when I'm on the internet and logged on stockcharts.com.
For anyone who reads this post, please try this link again and let me know since I still need to do a little more Christmas shopping. I'll be on line for another hour doing TA on YHOO. Although YHOO did not come up on the CBS MarketWatch scan, it still meets the criteria. This willingness to add stocks that meet the criteria applies to stocks submitted by all board readers. Please let me evaluate your stock ideas. If they have made a recent 52 week high, have an average 50 day volume of at least 2000000 shares and rate a MSN number greater than 7, I will add them to the N52WH list and watch for low risk positions.
http://stockcharts.com/def/servlet/Favorites.CServlet?obj=1345274,2&cmd=show[e22414351]&disp...
Also we need to, and will, work out the bugs in posting annotated stockchart.com charts to this board. If we still have a problem I will e-mail stockcharts for a solution. ED
chichi2,
Does the link I posted take you to the stockcharts.com log in page?
Thank you chichi2 for calling that to my attention. The same applies to anyone else who has a question or constructive criticism. I was logged out of EXTRA and will try to avoid that in the future.
Here is the link to AMAT. Looks like a short position during the next two (2) months is possible. But I will wait and let the market confirm my suspicion.
http://stockcharts.com/def/servlet/Favorites.CServlet?obj=1345274,2&cmd=show[s22414351]&disp...
AMAT
I think I've died and gone to heaven! Looking at AMAT, on the 'hard right edge' we see the ADX line below both directionals. This type of occurrence happened in mid April '02. There was a subsequent rally and then 60 degree decline forming a double top. This sequence of events may be happening now. There are very simular conditions in the OBV and A/D trend following indicators. Interesting to note the 'inverse' relationship between the stock price and the black ADX line during the early April to mid-June '02 time frame. The stock price forms a 'M' while the ADX forms a 'W'. During the completion of the 'W' the black ADX line moves upabove the green line while still below the red line. Elder teaches that this is the best time to take a short position. By the looks of the subsequent decline in price, one would aggree. So now we wait for AMAT to make a second top.
4God,
Thanks for the post, it is interesting.
Merry Christmas and have a great New Year trading.
chichi2
Thanks for the guidance , I did a quick read of the post by 4godnwv and was a bit confused on whether to start at the previous bottom or the recent top. I choose to start at the top because ADBE is now in a downtrend. I have read that so many traders either use Fibonacci numbers or are aware of them that they become 'self fulfilling' and warrant respect when trading.
Please take care as you are a treasured mentor to this board. Merry Christmas and have a great year trading in '04.
Question to the board,
Am I using the Fibonacci ratios tool correctly? TIA
ADBE http://stockcharts.com/def/servlet/SC.web?c=adbe,uu[e,a]daclyyay[dc][pb20!c10!d20,2][vc60][ill14!lg2...
I just graduated from the 'stone age'. EOM
My first postable annotated chart...
Looking at A.
http://stockcharts.com/def/servlet/SC.web?c=a,uu[e,a]daclyyay[dc][pb20!c10!d20,2][vc60][ill14!lg20!l...
Mr. Ted Burge says:
"THE MONTHLY CHART TO FIND IT, THE DAILY CHART TO SEE IT AND THE 10 MINUTE CHART TO TRADE IT. If you learn to do this, my time will have been worthwhile."
chichi2,
I just read your email regarding CD. I guess we think alike on that one and that's encouraging to me. Hope you are felling better and by the way, do you have an opinion on NXTL, A or IGT in regards to the ADX and OBV? TIA, Ed.
LT,
I'm also looking at NXTL, A, IGT
Here's what I have for the 3 yr weekly,
A: ADX near new high. Stk trending 35*. ADX is above both D lines. Ascending OBV . No position.
NXTL: ADX near new high. Stk trending 30*. ADX is above both D lines. Diverging OBV . No position.
IGT: ADX new high. Stk trending 40*. ADX is above both D lines. Ascending OBV. No position.
Here's the 6 mo daily,
A: ADX turning up. Stk trending 40*. G above ADX above R. Ascending OBV . Early bullish position.
NXTL: ADX turning up. Stk trending 35*. G above ADX above R. Ascending OBV . Early bullish position.
IGT: ADX turning up. Stk trending 40*. G above ADX above R. Ascending OBV. Early bullish position.
We want to keep an eye on TXN, AMAT, NSM, BSX and C. For all, the ADX is below both directional lines on the 6 mo daily chart. This is what Elder says about this orientation,
'When ADX falls below both directional lines, start getting ready, because major trends emerge from such lulls. The single best signal comes after ADX falls below both directional lines. The longer it stays there, the stronger the base for the next move.'
On the other hand, TXN does have a decending triangle formation which could break to the down side and the OBV is getting weaker , so it cold be a while before TXN begins to move up.
BSX is another one where the ADX line is under the directional lines. OBV is getting weaker here too.
LT,
I'm looking at CD now on a 6 mo daily ADX + OBV chart. Be sure to use NAV instead of candles and you will see the 'W' formation made at the beginning of Oct. Look at the ADX line moving to the upside and crossing the red line. The green line is on top of the ADX line. This is the type of condition we are looking for. Now look at today and you will see the same type of conditions as in early Oct.
This is what I got for the 3 year weekly,
CD: ADX new high. Stk trending 60*. ADX is above both D lines. OBV at resistance. No position.
This is what I get for the 6 mo. daily,
CD: ADX in early uptrend. Stk trending 40*. G above ADX above R. Ascending OBV. Early bullish position.
What do you think about CD, LT ?
LT,
What were the chart settings on MO?
I have a couple more stocks to evaluate on 3 yr weekly and will then evaluate the same list of stocks on 6 month daily charts. I'm in the process of developing a 'fill in' check list to make the evaluation process faster. When finished there, I will be turning my attention to the other two trend following indicators that I will use, ACC / DIST + MACD Histogram. I will still be able to answer questions on ADX or OBV.
Eventually, I will break my job down to tasks that I perform on certain days of the week and at certain time intervals, just like a business.
LT,
My evaluation on 3 year weekly ADX + OBV chart.
MO: ADX in late uptrend. Stk trending 60*. G above ADX above R. Diverging OBV . No position.
Note: * represents degree This is the approximate angle of the stock trend. G = green R = red directional lines.
The following is my evaluation of CVX, HAL, SLB and DOW.
CVX: ADX in early uptrend. Stk trending 30*. G above ADX above R. Ascending OBV. Early bullish position.
HAL: ADX in early uptrend. Stk trending 20*. G above ADX above R. Ascending OBV . Early bullish position.
SLB: ADX in early uptrend. Stk trending 25*. G above ADX above R. Ascending OBV . Early bullish position.
DOW: ADX in early uptrend. Stk trending 30*. G above ADX above R. Ascending OBV . Early bullish position.
The only short pospect on the list of stocks that I follow is:
ADBE: ADX decending. Stk trending 30*. R above ADX above green. Decending OBV. No position.
Thank You , LT...
I added that monthly link to the stock picking procedure as a reference. I typed in HAL which was added to the N52WH List yesterday.
Here is the monthly chart. Notice that the BB have 'necked down'. I think we both know that stocks breakout of this type of BB condition. I see the breakout as bullish.
http://139.142.147.218/StockChart_ImageOnly.dll?cus=0&co=ask&i_chart=0&inm=5&ind=2&a...
I have noticed that since beginning the N52WH list two (2) months ago, there has been a transition away from tech and into the S&P 500 or DOW type of stocks. Yes I know that's old news. My point is that the change in trend is being reflected in the stock list. I wish I had started this list earlier when the trend was moving money from bonds to the NASDAQ. I think we will have a chance to get in early on 2004 winners, but they will have to make a new 52 week high, have volume that indicates interest and get past the MSN screen which looks at (among other things) the fundamentals.
LT,
Due to the nature of the internet, sometimes sentences can be taken out of context. The line you refer to is on page 139 in the first paragraph. 'When a trend proceeds in a healthy manner, the spread between two smoothed Directional lines increases and ADX rises. ADX declines when a trend reverses or when a market enters a trading range. It pays to use a trend-following method when ADX rises and not when ADX declines' As far as I am concerned, Elder is telling us not to use the ADX (which is a trend following indicator) when the the ADX declines.
LT, LOL
We are having fun learning here. Please remember that I too am a student, only I'm had a chance to read the book. Once you have Elder's books and you begin to read them, and please do yourself the enormous favor of creating a word document and listing notes, the light will come on and we will both be on the same wavelength. Now, won't that be fun!
P.S. Don't short change yourself, take the time to type and organize your notes. The date in my copy of Elders book is 09-30-99 my first read was back then. I still managed to lose money each year since. In my humble opinion, just reading is not enough. One needs the mental re-enforcement of physically typing information. It's helpful to have notes on a word document that can be changed as necessary and printed for a reference as you trade.
LT,
Looking at a 3 year weekly chart, that 'little guy' said buy me at support in Feb of this year. Looks like 35 ish. Now it is saying sell me at 55 and take your profits. I calculate that to be a 57% profit in 10 months. Can't even think of comparing that to a Bank of American savings account. This is the type of long position I am looking for.
Also looking at the chart above, one can see LOW at an angular trendline. That is support until broken to the downside. Meaning the price must close below the trendline. Shorting here is too risky for me. Sure you might make a couple of points before LOW begins to trend back up (if that's the case) but then you will either have to cover your short or lose paper profit. If you cover your short and the next few days LOW begins to move back down, you kick yourself for not staying short. I will not let myself go through those 'mental' games anymore. If you keep your short position and put a buy back stop loss at any price that gives you a loss then, you are a loser. And then again it's time for those 'mental' games.
LT, I think you need to look at the big picture first and then start looking closer for a buy opportunity at support.
LT,
'it moves down when in a trading environment.'
Not sure about that, just know that I will not take either a long or short position in a stock with the black ADX line moving down. If the ADX line is above the directional lines and flat then it's too late in the trend to take a position. As Elder teaches, the ideal time to take either a long or short position is when the ADX line is below the directional lines and begins to trend up. With 34 stocks on the N52WH list, I can wait until the conditions are right for a low risk trade. Remember, my tolerance for loss will be 2% max. This means I need to use the 'gray matter' to identify an opportune time to take a position.
A word of caution, I would look for confirmation from the other three 'trending' indicators. So now we are working on gaining a better understanding of the ADX indicator and when to use it. Next we will look at the OBV indicator. What we want to see here is a divergence between stock price and the OBV. I am now in the process of creating a 'fact sheet' in regards to the relationship of the ADX and OBV trending indicators and each of the 34 stocks on the N52WH list. I will share my work with this board. You all will be welcome to comment and share advise or suggestions. Once we develop a method of evaluating stocks it can be used on any of your own stock ideas. Our objective here is to teach ourselves how to make money in the market with a low risk of loss.
correction.
You typed 'so e, what you are saying is that has an inverse relationship with price. price trending up, black line turned down. what happens if the line is flat (not up or down)??'
No, not at all.ADX moves up when price either moves up or down.
Elder writes,'The Directional system (ADX) identifies trends and shows when a trend (bullish or bearish) is moving fast enough to make it worth following. It helps traders take chunks of profit out of the middle of important trends'
I added the info inside the parentheses.
(The letters ADXwere removed by spelling/typo checker.)
You typed 'so e, what you are saying is that has an inverse relationship with price. price trending up, black line turned down. what happens if the line is flat (not up or down)??'
No, not at all. moves up when price either moves up or down.
Elder writes,'The Directional system () identifies trends and shows when a trend (bullish or bearish) is moving fast enough to make it worth following. It helps traders take chunks of profit out of the middle of important trends'
I added the info inside the parentheses.
I'll re-post what I find as a key sentence in Mr.T.B.'s post.
'Do not confuse buying at support to mean the next highest target. We buy at the next level of support that is lower.'
Once we recognize a trend we need to take a position, but be patient and let the position come to us.
Good Morning LanaTaylor,
I just read your posts and the very first thing I did was change the time periods to 3 year weekly on both INDU and WMT. It's much easier to see the long term trend this way. This is why I added 3 year weekly charts for the N52WH list. Also I spent time researching the indicators as to type. One should keep 'trend following' indicators separate from 'oscillators'. You have trend following indicators on the INDU chart and a mix on the WMT chart. Look at the chart list I made and follow my lead as to grouping indicators, just a suggestion.
As to the above Elder writes,
Trend following indicators are coincident or lagging --they turn after trends reverse. These indicators work best when markets are moving but give bad and dangerous signals when the markets are flat.
Oscillators are leading or coincidental indicators and often turn ahead of prices. They catch turning points in flat markets but give premature and dangerous signals when the markets begin to trend.
Elder writes, 'The single best signal comes after ADX falls below both directional lines. The longer it stays there, the stronger the base for the next move.'
and 'When ADX falls below both directional lines, start getting ready, because major trends emerge from such lulls.'
We can easily see that in the above charts. The INDU is bullish and the WMT is bearish. Use the stockcharts.com and 'annoteate' the above charts with horizontal support and resistance lines and angular trend lines. Also use the PnF charts to help locate support and resistance points.
Now you can reduce the time period to 2 yr and 1 yr weekly and then 6 mo daily to get an idea of where to take a position.
Remember what Mr. Ted Burge has recently typed, 'For newer readers please understand. We buy at support and not at resistance and make sure there is room for the price to move. Wait for a pullback it happens all the time, just look at the charts. When there is a profit protect it with a stop. Do not confuse buying at support to mean the next highest target. We buy at the next level of support that is lower. There is an assumption that selling (stop) at resistance means you have a profit, and buying at support means a lower level than you sold.'
N52WH List
The list of stock charts got sooooo big that RB made me create three (3) posts! No problem and we did add 136 new 3 year weekly charts!!! I guess they had to draw the line somewhere.
Added USB, DOW, SLB and HAL
'hopeful10'
If you have any questions after reading the previous post to LT and yourself, please let me know. After January, I will be out of the one year contract with earthlink DSL. I hope to save $20 a month by going with either SBC YHOO or Verizon. I will put the $20 into a stockcharts.com subscription and be able to bring annotated charts here. I need constructive criticism and questions. Th'ks, ED
LanaTaylor, hopeful10
You typed, 'question ed, does it make a difference if the red or green line is first under the black adx line, or just that the adx line in pointing down and is above the red or green line.'
Elder writes,'The best time to be short is when both red and black ADX are above green and ADX rises.'
So yes it does matter. The red line should be above the green line and the black ADX line should be above the green line and rising.
You typed, 'I have a stock that i am looking at where the adx line is on top pointing down but the red line is above the green? think it is ready for shorting but would think the green line would be next, not the red.'
Elder writes,'It pays to use a trend following method when ADX rises and not when ADX declines.'
I know, I left that part out of my challenge post.
Elder writes, 'ADX declines when a trend reverses or when a market enters a trading range.'
A fine example of this is seen in the 3 yr weekly chart of GDT. Look at the July 2001 time frame. One can see the black ADX line is above both directional lines, the red line is above the green and the ADX line is pointing down. During this time period, GDT is in rally mode. I think this answers your question. I would not short the stock you mentioned.
Here are more of Elder's thoughts.
Elder writes, 'When ADX rallies above both directional lines, it identifies an overheated market. When ADX turns down from above both directional lines, it shows that a major trend has stumbled. It is a good time to take profits.'
According to Elder, this is a time to take long or short profits not a time to go short. It's a change in trend either from bullish to bearish or bearish to bullish. My reasoning was to look for an early signal of a turn from bullish to bearish since your original question was about short opportunities. The problem is the signal may be very early. I was looking for stocks like G, Mo and GDT. In all three the black ADX line is above both directional lines on the 6 month daily charts.
Interesting to note on the above stocks, look at each in a 3yr weekly chart. G and MO are making cups while GDT was already made a cup, a handle and a breakout to the upside. G and MO may be next.
Elder writes, 'When a trend proceeds in a healthy manner, the spread between two smoothed Directional lines increases and ADX rises.'
So the trend can either be bullish with green on top of red or bearish with red on top of green but either way if the trend is healthy, the black adx line will be moving up.
Thanks for participating with me in learning more about TA. Your asking a question makes me work to find the answer and that type of exercise is good for me too.
WoW !!!, I was afraid that you may have had a medical problem but did not post my concern. I thought maybe the flu got to you. The internet is rather 'evil' in the sence that people communicate with each other and as humans do, form freinds. When you don't read their posts anymore you wonder what happened to them.
Anyway, hope you feel better soon, your computer friends missed you. Ed
hopeful10,
To be a little clearer, in my list I am including stocks where the black ADX line is above both the green and red directional lines. The ADX line may still be pointing up, moving sideways or pointing down.
So, just in general, ADX above both directional lines. You may want to view a three (3) month chart for close calls like CSCO.