Charts SYSTEMS

[JLS]

snoot,

This discussion started as my response to Michael's question regarding your fork versus what I thought was a better approach which was to look at SR levels. I offered it as alternative ideas worth considering. Everyone has the option of considering my ideas as worthwhile or not.

There are a lot of SR levels between current price and your fork's lower tine, 80 points lower. So there was much to consider that would definitely have significant influence on price movement downward. Your fork had nothing but open space for all of 80 points lower, and the same could be said in the upward direction. That's the essence of it all. SR levels had plenty to say in that space, and at several different price levels. Your fork had nothing to say other than the potential of an 80-point drop, and is why Michael asked the question.

I am not tearing down your system. Perhaps you are being a wee bit too sensitive. I am only tearing down a particular fork that you drew on $RUT. So just get over it. You learned forks from a guy who used to say that there's no such thing as a bad fork. That's equivalent to a plumber who only has one adjustable tool on his belt; and if it isn't a plunger, he's gonna stink up the place and himself. In other words, if a given fork doesn't fit the data well, then find something else that does.

That fork does a terrible job of showing the behavior of $RUT over the last year. What kind of trader is willing to watch price drop by nearly 10% from the middle tine of a fork before it even begins to test the lower tine? No good trader that I know would want to do that. Why? Because he's probably waiting for a successful test of the lower tine as an entry point for a Long trade, but it never happens. The term 'trader' applies to someone who wants to trade; that is, he wants to make money on the smaller up and down cycles within a channel. To do that, he needs a channel that snugly fits the data. The trade signals generated within good channels are a result of reversals, or breakouts, very near channel edges. Your fork is not even close to doing that. The wedge that I suggested would do that. Even a bad Bollinger Band would do that.

As I said, the vast majority of the time there is history. The only time there is no history is when you try to trade an IPO. I only do that when there is a pull-back, when there is history.

When new highs are being made, all data is history, so there is support but no resistance. In those few cases you could simply extrapolate existing trends or use virtual images of past data. At any rate, there will soon be resistance after a pull-back from all-time highs. Then the question is whether price is following the same trend or channel, or setting a new one.

I can understand that you would defend that fork if you had drawn it last January, when all the data was there from the prior few months to define it; and then you followed it for all the remaining time till now. But you didn't. Use all that support and resistance that you learned last year to define the path of your future. That which didn't work, fix it. That which did work, make it better. Above all, do not automatically discount suggestions or constructive criticism without due consideration.