One of the compelling reasons to view charts before making a trade decision involves what I often call “x^ potential”. In coverting my shorthand here, this means “cross up potential”.
There are several potential cross moves that I look for, but for the purpose of this post I will focus on the MA (Moving Average) cross. Below is an example that I am monitoring today in UXG (US Gold Corp):
As you can see, the 20 day moving average is rising and looks to cross up through the 50 day moving average. This occurrence is quite bullish and increases the probability of success in trading this stock from the long side.
Sometimes it is quite all right to get your wires crossed.
For those that are interested in doing a deeper study of candle patterns, here is a site that I use often when I am reviewing charts: The Pattern Site. The following is an example of an Advance Block 3 candle pattern:
I have spent some time this evening catching up on some reading that I was behind on and I came across some data relating to scan results and how they are “interpreted” by traders. I thought alot about what the author was trying to say but could not get past the thought of how the interpreation of chart patterns can vary so vastly.
I decided to give myself a little test and took 5 charts from last week. The excercise involved trying to make a case for the bull AND bear argument. Although I think I was doing this all along, it became apparent to me – once I focused on the excercise and made the case for being long or short – I noticed something that really stood out to me.
The inclusion of charts from multiple timeframes had an impact on my thesis for going long moreso than going short. The takeaway here for me is this: an increasing percentage of traders are viewing stocks with a decreasing timeframe. Probably not a big mystery here as I see comments frequently about how “buy and hold is dead” – but nonetheless it something to chew on for a while, food for thought.
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