60% chance of Rain

If you really want to know about rain, knock yourself out Rain

What we are really talking about here are probabilities. This concept is so important in trading and should be a key component used in determining entry and exit of trades. For an example, let’s take a look at the Area chart of PMTC (Parametric Technology Cp):

As you can see, price is heading up into what I call the Price Zone. The volume has been elevated recently, and this is quite a rocket ship up move for price. So, what is the highest probable path for price here? Can it just keep going? Sure. But was is the most likely scenario? A pause? A pullback?

I asked a question during the week on twitter on whether the Risk was to the upside or downside. Roughly 80% responded that it was to the upside which surprised me a little. In looking at this chart, how would you answer?

 

One thought on “60% chance of Rain

  1. What’s the correlation of $PMTC with the market? 😉 But seriously, the only way you can estimate where this is going is to know what *future* news events could affect the price and judge *their* probabilities.

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