Scott Pluschau is a Contributing Editor to the ETF Digest.
Scott was a financial advisor with Citi. His technical analysis report on the Nasdaq Composite Index was recently featured by Dr. Marc Faber in his June 1, 2011 Gloom, Boom & Doom report. Scott earned his degree in Accounting and Taxation from Pace University. He lives in Long Island with his wife Ilona, daughter Olivia and new baby Henry.
This is for the Japanese Candlestick junkies out there. In SLV there was a "Bullish Belt Hold" pattern with confirmation. Knowing Japanese Candlestick’s and applying them in the hope they work is a bad idea in my experience. I do not place trades on these signals alone. What I think is important in Japanese Candlestick Analysis and why I appreciate them, is for getting a better understanding of the psychology beneath the auction. The bullish belt hold forms when the direction of the security is down followed by a big gap down from a prior day, such as we had on September 26th, that opens near the low of the day, and price rallies into the close very near the prior day's close in what looks like a very long bodied candle with little or no wicks. I drew a blue oval on the chart.
What this should be telling the trader, is the bears have lost control after that gap down since there was no follow through, and we are seeing positions go from weak hands to strong hands. The market extended itself too far or overreached to the downside and this doubt should creep into the minds of the short traders, thus liquidating their positions before it is too late and fueling a reversal.
One other thing to note is the last four day's trading in SLV we have had big time above average volume. Prior to that we haven't seen a single day since August 25th, 2011 where volume in SLV was above its 50 day simple moving average.
I would like to see a close above yesterdays high which should have the bears feeling trapped down below.
In full disclosure I do not have a position in SLV, but I am long Silver futures.
Interesting explanation, Scott. Can you give an update of the SLV action since you wrote this? No follow through. . . .
Scott Pluschau :Comments(19)
October 05, 2011
Thanks for you comment William. I had another article today on Silver that is posted in the Commentary section. The comments here were meant to be posted on that article, sorry for the confusion.
Scott
Scott Pluschau :Comments(19)
October 05, 2011
I got an email from Ed.This is my follow up in an email, and I hope this helps with any other
questions:
Let me see if I can explain my methodology better.When price is in a tight range in the
futures market for a few days, such as Silver has been lately, this is known
as consolidation.But due to the open
interest of futures, one side, either long or short, is eventually going to
be hurting when the price moves away from the consolidation area.The longer it takes for a breakout, the
greater the tension that builds.
Let's say in Silver the price makes a move higher out of this
consolidation range as an example, then in theory those speculators who were
putting on short trades inside the consolidation area over the past few days,
might be closing out those losing short trades, and that is demand to buy in
order to close out the trade, on top of the already existing demand of the
long side buying and probably adding on the breakout, and that is what can
propel the price very sharply.The
further price moves away from where you entered on the losing side of the
contract, the greater the potential for market orders to cover and take the
loss.That is the result of a two way
auction. And it is those probabilities I look for when trading.It doesn't matter what the oscillators say
for me, they are lagging.
Scott Pluschau is a Contributing Editor to the ETF Digest.
This is for the Japanese Candlestick junkies out there. In SLV there was a "Bullish Belt Hold" pattern with confirmation. Knowing Japanese Candlestick’s and applying them in the hope they work is a bad idea in my experience. I do not place trades on these signals alone. What I think is important in Japanese Candlestick Analysis and why I appreciate them, is for getting a better understanding of the psychology beneath the auction. The bullish belt hold forms when the direction of the security is down followed by a big gap down from a prior day, such as we had on September 26th, that opens near the low of the day, and price rallies into the close very near the prior day's close in what looks like a very long bodied candle with little or no wicks. I drew a blue oval on the chart.
What this should be telling the trader, is the bears have lost control after that gap down since there was no follow through, and we are seeing positions go from weak hands to strong hands. The market extended itself too far or overreached to the downside and this doubt should creep into the minds of the short traders, thus liquidating their positions before it is too late and fueling a reversal.
One other thing to note is the last four day's trading in SLV we have had big time above average volume. Prior to that we haven't seen a single day since August 25th, 2011 where volume in SLV was above its 50 day simple moving average.
I would like to see a close above yesterdays high which should have the bears feeling trapped down below.
In full disclosure I do not have a position in SLV, but I am long Silver futures.
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Comments are welcome This e-mail address is being protected from spambots. You need JavaScript enabled to view itThanks for you comment William. I had another article today on Silver that is posted in the Commentary section. The comments here were meant to be posted on that article, sorry for the confusion.
Scott
I got an email from Ed. This is my follow up in an email, and I hope this helps with any other questions:
Let me see if I can explain my methodology better. When price is in a tight range in the futures market for a few days, such as Silver has been lately, this is known as consolidation. But due to the open interest of futures, one side, either long or short, is eventually going to be hurting when the price moves away from the consolidation area. The longer it takes for a breakout, the greater the tension that builds.
Let's say in Silver the price makes a move higher out of this consolidation range as an example, then in theory those speculators who were putting on short trades inside the consolidation area over the past few days, might be closing out those losing short trades, and that is demand to buy in order to close out the trade, on top of the already existing demand of the long side buying and probably adding on the breakout, and that is what can propel the price very sharply. The further price moves away from where you entered on the losing side of the contract, the greater the potential for market orders to cover and take the loss. That is the result of a two way auction. And it is those probabilities I look for when trading. It doesn't matter what the oscillators say for me, they are lagging.
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