Wednesday, October 29, 2008
Where is the rally likely to stop?
I have a simple formula for using indicator divergence to estimate price targets. Originally I experimented with a formula in a book by Connie Brown, but after a while I came up with a variant I believe works better. None of these methods are foolproof, but currently using daily Stochastics, I come up with a target of about 1545 for the $NDX, which is a .382 retrace of the whole decline so far...
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5 comments:
That correlates with what I was thinking for the %rally on the S&P to the 1150-1200 area.
Mark,
That's huge. Would like to more.
I use a combination of time frames and momentum indicators that helps determine highs and lows but, I have a difficult time calculating price objectives. What I do is watch the indicators as they approach visually obvious support/resistance zones on the charts. Still, I make mistakes and 99% of the time I can go back in time on the charts and find what I overlooked .... try to learn from the mistakes ..but, geesh, this market continues to teach!!
Any chance you could give the calculations for symbol GG?
Thanks Mark.
Hi Guy's
exciting market isn't it...
Hi Anonymous,
I tried to do the calcs on GG but there isn't a lot of positive divergence to work with on the daily charts..I shifted to a weekly chart and found some, but the answers were unrealistic..which is usually a sign that this method isn't working in this situation...it's not a foolproof method, it works spectacularly sometimes but also sometime produces erratic results..It seems to work best with clear and strong positive indicator divergence...which isn't always present in all cases...If I get a result that aligns with a .38 or .5 retrace, that's usually a reasonable projection...
Regards,
Mark L.
hey Mark,
Thank you very much for trying. I hesitated to ask because, once started, EVERYONE would have a fav symbol to dog you with.
I chose GG because of recent extreme volatility. Note how it totally fell off a cliff for options expiration last Friday. Virtually ALL November calls were wiped out. Virtually ALL November puts were in the money. Then came the drop to the 13's, nearly a 50% drop compared to the days immediately prior to option expiration!
So, I wonder and am thinking, this might apply to a lot equities. Would an hourly chart basis provide the necessary data points for a less "erratic" projection?
As noted earlier, I am currently using multiple time frames (1,10,60min) and watching RSI relative to the Stochs for intraday trading since visibility beyond a couple hours seems limited. LOL! Hence, the hourly question for GG.
Thanks again, Mark. I have learned that I can trust your charts on the market. They keep me 'grounded' in the overall market as I watch (sometimes with emotion) my indicators in the stocks I trade. Damn that emotion, hard to get it out in this market. :-)
Good morning anonymous,
I have been looking at the hourly chart of GG, and it also lacks much divergence on Stochastics, MACD has some, but only enough to predict where it has already risen too.....but it will probably get dragged up in the same rally that everything else is in....
Regards,
Mark L.
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