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Posted 20 November 2006 - 10:07 AM
I'm going to post some charts (.jpg) that show you what this stock is doing. The first one is a candlestick overview in weekly form (every candle represents 1 week). Notice in '99, the high was around $61, which is just about there.
The horizontal lines are where some major highs or lows were reached recently and also in the past. These areas are significant for one reason or other.
The blue lines going up is the major trend that this stock has been trading in since 3/2003. Right now, it's either starting a new leg of this major trend or breaking out of it, but notice that it's nearing this stock's all time high, so be careful.
The pink lines are a subtrend of the major trend that began a year ago. Also notice how it fits into the major trend. The blue lines are parallel to each other. The pink lines are parallel to each other. In upward trends, you connect the bottoms and you typically want to have 3 or more points to connect. But you can start with 2 points.
Here is a closer view of the subtrend, which is comprised of the past 13 months. Each candle represents ONE day
This last file gives a closeup of the past few months. Here I have targets for the upside and downside, based on the history of this stock.
Here are my thoughts on this stock and they are based solely on the price graph.
1. It is reaching its all time high of $61ish. This could be a resistance and this IS a significant point. The last 4 trading days' candles show a lot of indecision, so the major trades KNOW $61 is a major point.
2. The major traders will test this $61 area, so this means that if they can get buyers to come in above this price, then it will go above. If not, then they will sell to bring in more buyers, which means a drop in price.
3. The $48 range is also a significant point because look at how long it stayed in that range. It stayed there for nearly 4 weeks in the Aug/Sep timeframe. It also came back to test that point once in October and found there were enough buyers to raise the price.
4. The red & green brackets I have are contingent entry points for this stock if it should move up or down. The red signifies down, the green signifies up. You can either buy stock or short it; or you can buy calls or puts in options.
Upside Entry @ $62.25 with a hard stop @ $60.55 (that's a $1.70 risk factor).
Downside Entry @ $58.25 with a hard stop @ $59.95 (that's a $1.70 risk factor).
I've slightly adjusted the brackets from what is drawn.
The stops mean if my position should go against me, get me out. But, with the way this stock trades, that should be an okay stop to not be stopped out when you get in.
5. Targets: since it was near its highest point, how do you determine the upside target? I looked at the resistance @ $61 and its next support @ $48. That distance is $13. I added $13 to the $61 and got $74-75ish.
Upside Target = $74-75
Downside Target = $48
6. Risk: The risk is where I place my hardstop, which is $1.70 below my entry. I typically like to trade with a 4:1 ratio, meaning for whatever my risk is, I multiple that times 4 and make sure my target is at least that away, which would be $6.80. As you can see, my targets are $13 away, so I more than meet the 4:1 ratio.
7. Lastly, whichever order gets filled (either to the upside or downside), the other order gets canceled. After I'm filled with my entry, at the end of the day, I adjust my stops to whatever seems appropriate to what is happening to the stock and to the market.
8. Right now, DRIV is trading very much like the Nasdaq, so you'll want to pay attention to what happens to the Nasdaq 100. It trades similar right now also to the Dow-30 and the S&P 500, but not as close as to the Nasdaq.
The type of trading I do is end-of-day neutral bracket trading. This allows me to live my life, but still be very profitable in my trading.
Hope this helps.
I forgot to add, what about indicators? Well, as you can see, all that analysis was done just solely on the price graph without any indicators. My indicators (MACD, RSI, Stoch) show overbought and ready to turn around, however, it could also mean that it will continue on an uptrend.
I've had situations more than once where all my indicators said one thing (I use other indicators also other than these) in concensus, but my price graph said something else. Guess which was right? The price graph. The price graph rules all indicators, but earnings and news trump the price graph. However, I notice that even with earnings and news, and for those stocks that move big, then tend to go to familiar points, so, in the end, the price graph is very valid.
Many people overuse indicators. I've been there, done that way too often. If you become really good at reading the price graph, you won't need to use all those indicators as a crunch and get screwed with them. You also don't need expensive programs to tell you where to get in and out of trades.
I found the patterns/trends, support/resistance in a matter of a few minutes. Though I do not even know what this company does, I know how it trades pretty well just off the price graph.
You also do not have to believe me, but I would save the files and watch the stock over the next few months and see how close the stock trades to my lines. I'm not psychic, rather I know how to read the price charts pretty well. There is an art to seeing the patterns, but once you do, it's like riding a bike. You never forget.