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JAZZ made a high volume surge earlier today with rising price, the highest 15 minutes of volume going back several days. Just as in a daily chart, the intraday below has what you want to see...high volume breakout followed by lower volume pullback. Maybe it's getting ready to make a good multi day move, but need to see strong volume and price action into the close.
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Joined: 6/6/2005
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That is a great looking chart, fpetry.
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QUOTE (davidjohnhall) That is a great looking chart, fpetry.
It looks pretty, but then it looked pretty on the daily a couple weeks ago when I bought, it broke out nicely, I added, and then it promptly failed and stopped me out:) But I'll try her again if she finishes strong today.
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I hear you, fpetry -- it seems especially cruel when the perfect looking patterns fail. I just like looking at them in these early stages. So much promise. They make a great meditation.
Hope you get the nice move you're looking for. Because I guess the only thing better than looking at the promise of profits is looking back from realized profits and thinking Yes, that did play out exceptionally well. :)
David John Hall
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Joined: 6/11/2005
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fpetry, DJH,
I have noticed that patterns that are too perfect, are ... too perfect and liable to fail. Have you noticed anything like that?
-Jay
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Hi Jay,
Interesting point.
The only thing I have noticed is that all patterns are liable to fail.
I myself have had perfect patterns fail...and perfect patterns score. I have had ugly patterns fail and score. I would have to say that I would treat a perfect pattern no differently than an ugly pattern unless I was able to determine convincingly what a perfect pattern was and how much more (or less) they fail than thier less attractive counterparts.
But if you want to go a little further into this: maybe you could tell me the idea behind the theory. I think it would make an excellent conversation.
From what you're saying it sounds like you believe a perfect pattern might be a trap. As in: ohhhhh, look at the pretty pattern -- as we march hypnotized into the jaws of defeat.
Another take might be that more people stay away from the perfect pattern, or more people fade the perfect pattern giving it fuel to rise for the brave few willing to look past the percieved danger and take the trade.
This also sounds like a take on the quote: if it looks too good to be true...then it usually is. This might be true when it comes to people promoting systems that never fail, or miracle creams that can remove wrinkles in 24 hrs...
When it comes to perfect patterns I like to think of them like perfect waves -- they don't come around very often -- and you might not be there when they do -- but if one does come along, and you do happen to be there -- then take it and ride it for all its worth.
This doesn't mean that you won't wipeout on the perfect wave or miss it all together. LOL
Interesting.
David John Hall
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QUOTE (jkelkar) fpetry, DJH,
I have noticed that patterns that are too perfect, are ... too perfect and liable to fail. Have you noticed anything like that?
-Jay
I can't answer that, but a pattern regardless of how pretty it looks is just an edge or setup, you watch it and then when price breaks out you enter or add. A pattern imo doesn't truly fail until price breaks out and then there is no follow through and prices fall eventually. If a pattern is just sitting there and looking pretty but never breaks out I'm not sure I would call that a failure. Here with JAZZ it broke out of its nice flag setup 8/12 but quickly failed with no follow through and falling prices next several days; everyone would agree that was a failed breakout and I would call that a true pattern failure. But speaking of nice looking setups or patterns, look at FHCO, today it broke out of its pretty (to me anyway) flat top ascending triangle, but the real test is whether or not it follows through in the days ahead. Hard to find a prettier looking flag setup than OWW on 8/17, it broke out next day and hasn't looked back since. Check out picture perfect setup BCRX has had for days now and then today it explodes out of setup. And look at today's flag breakout of NVAX. Anecdotally just on the few examples here that I've been watching for days and weeks, I'd say that somewhat perfect setups can work quite well. Now what one person may call a perfect pattern may be called a flawed setup by another. All depends on what indicators the trader believes in and what patterns the trader believes to be legit for his style of trading. Sorry to ramble, but you bring up an interesting topic.
Back to the intraday pattern of JAZZ I show above, it did not follow through by the close like I thought it would per the intraday chart, but I still like the way the daily is setting up again...as long as price doesn't close below the 20 sma or 6 level I'll keep it near top of watchlist. Important I think to state that I never have in mind a daytrading scenario with my setups or patterns.
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QUOTE (davidjohnhall) Hi Jay,
Interesting point...............................
David John Hall
Hey John, very, very well said, good stuff.
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Joined: 6/11/2005
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This is a digression with a point.
The story goes that just before the crash of '29, Mr. J. Rockerfeller was having his shoes shined. The shine boy then asked Mr R for some stock tips. Being astute, Mr R realized that when even the lowly shoeshine boy was looking to the stock market to make a quick buck, there were no more buyers left and that it was the very top of the market. The story goes on that he then liquidated, saving himself from the aftermath of the crash.
Now the same thing applied to perfect patterns, when even newbie chart analysts drool over a pattern, well ... Everyone has already seen it. There are people who make a living out of fading "known patterns" and I am told they do quite well. You may want to look up "Turtle Soup", a term Linda Rashke uses to go against "Turtle" breakouts.
Sometimes there is just no short way to express something.
-Jay
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Joined: 1/28/2005
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Maybe it just the fact that we "notice" more when a "perfect"
set-up fails.
Our "weakness" leads us to believe that "perfect" equals "guaranteed".
Remember charts have never had a geometry class.
Thanks
diceman
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Hi Jay,
Street Smarts is a great book and Linda's a great teacher, but just because a lot of people fade perfect patterns and make money doesn't mean that trading "perfect" patterns doesn't make money. That's all I was saying.
If you like fading perfect patterns and it makes money for you then I think you should do it.
Now, I'm not sure who you're calling "newbie chart analysts", and what you consider "drooling" but a well respected and certainly not newbie trader (fpetry) posting a chart on a message board and me (also no noob) remarking that it's a great looking chart don't quite seem to insert into that description. Maybe they do, who knows...
But if they do, and if you believe your theory, then you would have been well advised to short JAZZ. See, it's not what we see, and it's not even what we think we see, or even what we believe what we see, it's what we ACT upon and what we do with what we see.
In this case JAZZ came down about .20 or 3% and then shot up to a high of 7.30 or 8%. The pattern didn't play out perfectly at all, but a short looking for more than 3% would not have been happy. But then again maybe a long with a stop closer than 3% wouldn't have been happy either.
Finally, in my opinion, it doesn't matter if everyone has seen a pattern, what matters is if enough patterns succede over time that trading them is a worthwhile method. I have traded them enough to know that yes, you can make money doing it. And obviously, there's money to be made on the other side. Gotta follow your strengths and specialize...
And don't forget, the Turtle Soup is a pattern as well. And they can look "perfect" as well. And yes, I love a "perfect" looking Turtle Soup trade as much as I do anything else.
And hopefully that poor little shoeshine kid went short. :)
David John Hall
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Joined: 12/31/2005
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Late arrival, and off point, that said...
Looking at the chart the pattern looks very nice. My question relates to whether when using the pattern on periods less than daily if the market close won't "bring the curtain down" and interrupt the pattern. To exaggerate the point, if the time was 3:15pm instead of 1:00 PM would the pattern look "as perfect"
Obviously in depends on the exepcted duration of the trade. If you expect to get out by EOD then it is a different story than if you exepct to hold for a couple days.
My general question is do daily bar patterns, or in this particular case, the "dragon pattern", migrate to shorter time periods and still behave the same visually?. My gut says the market close will put a bigger punctuation mark on charts with bars less than daily and could diminishor even cancel the predictive power of the pattern.
Comments appreciated.
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Hey jas! Excellent points. As I only trade EOD patterns I'd have to let someone else take a stab at that. I just liked the way the pattern looked.
If anyone can run a test on this I would be very interested in the results, or better yet -- if anyone who trades intaday patterns -- can sound in on if they close out EOD or carry the trades over if the pattern target or the stop-loss hasn't been hit yet I think that would be very interesting to know. I wonder if bulkowski has anything on his site...
David John Hall
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Its funny. I didn't even notice that was a 5min chart.
(I thought it was daily)
Patterns are supposed to be fractal so they should repeat
in all timeframes.
What changes are you profit /loss targets.
The wide end of the triangle is about 40 cents.
(on a daily it could be a few dollars)
Imagine 30 1 minute bars with higher highs and
higher lows vs. 30 daily bars with the same action.
All that really changes is your profit.
Remember that if all you are viewing is daily bars
you cant even see the 5 min patterns.
So all your really doing is transforming one type of
trade into another.
Basically patterns are volatility/supply/demand issues.
Using intraday vs. daily or weekly only changes the
time/profit levels but the pattern is measured with a different
yardstick.
Thanks
diceman
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Joined: 6/11/2005
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I do not fade patterns (perfect or not), it takes watching the market too closely for my liking.
On intraday patterns, I have noticed that in moving stocks, patterns tend to me more meaningful if I look at all activity (including out of normal hours). Otherwise it is normal to get gaps. I have made some great buys outside normal market hours after seeing how the international markets have been trading and also based on what I expected to happen today. However, as we see these days, things do tend to change quickly - so have to on our toes ...
-Jay
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