| Although investing by the charts is fun, I reckon there's an element of investor psychology involved. That is, one should be able to gauge investor sentiment (concerning some stock) by gazing intently at one chart or another. My current thinking is that, should a stock open UP (from last day's Close), it says something about how investors feel about that stock today. Indeed, I reckon that the sentiment that generated the increase will continue -- for a while, at least. To test that reckoning, I look at the 30 DOW stocks and identify those days where the stock opens UP. Then I look at the subsequent High. What happens? Do it continue UP (for a while) or DOWN?  For a DOW stock, when it opened UP, it continued UP by about 1.5% (on average, over the past couple of years). How about if it opened UP by 1% or 2%. How High did it go?  'course, it'll depend upon the stock, eh?  How about this guy?  Note: Opening UP by 0.0% just means the Open is larger than the previous Close. Anyway, if'n y'all would like to play this game. I've modified the spreadsheet described here to include that kind o' stuff.  ** When we were in Japan, they called it Maca-Donarudo. |
Monday, May 17, 2010
Opens UP
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Reminds me of Pristine's Rule to wait 30 minutes after the open, Unless............
ReplyDeletePristine 5-minute Entry Rule - If the 30-minute rule calls for buying a stock above the high established in the first 30-minutes of trading, the 5-minute Entry Rule calls for buying the stock above the high made in the first 5-minutes of trading. This is a more aggressive version of the 30-minute rule and is only used by our more advanced traders in training. When is this entry method pulled out of our arsenal? Usually when the stock has gapped marginally above our desired entry price. Let's say you wanted to buy XYZ above yesterday's high of $20. However, when the market opened, XYZ gapped open for trading at $20.35. This is beyond our 5 to 10-cent rule (see above), which causes us to employ the 5-minute entry rule. It should be noted that this rule is applied only to marginal gaps, not large gaps of $1 or more. The larger gaps take us back to the 30-minute entry rule. As is the case with the other two entry methods, reversing the above is necessary for shorts.
The creation of these three Pristine Entry Techniques was the result of years of trading experience. We have not only taught them to scores of professional traders the world over, they have been serving us exceptionally well for many years. While it would be impossible to cover every detail and nuance involved in this subject in the context of this letter (I could write an entire book on the subject of How to Enter Stocks the Professional Way), I hope the above has given you a deeper insight into the fact that entering stocks properly is a science. This science of entering stocks is an integral part of the Pristine Method of Trading, which is why we spend a good deal of time in our educational seminars making sure our students become well trained practitioners of them. There are several more entry techniques that are very important, but do not lend themselves to the type of plays we issue in The Pristine Day Trader. Should you truly be interested in becoming a professional at entering stocks properly, as well as a pro at selecting the right stocks, managing them properly and exiting them in a timely fashion (all the components of trading), I strongly suggest that you enroll in an upcoming Pristine Seminar. Decide to become one of our students, and let us show you how to take your day-to-day trading to a whole new level. In the meantime, I hope this helps. Happy Trading!
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Neat rule!!
ReplyDeleteI've been staring at spreadsheet which show the result of buying at the Open (when it's UP) then selling after another 1% gain (or loss).
Ain't easy to swallow them BIG gains over the past few years.