Cups Runneth Over, And Out

• July 16, 2001
• Duke Heberlein

Trade what you see, not what you think or predict will happen. Following
this rule will often keep you out of trouble, and many times will point you in
the direction of a trade that will be profitable.

I was reminded of this old axiom this morning while talking with others in
the TradersWire Interactive chat
room. When things began to look darker for the session, I noticed the Dow
Industrials
(
INDU |
Quote |
Chart |
News |
PowerRating) were forming an intraday cup and handle on the
five-minute chart.

 

 

Another member in the room, noticed the Nasdaq Composite
(
COMPX |
Quote |
Chart |
News |
PowerRating)
doing the same thing at a lower level.

 

 

Both of these patterns are normally construed to have a bullish
bias. Alas, not in today’s session.

 

 

 

This, I feel, illustrates the concept of what Dave Landry so
eloquently describes as “no tickee, no tradee.” Neither index cleared
the top of the cup out of its handle. This alone is a sign of weakness upon the
failure out of the patterns. This tipped the market’s hand as to the probable
direction — down — and allowed observant traders to take advantage of several
good shorting opportunities, while keeping them out of trouble by jumping the gun and going long. A pattern in and of itself is not important, but rather the activity out of it.

“Speculation is about observation” — Bernard
Baruch

Until tomorrow,

Duke