Stats 101
Constructive
action, with some decent tone
in the glamours and bells.
Volume was pre-jobs
report thin.
Like clockwork, the early leaders in
the tech benchmarks, Tellabs
(
TLAB |
Quote |
Chart |
News |
PowerRating) and Nokia
(
NOK |
Quote |
Chart |
News |
PowerRating), pulled back on
drying trade…good.
Others, such as EMC
(
EMC |
Quote |
Chart |
News |
PowerRating) and
Oracle
(
ORCL |
Quote |
Chart |
News |
PowerRating), did likewise.
This indicates that profit-taking in
the wake of their dense, recent gains is minimal, which is exactly what you
would expect from new leadership.
For the pure pattern player whose only
indicator other than volume is relative strength, this is valuable information,
and best of all, as objective as it gets.
Interestingly, although this type of
price/volume correlation analysis has been around since the early days at Wall
and Broad, it is used by a teeny percentage of all investors; well less than 1%.
Nevertheless, this is the type of
information that a medium-term player can use to give himself or herself an
edge.
The difference in volume between up
days and down days is normally more obvious in the early stages of an advance,
due to there being a vacuum of sellers.
Glue
(
GLW |
Quote |
Chart |
News |
PowerRating), aka “glow
worm” on The Floor, was a rare bell to rise, not surprising given that it
was one of the first bells to bottom.
As always following a sell-off of at
least 10%, convincing follow-through action in the Naz will crowd the top of our
radar.
Keep in mind, though, that this type
of action in the Index is not the panacea that should be blindly worshipped.
My Tuesday note about the
convincing, follow-through action of June 2, in which the Naz shot up 6.4% on
big volume, only to falter some weeks later, is just one example of the folly in
using any one indicator in isolation.
Moreover, even if the
Comp rings up several accumulation days in a row, one’s excitement should be
tempered by the experience of August.
Then, the Index rang up
three straight accumulation days over three straight weeks amid some solid
action in individual names.
This was followed, however, by the 41%
top-to-bottom soaking over the ensuing 14 weeks.
In its essence, successful trading —
no matter the timeframe — remains a game of correlation and probabilities.
A game of correlating an event with a
result, not unlike Stats 101.
And assigning a probability of that
result occurring.
Not of relying on a “Holy
Grail.”