Power To The People
Every trader I know is able to assimilate information
from a wide variety
of sources, filter out the noise, and fit all the relevant pieces together
into a pattern that, once in a while, suggests that a tradable move may occur.
Sometimes all of the disparate pieces are
in the price action. Other
times, they’re scattered between market dynamics, different time frames, and a
wide variety of different indicators.
Either way–you’ve got to learn to assimilate them.
Here’s an example. Peoplesoft
(
PSFT |
Quote |
Chart |
News |
PowerRating) is forming a pennant just above its
old two-month trading range. The old resistance level–now broken–may become
support. What’s interesting is that we see a surge in volume accompanying the
early Jan. surge in price. Then as the new base formed, volume trailed off.
That suggests that those who bought in are not selling out. A positive sign.
Now, look at a weekly chart, you can
see that PSFT is forming the
right wall of a potentially king-sized cup-with-handle. Price action may be
magnetized to the old 1998 highs and eventually find its way there. From
there, conventional wisdom would have you look for “handle” to form.
In some cases I’m not too keen on conventional wisdom–this is one of them
since this pattern spans such a long period of time. So, as Goran says, I’d
play it close to the vest. Pay close attention to volume. If volume remains
strong on up-moves, there may be fuel for a breakout. If volume weakens on
up-moves or you see pullbacks on increased volume, PSFT may be one to pull off
the watchlist.
See you Tuesday,