Quadruple On Quintiles

One of the lessons I’ve learned over the years is to not allow your tools
to create distance between you and the markets. 

Sometimes I cruise around and read the work of "technical
analysts." Granted, I have nothing against the title. But sometimes I
feel that the meticulously detailed observations I’m reading have nothing to do
with the real markets, let alone trading. 

It’s very easy to talk about channels, stochastic oversold readings,
support and resistance, Fibonacci, gaps, head-and-shoulders, Bollinger Bands,
etc., when looking at a chart — and not understand what’s really going on. You can
make observations. You can read someone else’s observations.

But do you really know what they mean from a trading
standpoint? 

For example, I sometimes hear
someone say that a particular stock is
trading within a downtrend channel. The assumption is that it will continue to
do so and allow you to trade the ricochets back and forth. Having the
assumption, however, can expose you to more danger than if you didn’t see the
channel in the first place. I have observed many times that once something
becomes obvious, it becomes a trap.

Yes, as Jeff says, the market is perverse. It taunts and conditions your
expectations and stabs at you the moment you let your guard down. Being flexible,
being open to all possibilities, reacting and not predicting–these are the
important things I’ve learned. It is best not to view the markets as an
inanimate object with a rigid "if A, then B" kind of cause and
effect modus operandi. It’s more like "if A, then A though Z."

Mind you, I don’t want to sound
overly critical of the various strategies, patterns and indicators that
everyone, myself included, uses to trade off of. However, what I am trying to
say is that one can become bogged down wading through a morass of technical
indicators and pattern setups, and in the process forget the basic tenets of
being a successful trader. Not seeing the forest for the trees, in other
words.

Keep all this in mind as you think about the observation that
the Nasdaq is pulling back from the top of trading range dating back to 1998,
the top of an internal trend channel, and the 61.8% retracement off the Oct.
1998 lows and the March 2000 highs. (Notice I’m already back to my technical
jargon.) Market action will determine on a day-to-day basis whether we retest the lows of the range. A break above this area
would be significant.

Quintiles Transnational
(
QTRN |
Quote |
Chart |
News |
PowerRating)
, discussed Thursday,
pulled back in early trading, but quickly catapulted back into the triangle.
Apparently a few people felt it was worthwhile to pick up some shares at a
bargain. To the tune of 400% average volume. A favorable sign. But don’t let
your guard down.

See you Monday,

Eddie