Banenarr said:
I would just like to know what i missed here
2 days ago i looked at NAB , make believe i bought a very small amount of shares waiting for it to show signs of going up before putting more in.
I bought for 40.20
I looked at moving averages on a daily and on a weekly chart , the
daily was - a 5 day , 8 day and 13 day
the weekly was 21 , 34 ,55
To my knowledge that looked fine
I looked at a MCAD and on the weekly and daily it was fine aswell
Momentum was up
OBV was high
Volume was steady
I had a feeling that the move had lost steam but it wasnt showing from what i saw
now the price has gone to 38.50 and maybe more.
and all the other readings are going bad aswell
Can someone inform me of somthing that i didnt see that showed that NAB was going to fall so steeply
Hello Banenarr,
I agree with Snake’s “one liner” – you’re using a lagging indicator, and with all due respect, many do not know how to use these effectively (wavepicker uses an effective displacement/cycle style for example).
What your indicators were showing you was the bullish impetus after the fact. There were patterns well before this drive that were tradeable that your MAs etc you were using wouldn’t have told you because you weren’t looking at the chart (the right way), you were looking at the indicators.
I had a key resistance level for NAB based on the division of the range (weeks earlier) – take the 28/04/06 $38.10 high and the 20/06/06 $33.07 low and extend this up above the high. 50% extended up was $40.61 (I usually take a few cents off the actual target since the underlying can trade just below the target price). This is a critical area of resistance, and a counter trend (pull back) was fairly likely from this price – just study a range of stocks and you’ll see this kind of pattern emerge time after time.
Also, the top bar looked like a false break. With both the extension, price action, and the bar, the three together suggested at minimum a brief halt to the drive. The chart still looks bullish, but with this kind of momentum combined with ex div will make the underlying chop up and down hard. If you understand patterns of trend, and specifically counter trends, this can help you in your timing on entry and exit. Also the XFJ is looking pretty toppy...
Your current approach got you long at a top. Timing is everything, and learning about trends and counter trends I believe is central to using T/A methods effectively. Some may not agree with this, and I do recognise that there are a plethora of approaches out there. But if you’re going to use charts, why not learn how to read charts without the indicators first, and just use bar chart and volume as a foundation?
Personally I agree with McLaren’s view that using oscillators and moving averages are like “trading shadows on the wall”. MA’s and MACD I’ve seen used more effectively for longer term investment style trading with year long targets or longer.
If you are looking to position trade, these indicators are very susceptible to whipsaw effects in a volatile market in the short term, giving frequent entry and exit signals, often at the wrong time. It can be the path to the death of 1000 cuts as stops come into play just when you should be entering not exiting.
Regards
Magdoran