Written by A.J. Brown

Skeptical Traders Take Note

Skeptical?Are you skeptical? You should be. In this day and age, I believe it’s important to test and prove for yourself the effectiveness (or ineffectiveness) of different strategies.

Take the counting method to determine a market bottom, for instance. Since I originally shared this method, a handful of people have questioned its ability to predict a market bottom.

And rightfully so.

Case in point: The counting method has been satisfied twice since the September break-down… and yet the market has continued to fall anyway.

This week the DOW has satisfied the counting method yet again — and the S&P500 and NASDAQ followed suit today — but because the counting method has failed to predict a bottom the last two times, it’s hard to say whether or not it will be accurate this time.

What gives?

Well, the mystery deepens.

Our three different trading template flavors are all setting up correctly, but they’re all giving us different predictions.

  • Our trend continuation templates are predicting the market is only testing the long-term bear trend with this current rally and we should be prepared for more down market.
  • Our trend reversal template is predicting a reversal has indeed happened — that a bottom has been found — and we should prepare for an up market.
  • Our pattern alteration template is predicting a horizontal channel is forming and that we should prepare for a sideways market and possible breakouts.

When we get mixed messages like this, we are in limbo until the markets mature into a definite personality (this is also referred to as a “balance point”). Only the charts can “tell” us what way to go. Guessing or speculating about the future isn’t a sound trading principle.

With that in mind, I want to share with you a video I found particularly good. In it, Adam from INO shows how he is using the Fibonacci Price Retracement lines to guide him in his trading during this current market reversal. It’s definitely worth taking 7 minutes to watch it now:

==> Click Here To Watch Adam’s Video Now

Can you do me a favor please?  After watching Adam’s video, write your thoughts to what I just wrote in this post and what Adam said in his video in the form of comments below.  I know what I think, but I’m interested in what you think.  Thanks!

Enjoy!

A.J. Brown

14 Responses to “Skeptical Traders Take Note”

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  1. Alan Ellman @ 6:53 pm:

    Excellent work! The video is important to demonstrate to your readers the importance of market tone when making investment decisions. I agree that market analysis and historical market trends during recessions point to one more bottom before the next bull market.

    I sell covered call options and have been still making decent profits utilizing this information. Even in bear markets there are stocks and industries that perform well. Using sound fundamental and technical analysis and selecting the best strike prices is the formula for success. This isn’t rocket science! Lately I have been selling I-T-M strikes.

    Keep up the good work,
    Alan Ellman

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  2. charles behrens @ 2:11 pm:

    yes, I want to learn to trade options successfully.

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  3. Billy W. @ 8:26 pm:

    I’m a little late on commenting on this post but I thought the video was spot on.

    Just to add, now that it has reached an almost 80% retracement which in my experience shows it has an 80% chance of retracing 100% of the last leg down.

    Good stock to watch is Visa (V).

    Been in a constricted price range on both the weekly and daily charts with Bollinger Bands very tight around the price action.

    Visa had some strong upward movement combined with an inverted Head & Shoulders pattern on the daily chart.

    With pre-Easter week in motion expect volume to be light but keep an eye on it if it turns into something.

    Overall, I personally remain bullish but will let the market tell me what it wants to do.

    Good trading everyone.

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  4. Alan Ellman @ 9:26 am:

    A.J.,

    This a quite a unique and historical time in the stock market. Just tune in to any financial network and note the diiverse opinions given by market experts. Market pyschology will play a major role in the eventual turnaround as trillions of dollars, currently sitting on the sidelines, make its way back into the stock market.

    In my view, another key point to factor in, is that historically the chart pattern of the S&P 500 during recessions show three distinct bottoms. We have had two so far.Based on this, Adam’s assessment makes sense and caution should remain the name of the game.

    Keep up the good work,
    Alan

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