|
| If you experiment with something as simple as horizontal lines you'll find things like support and resistance points on the charts. You'll see many "Double Tops." You'll see the price going exactly to these lines--that's often, exactly--and then reversing.
Making sense of a "Double Top."(The psychology of)
Lets say in November the market price for corn gets to 3 dollars even and then drops significantly. Couple of months later it also gets to 3 dollars even and then drops significantly. A big factor leading to this Double Top is traders who were long failed to take there profits in November and many then determine to not let that happen again so when price got to 3 dollars the second time they did take their profits and thus a Double Top is made on the chart. Taking their profits (selling) at that level plus bears selling at that level drives the price down.
An "extended market."
Another thing a chart makes easy to see is when a market gets "extended." By extended I mean it has gone up or down strongly for quite some time and distance. An extended market is subject to much profit taking (selling in bull move and buying in bear move) and when profit taking is done by the big boys prices MOVE. And, sometimes MAJOR tops are made.
A very good example of an extended market is the soybean market a few days ago. It was ripe for picking and that's a lot of what happened with the funds selling a bunch--and "taking their profits."
There's a saying: "Does the market make the news or does the news make the market?" I've seen many times where the market makes the news. That is, the market makes a significant move and then the news media justifies it--whether bullish or bearish. BLAH, BLAH, BLAH !
The present market is REALITY. The news and "what should be" is mostly speculation.
How often have you seen markets doing the opposite of what "they should" be doing? You have to go with the market and not the news and speculation. The chart tells you what is happening--reality. The news speculates about "what should" happen.
Don McCullough | |
|
Using charts to help with marketing crops
