Weekend Strategy Review January 23, 2022
Posted by OMS at January 23rd, 2022
There’s an adage on Wall Street that says there’s NEVER a bad time to buy a stock that’s going up or a sell a stock that is going down. Yeah, Buffet would tell you otherwise as he’s a buy and hold forever guy. But Jessie Livermore is more my kind of guy. Jessie made millions in the market during the crash of 1929 and is perhaps the greatest trader of all time. One of the things he said was ‘Buy rising stocks and sell falling stocks”. Jessie always tried to keep things simple.
So, with the Dow down about 5 percent this week and looking like it’s in wave 3 down of a new Bear Market, I thought it would be a good time to revisit what old Jessie once said. Specifically, I want to focus on one of my new Arrow ‘tweaks’ I showed students in my webinar last Wednesday night.
But first, let’s get back to Jessie. As most of you know, Thursday was a decision day. I was watching the 35,000 level on the Dow for clues as to whether the Dow would find a bottom by completing Wave ‘D’ down of the Ending Diagonal Pattern, or was about to decline rapidly, indicating that the Bull Market ended by completing an Expanding Wedge Pattern on 4 January at 36,934. That question was answered on Friday when the Dow fell below the 1 December low of 34,665 level which was Wave ‘b’ of the earlier pattern. Friday’s close of 34,229 was also below its 200-day moving average currently found near 34,529. So clearly, the tide has turned negative, and stocks are no longer in the bullish trend they have been since Major Wave 5 up started back in March 2020. At this point, Jessie would be a seller.
Jessie didn’t have a computer. All he had was a ticker tape machine, which was an electrical device that transmitted stock prices over telegraph lines. BTW, stock tickers were still in use through 1970, and I even saw one when I set up my first trading account at Merrill Lynch in 1964. Anyhow, my point is that Jessie was working with limited tools. He would watch the tape looking to see if his stock was either up or down. When people said, ‘he read the tape’, this is what they are talking about. He simply watched to see if the current price was either above or below the last level. That’s tape reading. And today, mostly because I received a lot of questions from students asking things like, “Did I miss my opportunity to get short?’ or Where should I enter my short position”, I wanted to focus on what old Jessie said. ‘It’s never too late’.
To illustrate my point, I want to take you to a casino. I want you to imagine that you are at a roulette table betting black or red. None of the complicated number bets…just black or red. I want you to focus on these bets because they are among those with the best odds, almost 50-50.
When most people land in Vegas, before they get to the casino, they usually buy a book that tells them how to play various casino games. One of the more popular ways to play the black/red system is to wait for the color you want to play to come up and then place a bet on that color. Casino’s even place a sign at each table to help you keep track of the last 10 colors to make it easier for you. Like it matters. It doesn’t! The odds are still less than 50-50 on each new bet. So, with each spin of the wheel, no matter what the board says, the odds are still below 50-50 that you will win.
OK, so why am I telling you all this? Hmm? Well, just like Jessie, the new candles that I showed you on Wednesday give you a better shot at winning than any casino. That’s because they now show you, tick by tick, if the stock is moving higher or lower. You can use the colors on the 4 min bars if you’re a scalper or the 4-hour bars if you’re a longer-term trader. The process is the same. I want you to slow things down in your mind and think about each new ‘stick’ as an independent bet. That’s because in reality, it is. Just like in the casino where you can decide to leave your ‘bet’ on or take it down. You have a choice. If you’re playing “Green”, like my Doctors Trade with TZA has been all week, you can watch each new bar as it prints and decide if you want to keep your bet on or take it off. What happens on each bar is an independent decision. It’s exactly like what Jessie would do over 100 years ago, only now you have the colors to help you decide.
You also have something else that is NOT available to casino betters. You have real momentum that increases the odds of a winning your bet on each successive bar. It’s the momentum that keeps each bar green or red. So, you have momentum (higher odds) working for you, vs. the informational roulette sign which no matter what color it puts up, the odds stay at less than 50-50.
So back to the questions that started this discussion. When is a good place to place your bet (or enter a trade)? I hope that you will see from the above discussion that you will get favorable odds on long bets with the Enhanced Arrows System anytime you have a confirmed Green Arrow. If you miss the first green bar with the Arrow, you can enter on the second bar, the third, and so on as long as the bar remains green. Remember, each bar is a separate independent bet and with each bet, you have momentum working for you. If the next bar turns Red, it’s telling you the momentum has slowed or shifted. It might be getting close to the time when you have to take your bet down. This is something casino betters don’t have. That’s why betting in a casino is always a losing proposition.
Anyhow, I hope this discussion has been helpful. I want you to think about what Jessie said this weekend. There’s NEVER a bad time to sell something doing down. I’m sure that Jessie would love to be alive today using my new ‘tweaks’. He’d love them!
I haven’t talked a lot about the market today, but that’s OK. Now that you have the new Enhanced Arrows System, I believe it’s infinitely more important that you start getting a feel for how the Enhanced Arrows perform. Spend some time this weekend looking at several charts, especially the mid-to longer time periods, like the 15s, 60s, and 4-hour charts. Think about what I said with respect to each bar being a separate, independent bet, especially on the longer-term charts. I think that if you look at the charts in this way, you will start to see that you will no longer feel left out on good trading opportunities and will no longer watch from the side-lines when your train leaves the station. With the new Enhanced Arrows, you can board the train on the next bar, as long as the bar is still green. Take a look at 15 minute or 4-hour chart of TZA and SDOW. You’ll see what I mean.
I have a Consulting Session in about an hour with a student who wanted to take advantage of my ‘Valentine’s Day Special’. You can schedule your own session by registering on the website. Once registered, I’ll send you an email to schedule a date.
I will be taking a close look at the markets after the session and if I see I can find anything new or come up with new targets for the decline. If I do, I’ll post a few brief Comments early tomorrow. But for now, with markets around the world looking like they are starting crash modes, please exercise caution. The Russian market is already down 31 percent. Turkey, Brazil, and Hong Kong and others are in the same boat. This is not the time to be taking a casual look at what’s happening in the market. I want to take some time.
You should too.
Have a great weekend.
That’s what I’m doing,
h
Market Signals for
01-24-2022
DMI (DIA) | NEG |
DMI (QQQ) | NEG |
A/D OSC | |
DEANs LIST | NEG |
THE TIDE | NEG |
Index | Signal | Signal Date |
---|---|---|
DOW | NEG | 18 Jan 2022 |
NASDAQ | NEG | 13 Jan 2022 |
GOLD | NEU | 20 Jan 2022 |
U.S. DOLLAR | NEU | 18 Jan 2022 |
BONDS | NEG | 18 Jan 2022 |
CRUDE OIL | POS | 23 Dec 2021 |
CRYPTO | NEG | 06 Jan 2022 |
DISCLAIMER
As always, the Professor never makes recommendations. The information is provided on an educational basis so you can have informed discussions with your financial advisors and/or accountants about your individual investment decisions.
All of the commentary expressed in this site and any attachments are opinions of the author, subject to change, and provided for educational purposes only. Nothing in this commentary or any attachments should be considered as trading advice. Trading any financial instrument is RISKY and may result in loss of capital including loss of principal. Past performance is not indicative of future results. Always understand the RISK before you trade.
Category: Professor's Comments, Weekend Strategy Review