Lesson 18

[Trader Question]

I am putting significant amount in learning the methodology and I think it is sinking in somewhwt. I don't want to claim that I am an expert, but I have a question about one trade in the videos( of course my analysis is based on hind sight).

In lesson 18, video 78, week ending 8/07/98. We notice that weekly nearby reistance moved down to create a C wave down, further prices are in monthly resistance and monthly is cycling down, so monthly direction is down. Everything points towards downside pressure. In screen 80, daily, day 1, we see daily resistance locates at daily pldot. In the context of weekly and monthly dowside direction, this is a YES pattern that weekly and monthly resistance are strong. My question is: what was the logic to enter long on day 1. Even though prices are in weekly support, everything indicates that weekly nearby support is going to break. Please clarify.

HB

[pldot]

The long trade on bar 1 in question is an attempt to play the weekly dot refresh, and is a logical trade given price location in weekly support, and that daily suppport was moving sideways. Even though one might see that the longer-term move has a higher probability to be down, there are many opportunities for trades like these that work out, since the daily will "have its day in court" as we say. A cautious and very conservative trader might duck that trade for the reasons you mention that are oh-so-clear in hindsight, but in P&L terms there is nothing wrong with the attempt to go long on day 1. Of course it didn't work out, but that is again part of life as we know it....

[Trader Question]

Another question: In lesson 18, video 1.9, screen 83, day 1 formed a block on top, which we assume to be weak.

My analysis: if we look at the last week's price action, we see that prices broke below weekly nearby support, and that area thus becomes resistance. Further more, this resistance held on close. next week, on day 1, daily block formed right into that weekly resistance. If this is true, then we should assume daily block resistance in that area to be strong(even though weekly resistance based on envelope was high up in pldot). What do you think?

HB

[pldot]

No, going intot hat day we had weekly support holding and monthly 5/9 holding, and that would be presumed to determine direction. Turned out differently as you see. Your point is well taken though and could provide the counter argument which should always be developed to avoid wearing blinders... But, have to respect those 5/9s...

[Trader Question]

Got it. Now, it's my understanding that any lower time period range is contained within next HTP time period, e.g., daily is contained within weekly, so you buy at weekly support and sell at weekly resistance. Similarly, weekly is contained within monthly support and resistance, and so on. Is that true?

HB

[pldot]

contained within HTP *on-coming* support and resistance, yes, but LTP can of course break through that on a strong move..., thus you can have weekly support above monthly resistance and daily support above weekly resistance if things are particularly crazy ...