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Block Clarification

Posted: Fri Oct 31, 2008 1:31 pm
by Trader Question
I think I have been looking at the lessons too long! Please explain what I should already know.
If you have a weak block, it means there is little support or resistance around the block on the focus and HTP. For example, if you take a trade in the opposite direction of the strength of the block. i.e., a strong block above would indicate a sell into the block and a strong block below would indicate a buy into the block.

However, on screen 96 of 118, Lesson 17, the block appears to be above (there is the light color light blue color indicating the block), a discussion of resistance above, a strong red line below. It seems as if we are buying into a strong block, instead of selling into it. In addition to all of this, the HTP envelope bottom is sitting right where we are trying to buy. I then get into the questions presented in lessons 8 & 9 about determing is a eb/et will hold.

It appears as if we have several decisions to make on one single point. 1) Is it a strong block? 2) Never sell support or buy resistance; 3) Even if it is strong, can it then turn around to be a point that we should ignore and say it has the appearance of not holding as covered in previous lessons?

SUMMARY OF QUESTION: I see the underlying point of trying to determine whether a certain area is a possible support/resistance, but the number of variables to make that determination seem to be growing, thus causing me confusion.

TJ

Re: Block Clarification

Posted: Fri Oct 31, 2008 1:47 pm
by pldot
I am going to give you a response here and ask Charlie to post his answer on the web as well.

Yes, you are correct.. a strong block is a block that holds and a weak block is a block that gives way. Yes, we assume a strong block when there is substantial reason on the HTP to believe that it will hold.

On screen 96 we give the example of traders who thought the block would be weak but instead it turned out to be strong. Given their assumption, they bought support. But things did not turn out the way they though and they had to cover on day 2 for a loss. You point out hat the traders might have reversed their thinking if they had given more weight to the HTP envelope bottom and its potential to act as resistance, and you would be right. In later lessons you will find much to support that view (e.g. in Lesson on Flow, etc); for this lesson we wanted to show what happend when things don't always go right...

Your assessment ofthe several questions... question 1 and 2 are certainly right. On question 3 you wander.. the issue is, it it holding or is it not. You have formed a hypothesis and have taken a position based on that hypothesis. Are you correct? The flow will tell you, and the activity on the lower time period. You have a leg up in finding out of you are right or wrong becuse you have an idea of what should happpen, and can therefore tell if this is occuring or not.

Lessons 15-19 have some complxity.  This will get better in Leson 20-30. Hang in there.

Re: Block Clarification

Posted: Fri Oct 31, 2008 1:48 pm
by Trader Question
Lesson 17, Screen 114, "Day 1 is congestion entrance up & we are assuming that the block will be weak, thus we buy nearby support".. With all of those blue lines above the price action, I would have assumed the block was strong. Why would I assume that it is weak. I would have been looking to sell the block, not buy support.
This is my point. I am having difficulty seeing if it is weak or not, and even if it is, the HTP's many times can dispute that focus, or vice-versa.

THIS IS ACTUALLY A CONTINUATION OF MY EARLY QUESTION/COMMENT OF TODAY.


TJ

Re: Block Clarification

Posted: Fri Oct 31, 2008 1:49 pm
by pldot
The situation here is much clearer. There is little on the focus time period that would permit you to argue for a strong block. There is no HTP resistance on bars 2 or 3 to back up the focus TP block. On Bar 4, however, there is such re-inforcing HTP resistance (the HTP PL line) and the block then does in fact become strong for a while. As the situation develops in bars 8-9 ther is again no HTP re-inforcing resistance and the block gives way... In the example, our traders keep on trying to get long, and eventually succeed....