April 2004
It seems as though it was just yesterday that the markets appeared to be in a sustained rally. Now I'm not so sure. The Nasdaq looks like it's broken key support levels, and the Standard & Poor's 500 and Dow Jones Industrial Average (DJIA) are on their way there too. This shouldn't come as a big surprise, since this type of behavior is typical of any market. They are unpredictable, and that's precisely why I believe that market timing plays a vital role for anyone involved in the markets. Keeping an eye on the markets on a regular basis and watching price patterns form on charts can reveal plenty about the direction of the markets. But do they reveal everything?
As you will find out from the STOCKS & COMMODITIES feature article this month, "Do Price Patterns Really Work?" by Martin J. Pring, starting on page 30, price patterns don't always reach their price objective. Only certain patterns have a high probability of doing so. Hopefully, from this article you'll know which ones they are. The price objective of any pattern doesn't have to be too far from the start of the formation. You can take advantage of tiny chart patterns, although, as you'll find out, they may not be as reliable as you would expect them to be. In S&C Contributing Writer Thomas Bulkowski's article, "Tiny Chart Patterns: Stinkers or Stalwarts?" starting on page 44, you'll find out about some of the best-known tiny chart patterns. Perhaps you'll get ideas on how and when to take advantage of them.
There are numerous ways to use chart patterns and there's no way you can use all of them. It's best to identify a few that work well for your trading. That's what hit-and-run trader Jeff Cooper, our interview subject this month, does. He has a few favorite patterns and when he sees them form, he jumps in without hesitation. Of course, his success depends largely on his strict money management principles, which are an important if not the most important aspect of trading. Find out what he has to say about his favorite patterns. The interview starts on page 66. Next time you look at a chart, I hope you will be able to identify the start of the formation of your favorite patterns and enter and exit your trade with confidence.
Jayanthi Gopalakrishnan,
Editor
Originally published in the April 2004 issue of Technical Analysis of STOCKS & COMMODITIES magazine. All rights reserved. © Copyright 2004, Technical Analysis, Inc.