The danger in a bullish up wave market

This bull market since march has been ~ 5 months so far. Please forgive me, if you don't like me to call this big UP wave as a bull market.

The hard lesson learned is to sit tight when you are right from the start of the trend until the end of the trend based on the daily chart. How to do this ? it's extremely hard because no body can resist the temptation to take profits off the table, especially when the market correction comes, every human being is worrying about the loss of the hard learned profits. I have made several mistakes during this wave. For example, I bought in BAC at around 3, but all my BAC positions are called out because I sold some stupid covered calls and want to make some idiot small profits. You know, it's so painful to see it climbs to 15 ! You may say I can buy back at the correction. No way. It's the human nature, at least for me, to buy back a stock at a higher price than the price you sold it.

So the danger in a bullish up wave market is the lost of your stocks, not your profits. But holding stocks always have some risk, right ? So here is my solution:

1. Find a good potential stock and get in based on the daily chart.
2. Hold half position tight until the end of the UP wave based on the daily chart. At the same time use the other half position to trade based on the hourly chart so that the other half position's cost is reduced. Once the cost is reduced to zero, then risk-free now. It's not that hard to reduce it to zero cost. For example, once doubled, sell half. then the other half is free !
   
3. Finally sell the other half risk-free position as the trend finally reversed !

On the other hand, the human nature let people always sit tight when they are wrong! Human being always resist to take loss, even they are real. It's so painful ! I know a friend, from his published blog, holding QID from 58 down to 26 since March! I can't image how painful it could be, but I understand why he do so. That's the human nature !! In order to win in this market, we need to act on the rules not our human nature.

Cut loss very quickly when the loss is small ! If keep cutting losses, then stop and think why ? what's wrong ? let profits run and grow, if you don't have a trade win you more than 500% profits in 1-2 years. Then also need to think what's wrong ? Only in this way, we can continue to grow !

The expected DOWN wave finally in the shaping

now ! Please refer to the chart below, I have marked a possible DOWN wave with a dashed black line !

Isn't it great that 2009 could be a regional top in the year 2009 !!

During the day, I have called this DOWN wave using my own stock price development theory. Please refer to the old post here to refresh your thinking. A brief summary of my unique theory can be found here.

Next week, the market will try to confirm this DOWN wave to see if it is a false one ! If this DOWN wave is real, then an UP wave will follow at the end of the DOWN wave. More details on my predictions and outlooks for the coming 3 waves can be found in a previous post. the link is here.

Great day ! Great week ! And great month ! Enjoy !

QID's first bouncing back target 27

See the chart below:

In the intra-day chart, QID formed a bullish trap-zone. It will head to 27.00 as the first short-term target.

The NADAQ intra-day chart also formed a bearish trap-zone. The expected DOWN wave probably have started from yesterday's high of ~ 2009. It will be re-confirmed next week !

What a joke ! This nice UP wave's highest point is 2009 ? We are in 2009 now ! All magic numbers, like 666 in S&P.

You may also notice that both Euro and gold soared this morning, but the US stock market didn't follow. This usually is a pretty bearish sign.

If the US market close today with a DOWN day, next Monday will have a good chance to be a BLACK Monday !

The GDP is not bad at all

The US economy dips only ~ 1 percent pace in 2Q, which may indicate the recession is near the end ?All the panic selling is gone, and may be all the buying will rush in as the dip comes ?

Some big bears will be totally burned out just like the burned out bulls last year ! What an amazing market !! it always has the crazy waves to redistribute the cash flows.

Anyway, the market mood is the key ! No panic, the bears will lost every penny !!

Please keep an eye on the daily patterns, make sure yesterday's intra-day bearish reversal down will not happen again today, which is pretty worry some for me as a bull !

The expected DOWN wave has not shown up yet in the daily chart, may be next Month. Crossing my fingers.

below is the chart of GDP history:

The predicted Nasdaq target 1995 finally becomes true

today ! I hope you all have enjoyed the nice ride up to date.

Now where is the market will go from here ? Don't guess, just follow the market. My predictions and outlooks for the coming three waves can be found here.

Please note that another trap zone is formed again very quickly after the money-making zone, which is not a good sign. Plus, the expected move after the trap-zone is not very measurable ! If the second trap-zone is broken down, namely, NASDAQ 1980 can not hold well, which is still possible to date, the expected DOWN wave will come for sure! So stay alert.

However, for a reliable top in the daily chart, at least a combination of 6 waves is required. So far, I have not seen such waves yet.

Finally, the daily pattern dramatically changed ! Today in the morning, goes higher, but at the end of the day, an intra-day reversal down happens. Usually, this is a bearish sign. It will lead to the breakdown of the trap zone finally.

What a beautiful market opening today !

What a beautiful market opening today !

Really, it is !

The NASDAQ index uses a gap up to pass the Trap-zone which is mentioned last night. Please refer to the chart of the trap-zone here. Some bears trapped inside the trap zone will be toasted again.

IF 1980 can hold well during the pull back, then a money-making zone will be formed again ! I will do more analysis later to follow up the market.

I am so happy that my predicted NASDAQ 1995 will soon be fulfilled. So far, the highest point is 1991.72, only less than 4 points away ! This is the initial post. The latest update is here.

Please notice that I will apply my own theory on the stock price development analysis and prediction in the blog so that you may learn something new here, and at the same time I can refresh my thinking and improve the theory accordingly. My theory is pretty unique, creative, and very practical in terms of application. So please make sure you can understand the basic staff listed below:

1. Short summary and key points
2. Technical analysis tips (will be updated accordingly)

One real application example: According to my theory, the end of a trap zone will lead to a money-making zone. So once the trap zone pattern is gone this morning with 1980 being breakout, that means a money-making zone is forming. In addition, the end of the money-making zone will lead to another trap-zone !

Another example: A reliable top and bottom formation needs a successful transition from either a bullish trap zone to a bearish trap zone, OR, a bearish trap zone to a bullish trap zone. In general, to complete such a transition, at least 6 UP/DOWN waves are required.

So far, in the NASDAQ daily chart, no such transition at all. Of course, my theory can not guarantee you sell at the highest point and buy at the lowest point during a big profitable wave because it is impossible. It makes sense in reality because the highest point and the lowest point may be created through just one very low volume trade. The nature of this special trade is very random. But the theory can help us to sell at a reliable top area, to buy at a reliable bottom area, and make profits from the wave in between.

The US stock market has been in a trap zone for 4 days

so far ! What a great opportunity to do some day tradings in this trap zone, if you want to. Why ? Because every day the same thing/pattern happens again and again in a row of four days so far:

• Going down in the morning
• Climbing back at the end of the day

Such kind of intra-day reverse up pattern usually is pretty bullish, if not 100% sure !

Breakout or breakdown the box in the chart below will lead us into a money-making zone. It is coming very soon, if not tomorrow !

My theory/opinions on the stock price development

Here is a short summary and key points:

• The stock price is always moving in three ways: trend UP, trend DOWN, and no trend fluctuation
• The stock price movement pattern can be classified as two zones: trap zone and money-making zone
• Trap zone can be further classified as bullish trap zone and bearish trap zone.
• The price movements always follow this pattern: trap zone -> money-making zone and then another trap zone. It is a regular repeatable pattern, but could be combined together to form a complex one zone.
• A reliable top and bottom formation needs a successful transition from either a bullish trap zone to a bearish trap zone, OR, a bearish trap zone to a bullish trap zone. In general, to complete such a transition, at least 6 UP/DOWN waves are required.
  
• After the trap zone, the expected money-making zone should be measurable. Otherwise, a trend reversal could happen. For example, the current rally since march can be classified as this case. After the trap zone, the expected move is only about 30 points lower than the trap zone, which clearly shows the weakness of the bearish force. Please refer to the chart below.
  

For other technical analysis tips, please refer to the collections here.

I hope you all can learn something from the blog ! It refreshes my thinking as well while I am writing and sharing.

SVA also breaks out. Here is the link to the initial call.

Trap zone and Money making zone

I classify a financial price movement chart into two zones:

1. Trap zone
2. Money making zone

Generally speaking, in the Trap zone, it is very hard to make money and even worse, you could be easily trapped and lost your money. on the other hand, in the Money making zone, there are very few traps. Therefore, you can easily make money from the price movement!

It is a bad time to trade when you try to trade in the Trap zone, as mentioned before.

An unique feature of the trap zone is full of false price moves. Due to the huge amount of false movements, many traders will be tempted and trapped !

Below is a chart example, showing the trap zone in the black box ! Good traders need to avoid such trap zone because it is so dangerous to play with!

VRTU is heading to 10 now !

VRTU is heading to 10 now ! That's the power of breakout !

Here is the old post link on VRTU.

Some later follow ups on VRTU can be found here.

Nasdaq 1995 is very expectable

Nasdaq 1995 is very expect able, as predicted before, based on today's market action, at least very promising !

Bulls really need another BIG jump up day to breakout 1980. It seems to me some big bears will be burned out again in a short time, if this turns out to be true.

I am watching closely on the chart to learn how the bulls will complete this crazy run up wave and how the old bears be killed and new bears be trapped as well ! It's so fun to watch!

Trading the market is like dancing with the market. We need to know its beat !

I have sold most of my long positions, only a small part (with zero cost) is left to wait for the NASDAQ 1995 to be fulfilled. I will hold cash for a while. I feel it's not a good time to trade in the next 3 coming waves.

Here is my predictions and outlooks for the coming 3 waves:

1. The next 3 waves after this UP wave will be in this order DOWN, UP and DOWN.
2. The battle in the coming DOWN wave will be a battle over the 250 MA. Watching 250 MA closely can tell you the fate of bulls and bears in advance.
   
3. The fate of the coming DOWN wave has already been discussed before, please refer to the old post here.

Since there are two quite different possibilities for this expected coming DOWN wave, either kill bears again or kill bulls, I decide to stay sideline and keep my earnings this year safe. In my opinion, trading such waves is a gambling! It's not good at all. I only trade the inevitable wave like this UP wave. Hopefully, I can keep the good habit.

Good time and bad time to trade

Good time and bad time to trade !

Every traders including myself, of course, need to learn to know what's the good time to trade as well as the bad time to trade.

I believe the only good time to trade is to trade the inevitable trend !

So the key is to discover the inevitable trend and then follow it !

For now, I am expecting a DOWN wave to come. As described last Friday, "However, for the Bull's sake, I really hope the expected DOWN wave can come sometime next week, if not already started from yesterday's high of ~1980, which may still be possible to date !" The down wave, maybe or maybe not, already started from last Thursday, ~1980. That's what the market is doing now ! It is seeking the direction and then to reconfirm it !

But, I don't plan to trade this DOWN wave because it may be another BEAR's trap. Simply put, it is not an inevitable trend, according to my own definition! After that, there will be an UP wave, then I will observe what the market will do then and make a decision in the next DOWN wave.

So far, in the NASDAQ chart, there are three inevitable trends.

1. 1265 UP to 1773
2. 1677 UP to 1879
3. 1727 UP to ???(1979 or 1995 or ???)

Some characteristics of these inevitable trends:

• All trends are along the same direction
• All trends are profitable in terms of the trend movement range

Again, only trade the inevitable trend! That's the key to follow the market !

Time, a very important consideration

Once a major trend is formed, it will not be reversed very quickly. The underlying reason is that the fundamentals and economic conditions need time to complete a trend reversal.

We need to leave it alone and give it the time for it to perform well.

That's why people always say: " sit tight when you are right !"

Importance of the moving averages

Moving averages are very important because they show the trend of the price movement.

I want to comment here on 5MA,10MA,50MA and 250MA on the daily charts.

• Golden crossing of 5/10/50/250 means BULLISH trend
• Dead crossing of 5/10/50/250 means BEARISH trend
• Both 50MA and 250MA are major resistance and support levels (trading opportunities)
• Once breakout / breakdown 250MA, re-testing is very possible.
• The third time both 5/10 crossing over 50 in a no trend zone will lead all three to a crossing to 250.
• In the no trend zone, how 5/10/50 moves will indicate if they will head to 250 or not.