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11 minutes ago, dmedin said:

Wasn't one of my best ideas!  I got stopped out today.  Will still keep an eye on it and see where it goes from here.  It still seems to be in a downtrend.

Not sure what your trigger for entry was but at a glance it looks like a case of getting in late. This can happen when you are trying to look at too many charts and keen to get a trade on. 

Always spot where the First Trouble Area is and check it's not so close to the entry point that you have no lee way if things go wrong and you run straight into another pullback. The prior low for a short is the FTA and if the reversal to continue the trend entry has been missed then as price passes the FTA is a second opportunity to get in short (a breakout entry). 

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Thanks for posting this @dmedin, I hadn't been paying much attention to the sectors on the FTSE of late, being more focused on the US large Caps.  Given the strongly Bearish turn of events on Tobacco, note Imperial Tobacco (now called Imperial Brands in a vain effort to eliminate the word Tobacco...) is showing a very similar (even more Bearish perhaps) set up, I decide to analyse it out.  My results are as follows and may go some way to explaining why your Short idea failed this time.

The Monthly Chart shows the progression on this stock nicely since the beginning of a long Bull move since 2000 that barely blinked during the major corrections on wider indices.  This move is in a classic 1-5 (purple) with another 1-5 (pink) on the final wave to the top.  The Central Bank bubble rally since 2009 is encompassed within an expanding triangle, a signal of over exuberance.  At the top there was clear and strong NMD on the Weekly and Daily to signal the turn.  Then the first drop (1-2 purple) broke, and had a failed retest of, a weekly chart ending channel (blue lines on weekly chart).  This retest, which took its sweet time, finally capitulated and the market ran quickly down to a Pennant formation (pink line triangle) that occurred with an initial failed breakout of the lower expanding channel line.  When the Pennant failed the expanding channel line also quickly failed and led to a sharp drop.  This was stopped by a long term supporting trend line after a push through the Monthly Fib 50% and the market closed above this level and is now, it seems, in a retrace rally (not a continuation of the Bearish move).  Note the Pennant often signals the halfway point in a move and so it was here.  An extrapolation from the Pennant gets to around where the market bottomed out in what I think is either a wave A or 3.  We should now get a wave B or 4 (i.e. a rally).

If you look at the Daily chart you will see significant PMD at the wave 3rA turn point followed by a 1-5 rally up to what looks like a wave A (NMD on that turn), the first leg of the retrace rally.  IF wave B is done, and it might yet run down for a lower low, then a projection of equivalence (i.e. wave A = Wave C in length) gets us to about the Fib 50% and the previous breakout zone from the expanding channel.  At present I would anticipate a sharp 1-5 rally up to this area, around about £36 followed by a final phase Bearish drop.  Whether this is an A-B-C or 1-5 on the big picture chart remains to be seen.

So net I would not look to short this market until a suitable retrace rally turn is identified.  However with a large part of the Bearish move done there are surely better Shorting options about?  The one thing that interests me with this though is the apparent change of strategy of fund managers, who were crazy for these high divi yielding stocks in the recent past.  Could this be a precursor of things to come more widely?    

 

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2 hours ago, dmedin said:

Does my pathetic attempt at wave numbering make any sense?  Could BATS.L be about to decline again?

I don't know but I do know that historically BATS has been the most bullish trend I ever saw so I wouldn't sell this one so low in it's history.  👿

 

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@dmedin, your A-B-C doesn't really stack.  Typically the wave C ends beyond the wave A.  Although I have seen some deep EWT users label a retrace as you have, I have generally ignored this because it seems like force fitting via exception to me (I am not that deep into EWT truth be told).  If a set up doesn't conform to the standard modes I tend to simply wait for further information in the form of price action and look at other markets, there are many many more options out there after all.

If I look at BAT now, and please be advised that I do not look at individual shares much anymore so this is just a cursory look, I do not see any change from my previous detailed post above.  Therefore the A-B-C (pink - weekly chart) is still on.

You may recall that I wasn't sure whether the wave B (pink) was done or not (2 placements).  When I saw a slightly higher high on the Daily I though maybe it was done and the retrace rally was on.  However now that the market has moved back down there are 2 scenarios present for me as follows (see daily chart):

  1. the current bearish move is just a natural zig zag within a wave C that will carry on up in due course
  2. the whole move off the wave A (pink) is not yet concluded but is tracing a so-called complex retrace that is made up of a series of whip saw A-B-Cs and the recent top is a wave B (red).  If that so we can expect a wave C to conclude with a lower low, maybe around the Fib 62% support zone. (and note there is a small A-B-C (blue) within the current move that fits better).

Wave Bs are tricky moves to trade, I tend to try and avoid then until an obvious conclusion (turning point) and seek to catch the wave C OR just leave it alone until the retrace is done and catch the bigger next move down (in this case) because after a retrace, or counter trend move, comes a return of the motive wave (in this case down).  There are surely better opportunities (and safer) elsewhere than trading this set up at this time.  Even if you were minded to catch the retrace, say at £36, wouldn't there be bigger opportunities elsewhere?  Seems like the bulk of the move down on BAT and similar sector companies is done now.

I agree with @Foxy that I would not Short BAT as a retrace is on but I have different reasons I think.  Check out my monthly chart on my first post for my long term view, which is also unchanged.  I believe we have seen the top on this sector now, and this is a significant change in the stock market as a whole, in terms of money managers seeking high yielding stocks that are engaged in significant buybacks.  Obviously this strategy is no longer working for tobacco companies and the reality of declining markets and the inevitability of vaping regulation is taking its toll.  So after a retrace I expect a break of that LT trend line and a drop to the end of the Bear.  Meanwhile the momentum stocks in the rest of the indices will keel over and join the early movers heading down.  In terms of sector we also have property under pressure, most stocks on the FTSE didn't recover from the credit crunch and are now heading down for the final leg, similar to tobacco.  Also, critically, Retail is under pressure with many companies in this sector having apparently topped out.

Question for you Dmedin, have you assessed all the sectors to see where the best opportunities are?  If I was still trading individual shares I would be focusing on sectors that are about to top out, or recently may have, to get Short early.  Once a sector or share has made a major turn and moved significantly (in the case of tobacco over 50% decline) it is too late to join as the risk of significant retrace is to great and there are likely better opportunities elsewhere.  Of course your trading methodology needs to be geared to identifying and entering turning points as opposed to trend following, where you wait until the trend is well bedded in.  BTW, a long term swing trader will deploy both of these methodologies so for me it isn't about 1 or the other it is about using the right method at the right time.  So second question, do you have a methodology that is designed to deliver against your treading strategy?  These are rhetorical questions of course, for you to think about rather than answer.  EWT is useful for both swing trading and trend following but the most critical thing is being clear on your overall strategy and picking the right vehicles to execute that strategy.

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@dmedin, your A-B-C doesn't really stack.  Typically the wave C ends beyond the wave A.  Although I have seen some deep EWT users label a retrace as you have, I have generally ignored this because it seems like force fitting via exception to me (I am not that deep into EWT truth be told).  If a set up doesn't conform to the standard modes I tend to simply wait for further information in the form of price action and look at other markets, there are many many more options out there after all.

If I look at BAT now, and please be advised that I do not look at individual shares much anymore so this is just a cursory look, I do not see any change from my previous detailed post above.  Therefore the A-B-C (pink - weekly chart) is still on.

You may recall that I wasn't sure whether the wave B (pink) was done or not (2 placements).  When I saw a slightly higher high on the Daily I though maybe it was done and the retrace rally was on.  However now that the market has moved back down there are 2 scenarios present for me as follows (see daily chart):

  1. the current bearish move is just a natural zig zag within a wave C that will carry on up in due course
  2. the whole move off the wave A (pink) is not yet concluded but is tracing a so-called complex retrace that is made up of a series of whip saw A-B-Cs and the recent top is a wave B (red).  If that so we can expect a wave C to conclude with a lower low, maybe around the Fib 62% support zone. (and note there is a small A-B-C (blue) within the current move that fits better).

Wave Bs are tricky moves to trade, I tend to try and avoid then until an obvious conclusion (turning point) and seek to catch the wave C OR just leave it alone until the retrace is done and catch the bigger next move down (in this case) because after a retrace, or counter trend move, comes a return of the motive wave (in this case down).  There are surely better opportunities (and safer) elsewhere than trading this set up at this time.  Even if you were minded to catch the retrace, say at £36, wouldn't there be bigger opportunities elsewhere?  Seems like the bulk of the move down on BAT and similar sector companies is done now.

I agree with @Foxy that I would not Short BAT as a retrace is on but I have different reasons I think.  Check out my monthly chart on my first post for my long term view, which is also unchanged.  I believe we have seen the top on this sector now, and this is a significant change in the stock market as a whole, in terms of money managers seeking high yielding stocks that are engaged in significant buybacks.  Obviously this strategy is no longer working for tobacco companies and the reality of declining markets and the inevitability of vaping regulation is taking its toll.  So after a retrace I expect a break of that LT trend line and a drop to the end of the Bear.  Meanwhile the momentum stocks in the rest of the indices will keel over and join the early movers heading down.  In terms of sector we also have property under pressure, most stocks on the FTSE didn't recover from the credit crunch and are now heading down for the final leg, similar to tobacco.  Also, critically, Retail is under pressure with many companies in this sector having apparently topped out.

Question for you Dmedin, have you assessed all the sectors to see where the best opportunities are?  If I was still trading individual shares I would be focusing on sectors that are about to top out, or recently may have, to get Short early.  Once a sector or share has made a major turn and moved significantly (in the case of tobacco over 50% decline) it is too late to join as the risk of significant retrace is to great and there are likely better opportunities elsewhere.  Of course your trading methodology needs to be geared to identifying and entering turning points as opposed to trend following, where you wait until the trend is well bedded in.  BTW, a long term swing trader will deploy both of these methodologies so for me it isn't about 1 or the other it is about using the right method at the right time.  So second question, do you have a methodology that is designed to deliver against your treading strategy?  These are rhetorical questions of course, for you to think about rather than answer.  EWT is useful for both swing trading and trend following but the most critical thing is being clear on your overall strategy and picking the right vehicles to execute that strategy.

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I haven't done systematic sector analysis.  I have been trading opportunistically.  To be perfectly honest, I haven't found a reliably profitable way to trade yet and if I am going to get into detailed sector analysis I might as well become a fundamentalist and try to get a full time job doing that as a living instead of trading off my own account.  That seems to be what all successful people do anyway.

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LOL @dmedin I feel you.  However if you are interested in trading individual stocks and are not considering what the sector or indeed the whole index is doing then how do you decide if the individual stock is going up or down?  Or put more pointedly where in the cycle is the stock you are interested in?  If you are not using a technical analysis technique to do this (line EWT) then you have to look at fundamentals.  Personally I prefer to do both.  I do not think intrinsic value is a good basis for trading, investing maybe but it doesn't matter what the intrinsic value of a particular stock is in a market crash, everything goes down...

Regarding your question about individual stocks vs the indices, that would seem to be a good topic for specific thread, if you would care to start one.  I am sure there are many different opinions on the forum that may be beneficial to hear.

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You got your answer @Foxy, my only issue with these sector indices is I am not sure what is in them.  I assume there are FTSE not a global group?  Allshare or FTSE100?  I only trade the whole index and only use sector analysis to assess what may be going on in the overall index.  Without knowing what the make up is I can't do that so I made my own from the FTSE100.  As an example, I would expect Hammerson plc to be in the REIT sector but all of their income comes from retail (the own and run shopping centres).  So I have Hammerson in both my property and retail sector groupings.

 

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Looks like the problem with BATS is that it is too chopping on the HTF with swings too wide for a small punter to be able to get it right and/or afford the stops, R/R.  Probably need to have a long term fundamental position or be following short term momentum.  As said elsewhere if you look at the chart and you don't see the trade, stay away  from it.  If you are looking at it and trying to guess the direction, stay away from it.  There are so many instruments out there it is pointless being married to the ones that wreck your head.

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Can't see it @dmedin, the pin bars may be indicative but I don't buy the trend line, insufficient touches to be strong.  Looks more like a consolidation retrace to me at present with a potential A-E pattern being played out.  The E may turn within the channel but preferable at the top, so the risk is that there is still some upside left in the move.  It would also yet morph into a more conventional A-B-C and rally higher.

I am not sure why you want to Short this stock as it looks to me the majority of the move is over.  Since the top out the market has traced a 1-3 of a likely 1-5 and looks to now be in a wave 4 retrace.  The whipsaw price action is certainly consistent with a complex retrace pattern.  In a traditional 1-5 under EWT you typically get 1 major retrace in simple form and one in complex form.  The simple one was the 1-2 so it makes sense that the complex one (current one) is a 3-4.  But price has already dropped to the Fib 62% level (or just above) so there isn't that much left to go.  Personally I would be looking for stocks that are completing or have completed their wave 2s and are about to run hard and fast in a wave 3.

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