XLF

1. 

   craig7
   Member

   XLF has found itself in a critical juncture. I have given plenty of reason for a top in the last post. Now I will give the critical levels that would confirm a top in XLF is complete.

   I stated in the last update a strong case for a top using Elliott Wave analysis. I also stated that there was an incomplete A-B-C wave correction. Now I want to make a case that the A-B-C wave correction is complete and a major move down in wave three is expected in the next couple of weeks.

   Like in the last update, I am using a 60-minute chart to show more clearly the Elliott Wave count. You can see a clear five waves down from the 10/14/09 top labeled with circled numbers. This completes wave I on 11/2/09 with a red square around it. Since then, we can count a 3-3-5 wave pattern indicating an Elliott Wave Flat pattern. This is shown on the chart as wave a, b, and c. As you can see, wave c is a five wave impulsive pattern. In Elliott Wave analysis, wave c is always a five-wave impulse wave in flats and zig-zags.

   This completes wave II on 11/11/09 shown on the chart with a red square around it. Since 11/11/09, I can count a complete five waves down. If not complete, it will be with one more push early Monday below the 11/13/09 low.

   How could I be wrong? The price action from the 10/14/09 high could be a larger corrective pattern, not a change in trend. What I have labeled as wave I with a square could be wave A and wave II with a square could be wave B. Wave C would be incomplete. Even in this scenario, wave C should fall to at least the 13.00 level. That is where wave C will equal wave A and there is an unfilled gap from 8/3/09 at that level.

   One more thing to mention is the Fibonacci retracement levels from the 10/14/09 high to the 11/2/09 low. Wave II hit a roadblock at the 61.8% retracement level. The candlestick patterns on the 120-minute chart also indicate a wave II top.

   Expect XLF to fall from current levels to the 13.00 price level as the minimum target. The critical resistance level that must hold for my count to be correct is the wave II high of 11/11/09. You can short XLF with a stop loss at the 11/11/09 high or you can buy SKF as the Ultra Short Financial ProShares ETF. SKF price action and wave pattern is the inverse of what I just posted.

   Be a smart trader!

   Craig

   http://www.etf-technical-analysis.com/xlf.html

   Posted 2 years ago #
2. 

   craig7
   Member

   I stated in the last update a strong case for a top using Elliott Wave analysis. I also stated that there was an incomplete A-B-C wave correction. Now I want to make a case that the A-B-C wave correction is complete and a major move down in wave three is expected in the next couple of weeks.

   Like in the last update, I am using a 60-minute chart to show more clearly the Elliott Wave count. You can see a clear five waves down from the 10/14/09 top labeled with circled numbers. This completes wave I on 11/2/09 with a red square around it. Since then, we can count a 3-3-5 wave pattern indicating an Elliott Wave Flat pattern. This is shown on the chart as wave a, b, and c. As you can see, wave c is a five wave impulsive pattern. In Elliott Wave analysis, wave c is always a five-wave impulse wave in flats and zig-zags.

   This completes wave II on 11/11/09 shown on the chart with a red square around it. Since 11/11/09, I can count a complete five waves down. If not complete, it will be with one more push early Monday below the 11/13/09 low.

   How could I be wrong? The price action from the 10/14/09 high could be a larger corrective pattern, not a change in trend. What I have labeled as wave I with a square could be wave A and wave II with a square could be wave B. Wave C would be incomplete. Even in this scenario, wave C should fall to at least the 13.00 level. That is where wave C will equal wave A and there is an unfilled gap from 8/3/09 at that level.

   One more thing to mention is the Fibonacci retracement levels from the 10/14/09 high to the 11/2/09 low. Wave II hit a roadblock at the 61.8% retracement level. The candlestick patterns on the 120-minute chart also indicate a wave II top.

   http://www.etf-technical-analysis.com/xlf.html

   Posted 2 years ago #
3. 

   craig7
   Member

   XLF has done nothing but move sideways since September. I have stated in previous post that I believe a corrective top is complete and I continue to believe it. The corrective pattern turned out to be more complex than anticipated. I will attempt to back it up using Elliott Wave Analysis.

   The Financial Sector has been weak relative to other sectors and the overall market indexes in general. The financials have not even come close to making new highs as the major large cap indexes have made higher highs. This is a significant divergence and the reason I believe that the price is heading for lower prices.

   XLF topped on 10/14/09 and it has traced out a five-wave decline to the 11/2/09 low. Since then has been nothing but a corrective pattern, which I believe is not complete.

   The high of 11/11/09 completed wave-A. The overlapping nature of the pattern to the 11/27/09 low, completed wave-B. The rise since then has taken on a three-wave pattern up. Since we have only three wave up since the 11/27/09 low, I expect one more push to break above the 12/1/09 high. This should complete the corrective pattern. I have labeled the chart with my counts. This should come to a conclusion by tomorrow. From there, we can expect new lows ahead.

   A break below the wave-B low will signal that the correction is over and the price is heading for new lows.

   http://www.etf-technical-analysis.com/xlf.html

   Posted 2 years ago #
4. 

   Donato
   Member

   Hi Craig . . .
   Well, I think XLF hit a low. Don't know if it was the "new low" you were expecting. But it was a higher low (14). So I'm in at 15. Hoping it'll be able to make a sustained break above 15.20 and make it up even further.

   Baby needs a new pair of shoes . . .

   Posted 2 years ago #
5. 

   craig7
   Member

   Donato, XLF has moved straight up the last couple of days. It is due for a pause. If my Elliott Wave Analysis is correct, I am not sure XLF will make it to the 15.20 level. It is possible it topped today. The 15.10 level seems to be good resistance. We will have wait and see if it will hold. You know I have been wrong before, so we will have to wait and see. Hopefully your baby will not have to wait for new shoes:O

   Posted 2 years ago #
6. 

   Donato
   Member

   Oh ye of little faith. Baby's gonna get those shoes. An I'll be able to get me a pint.

   Posted 2 years ago #
7. 

   craig7
   Member

   Donato, You have done well with XLF. I want to pick your brain if I may. Where do you see XLF headed near term? Do you believe it will break the October highs? You know I have my opinion, but you have done so well recently and I have not, I wanted to here from you. Glad to know there are no bare feet in your house!)

   Posted 2 years ago #
8. 

   Donato
   Member

   Hi Craig . . .
   To be sure, baby doesn't have his new shoes yet, and I don't have my pint yet either . . . But thanks for the compliment!

   My trading plan is overly simplistic, and uses a thought process that took a bit to get used to. I look at the long term trend to decide whether I go long or short. I'll explain long, and of course shorting is the opposite. I use no indicators except price and volume; sometimes I use a couple of moving averages so I can flip through the charts real fast and pick out the TAZ trades.

   I never have an opinion or target. I either buy support or resistance (breakouts). The first thing I do after looking at the long term trend is determine the exit. This is the hardest part; deciding when to admit that I am wrong. Once I know my exit, then I look at the current price. The difference between the two is then divided into how much I'm willing to lose on the trade, the result is the maximum amount of shares that I can buy.

   The second method if I want in and the price is between support and resistance is to just enter with a stop at the low of the day. If I get stopped out, I watch it every day for a reversal to signal an entry. I let the candles speak to me, for example, wait for a hammer or swing point low (or the breakout if buying resistance).

   As an example, when shorting that DUG we were talking about awhile ago, the first entry was a decent winner. The second entry had minimal gains. I'm in my third trade now and it is a big winner. I think I'll just hold it until it falls so much they have to do a reverse split on it!

   No matter how I get into the trade, I move my stops periodically to lock in the profits. So, to answer your question, the market determines my target. I only determine my risk. That last sentence is why so many people lose money in the markets, they do the opposite . . . They pick a target and let the market determine the risk.

   There is other minutia, mainly specific to me or my account. There is one other concept, which I guess I tried to explain above, but this is it spelled out . . . The stop is your friend. Once you get stopped out, that is just the signal to begin looking for another low risk entry. That is also key to making big gains. If you give up on the equity, that will be when it decides to make a run for it.

   I like the ratio of 5:1. Sometimes I'll take a partial profit when my gains are five times my initial risk. But that is done more in my swing trading account with stocks. I use ETF's in my "long term" account. I have yet to implement jdiercks ideas of multiple exits to deal with volatility.

   There is a lot of interesting psychology to successful trading. Like just accepting the fact that half your trades will get stopped out for a loss (eventually, they all get stopped out!). And accepting the fact that there is no technical or fundamental indicator that will save your ass. Also, if you're not having fun, you're doing something wrong! That one took me two years to learn, i.e. if you're stressed out, you're share sizing is too big; or as I like to think about it, you're risking too much on each trade.

   That's it in a nutshell. Hope this helps.

   Good Luck

   Posted 2 years ago #
9. 

   Doug
   Member

   Donato,

   Nice post and thanks for the generous detail. It's always fun and interesting to get a sneal peak over another trader's shoulder.

   Doug

   Posted 2 years ago #
10. 

    Donato
    Member

    Thanks Doug . . .
    Take that above post to heart. It could be worth thousands of dollars to you.

    Forming an opinion about the market is the first wrong step to make. Just look at the trend and go with it. For some reason, it is very hard for most people to do this. It used to be hard for me, now it is just common sense.

    I don't believe in diversification. But I bought XLF to give the account diversification. Go figure. Look at the chart and think about the financial industry. Earnings season is around the corner, real estate will still have problems for a year or two (maybe more), our economy shows no signs of recovery (if you figure in the 11 trillion in debt we just took on), there is talk of the US dollar not being used as the reserve currency, and it goes on and on.

    Who would possibly want to buy XLF? Me. Where do you think it will be in a couple years, when some of these troubles are behind us?

    When XLF reverses, I'll get stopped out. That's my signal to start looking for another entry. I'm just going to ride that saw toothing chart on up and make more money than if I just held it.

    Funny thing, I was looking at steel (SLX) last week, but I'm so weighted in commodities . . . To bad I didn't get in. I like five point moves in one week!

    Good Luck

    Posted 2 years ago #
11. 

    craig7
    Member

    Donato, thanks for sharing! I seem to do better swing trading with TAZ than when using other methods. I rely heavily on Elliott Wave and Fibonacci in my long term trading. There is a little more risk when using those tools. I have done very well with TBT if you have been following that thread. However, I missed with USO and XLF. I do appreciate your comments, critical or confirming. Keep in touch!

    Posted 2 years ago #
12. 

    Donato
    Member

    Hi Craig . . .
    Hey, come on, aren't you gonna give me DUG also?

    No, I haven't been following TBT. I do take a look at the chart when you make a post, but I don't see much (if any) long term trend. So I don't see me making much money on it. If I was going to play it, I would have to find a shorter term trend to follow. And that would just be a hassle.

    My attitude is: Why bother, when there are so many equities out there that have well established long term trends and it's so much easier to make money on those.

    And just so it is said, even though I followed my rules and bought KOL on the breakout, I had no idea it was going to make such a big jump so soon. That was just luck.

    But, I mean, just look at the chart! You'd have to be a monkey not to see the trend. And even though I'm a technical trader, that doesn't mean I can't combine that trend with the fundamentals of an economic recovery (which hasn't happened yet).

    Then there is a whole other third factor: Sympathy.

    Think about it. What did Buffett just do that was so big? Coal is the sympathy play. There is now a lot of institutional money looking for a place to hang out and join company with coal. Some of that big money is in, but there is a whole lot more on the sidelines, just waiting to jump in.

    Where do you think the next sector or industry is that the institutional money will want to jump into? How 'bout the financials? They're pretty beaten down. How 'bout steel? You need a lot of steel to bring up the standard of living for a whole country (not just ours!).

    What about communications? Or information technology? It goes on and on. There are so many opportunities right now, it's like picking low hanging fruit. Give it a couple or few years and, if you don't pick that fruit now, you'll have to climb a ladder to get it. And climbing ladders to pick fruit is more dangerous than just standing on the ground to do it!

    Good Luck!

    Posted 2 years ago #
13. 

    Doug
    Member

    Donato,
    I'm a sponge for information. I printed it out as I recognized a peek inside a trading room was being given. Not knowing what a hammer was I'm now watching a video on hammers and shooting stars...good stuff.
    Thanks,
    Doug

    Posted 2 years ago #
14. 

    Donato
    Member

    Oh Doug . . .
    You just stepped into a new wonderful world! A world where the charts will begin speaking to you. And you know what? You will begin to hear and understand them! If you've never heard of candlesticks (with regard to trading), it will blow you away. You've just found a new hobby! A fun hobby that can make you a bunch of money along the way.

    With no offense to Craig, you want to ignore any and all indicators except price and volume. You even want to ignore moving averages in the beginning. You can learn a very clean and pure form of trading that will put a spring in your step! Life will begin to look a lot different to you.

    Ever hear of Steve Nison? No, of course you haven't. What am I thinking? Sorry, just messin' with ya.

    He is the one person who single handedly revolutionized the entire world of technical trading only a few short years ago. To date, he has spent hundreds of thousands of dollars to have Japanese books translated for him. Not just any books. But very special books.

    Then he put the information in his own book. I think he sold it for a couple of hundred bucks initially. I think you can get it now for maybe a hundred bucks, I don't know for sure. Or you can read it for free on line. It's only something like 330 pages (he says with a twinkle in his eye!).

    Then he came out with a second book, with the same pricing, I think. You can read that one on line for free also.

    I'll give you a link to the first book. I guess it's legal. Somehow I don't think Steve Nison will mind. After all, the knowledge is pretty common now. And it would be good advertising for him. You see, he now sells an advanced course on candlesticks. I think the courses are in the two to 2.5K dollar range. Which in my opinion is probably some of the best money you could spend to learn how to trade. But I don't actually recommend taking the course until you have some hands on experience trading. I have not taken the course, I learned the hard way!

    What I recommend is buying and selling some equities using only 100 shares at a time. Remember, if you're getting stressed out from trading, you're risking too much! Successful trading is all about the risk, not the target.

    Not to brag, but here's how I did last week: In my trading account using stocks, and share sizing of only one or 200 shares per trade, I closed trades for $500; and the open trades are up $300. In my long term account using ETF's (with no trading, only a couple of purchases, and bigger chunks of money) I'm up maybe 6% over maybe the last three weeks.

    Learning about support, resistance, and candle sticks pays! You do not need to learn anything fancy! You do need to also learn risk management. Anyway, here's the link. I recommend you save the PDF file to your computer for easier access. The PDF file is something like 5 meg, so it may take a minute to download:

    http://stockedu.info/education/Candlestick_Charting.pdf

    Have Fun!

    Posted 2 years ago #
15. 

    craig7
    Member

    XLF has had an incredible move up since moving sideways for so long. One thing I need to bring to your attention is the fact that it has not made new highs as the major indexes have consistently been making higher highs since October. That is a concern for me. Some people believe the financials are good buys because the believe traders will rotate into the financials propelling them higher. We will see.

    I have labeled the chart for XLF as putting the final touches on an Elliott Wave Triangle corrective pattern. The 10/14/09 high cannot be broken for this interpretation to be correct. A drop below the 12/30/09 low will signal that lower prices are coming. That date was the wave-b low of wave-e shown on the chart.

    If the price eventually breaks out above the 10/14/09 high, there still should be a decline from current price levels before it does. Let me explain. Wave-I could be wave-A of a larger correction. What I have labeled as wave-II could be wave-B. That means wave-C is forthcoming. Wave-C will be a five-wave impulse wave taking prices back to the 11/2/09 low as a minimum. After that, the price can then move to new highs above the 10/14/09 high.

    So far, the price has reached the 78.6% Fibonacci retracement level of the move from 10/14/09 through 11/2/09. There is also strong horizontal resistance at current levels as shown on the chart.

    There was an island reversal at the 10/14/09 high, which offers strong resistance. The candlestick pattern on 1/8/10 indicates the significance of this resistance.

    I expect XLF to fall in price from here, whether you believe that new highs are forthcoming or new lows.

    http://www-etf-technical-analysis.com/xlf.html

    Posted 2 years ago #
16. 

    Doug
    Member

    Craig7...your link appears broken

    Posted 2 years ago #
17. 

    Donato
    Member

    Doug . . .
    Try that link at the end of my post addressed to you above.

    Posted 2 years ago #
18. 

    craig7
    Member

    Sorry, the link is http://www.etf-techncial-analysis.com/xlf.html

    Posted 2 years ago #
19. 

    Doug
    Member

    Craig, still goes to a Cox error message...Donato, That book looks amazing. That is the same fellow that produced the 90 minute video that i watched on the subject! Am I smart enough...NO...but I will go there and see what sticks. Good luck to both of you on your XLF trades.

    Doug

    Posted 2 years ago #
20. 

    craig7
    Member

    The price has had a huge decline just in the last two days. That is not a good sign if you needing the price to move higher.

    You should be holding good profits if you had acted on my recommendation. However, it may bounce up early next week before moving lower.

    There is good support at the 14.00 and 13.65 levels. The next support below that is the 13.10 level.

    Posted 2 years ago #
21. 

    Donato
    Member

    2-19-10
    After getting stopped out for a small loss on my last attempt with this equity, I got back in a few days back for another go at it. It's been nice to see movement in the correct direction this week. Maybe it'll be able to break the 52 week high this time around.

    Although the market has seen some nice moves up, our economy is still in the crapper; XLF's got some major hurdles to jump over. And if you think our economy HAS actually been recovering, I've got a bridge you might be interested in . . .

    All that said, the charts look bullish to me, and all my positions are long. Remember, trade the chart, not what you think . . .

    Good Luck!

    Posted 1 year ago #
22. 

    craig7
    Member

    I agree with what you said concerning the economy; however, I disagree with the correct direction for XLF. I appreciate your comments and insight. It keeps me on my toes.

    XLF never broke out to higher highs in January as the Major Indexes did. This to me is a major divergence and a bad sign for the future price of the financial sector. Not only did it not make a higher high, it has actually made lower highs and lows. XLF bounced nicely as you have mentioned and I congratulate you on your timing. However, I believe by what I see in the charts, this bounce is a correction of the major down trend evidenced by the lower highs and lows.

    This correction should be near complete. We shall see soon enough, as next week will give us a good clue. Currently, the price has retraced 50% of the move from the 1/7/10 high. It could potentially make the 61.8% retracement; however, the price has already found stiff resistance at current levels with the congestion area of the previous fourth wave.

    Thanks again for you input:)

    Posted 1 year ago #
23. 

    Donato
    Member

    Hi Craig . . .
    I know what you're talking about regarding the lower highs and lows, but I seem to have the best luck in the market going with the larger trend. The best part about my most recent entry is that now my stop is above the entry! Not by much, since I like to give an equity room to breath, but so far so good.

    The other interesting thing is the contrarian view. There are so many bears out there, especially with regard to the financials, it will likely keep main street away. That is often when the institutions accumulate shares as quietly as they can. Then the traders step in. From there it's anyones guess. But funky things often happen in the market, and it's usually safer to get in early; if for no other reason than a safer exit.

    On a much more general note, I expect this year to be a choppy one. And to make money on chop, you need to get in earlier; usually with a smaller position. That's what I did, and I would love to add to the position, but I haven't got enough confidence to do that yet!

    But now that I'm in the trade, you know I'll be watching it more closely now . . .

    Posted 1 year ago #
24. 

    Donato
    Member

    3-9-2010
    Come on baby! Getting close to that threshold we're looking to break through . . .

    Posted 1 year ago #

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