Hi folks,
I'll be posting trades and my planned trades/commentary regarding xjo/asx200.
The reason i've chosen this index is because after a hell of a bull run, we are seeing a classic distribution pattern occurring. If all goes well, once the lower tl(blue) is breached this will fall, and fall hard and fast, first top the upward trend line at the bottom. I plan to be on that ride should it occur.
In the coming posts i'll explain what makes this a distribution pattern, as well as the psychology behind why they occur, and what they mean.
Edit: 12/1
Ok, just to preface, nothing I say here is gospel. I'm still learning, and this is helping me further understand – i work a full time job, so posting might not be as frequent as some would like, however I will post all trades as I take them with a rationalé as to why. I'll probably jump back on to edit this because I wrote it at stupid o'clock last night, so bear with me, but here is the beginning of my explanation of distribution:
Distribution
Ok. So under the (not-to-be-bet-on assumption) that we are in distribution mode, we will see the bear market come in once the blue line is broken. Distribution begins in the later stages of a Bull market. Throughout this period there’s a distinct sense (fundamental in this case) that the market/currency/stock/etc has reached it’s height and it’s time to unload the stake you have at a still increasing price. Now, Volume is still high, though it does tend to reduce on the rallies, and the ‘public’ (us) are still actively buying the dips as we’ve been taught to, however, in this instance we’re only met with frustration as the profits from dip buying don’t arrive.
The pattern is what it is because the big holders need to reduce their stake at a still rising/decent price, while the majority (us) buy the dips caused buy the unloading and surrounding fundamental reasons for a stock/currency/index to weaken.
Now, buying dips aint a bad thing at all, in fact, it works far better than catching a falling knife, picking tops and bottoms, etc. A lot of money can be made and is made from buying dips/selling rallies – however, and i’m not a fundamental trader – but what’s happening in the world is often a good indicator of what could happen in the markets.
Throughout the distribution faze, we hope to see a range forming – of lower lows, with a relative solid floor. This is because the big money will not offload all their holdings in one foul swoop, otherwise the price will fall to fast and they’ll lose out on the potential higher price that’s cause by everyone buying the dip.
Now, the problem with preempting distribution, is that you end up getting whipsawed and stopped out. The good thing about distribution is that when/if it breaks down, the move is explosive. The reason in this case why we’ve moved into this distribution pattern in XJO is bacause there’s indecision.
When markets distribute, the tend to play our over months, which is why the index has gripped on the neck (blue line), as you can see we ran to 5335, and are hopefully on our way back to 5130 - the neckline.
I'll be posting trades and my planned trades/commentary regarding xjo/asx200.
The reason i've chosen this index is because after a hell of a bull run, we are seeing a classic distribution pattern occurring. If all goes well, once the lower tl(blue) is breached this will fall, and fall hard and fast, first top the upward trend line at the bottom. I plan to be on that ride should it occur.
In the coming posts i'll explain what makes this a distribution pattern, as well as the psychology behind why they occur, and what they mean.
Edit: 12/1
Ok, just to preface, nothing I say here is gospel. I'm still learning, and this is helping me further understand – i work a full time job, so posting might not be as frequent as some would like, however I will post all trades as I take them with a rationalé as to why. I'll probably jump back on to edit this because I wrote it at stupid o'clock last night, so bear with me, but here is the beginning of my explanation of distribution:
Distribution
Ok. So under the (not-to-be-bet-on assumption) that we are in distribution mode, we will see the bear market come in once the blue line is broken. Distribution begins in the later stages of a Bull market. Throughout this period there’s a distinct sense (fundamental in this case) that the market/currency/stock/etc has reached it’s height and it’s time to unload the stake you have at a still increasing price. Now, Volume is still high, though it does tend to reduce on the rallies, and the ‘public’ (us) are still actively buying the dips as we’ve been taught to, however, in this instance we’re only met with frustration as the profits from dip buying don’t arrive.
The pattern is what it is because the big holders need to reduce their stake at a still rising/decent price, while the majority (us) buy the dips caused buy the unloading and surrounding fundamental reasons for a stock/currency/index to weaken.
Now, buying dips aint a bad thing at all, in fact, it works far better than catching a falling knife, picking tops and bottoms, etc. A lot of money can be made and is made from buying dips/selling rallies – however, and i’m not a fundamental trader – but what’s happening in the world is often a good indicator of what could happen in the markets.
Throughout the distribution faze, we hope to see a range forming – of lower lows, with a relative solid floor. This is because the big money will not offload all their holdings in one foul swoop, otherwise the price will fall to fast and they’ll lose out on the potential higher price that’s cause by everyone buying the dip.
Now, the problem with preempting distribution, is that you end up getting whipsawed and stopped out. The good thing about distribution is that when/if it breaks down, the move is explosive. The reason in this case why we’ve moved into this distribution pattern in XJO is bacause there’s indecision.
When markets distribute, the tend to play our over months, which is why the index has gripped on the neck (blue line), as you can see we ran to 5335, and are hopefully on our way back to 5130 - the neckline.
Attached Image (click to enlarge)
