Questions for the Doc!

[PaulPaulPaulPaul]

Hey Doc, I have been reading through many of the forum topics and just had a couple of questions for you.

First off, it seems that when I click to see your chart setups on stockcharts.com, it does not work for me.  However, I have seen some of your screenshots and I believe you use RSI, MACD, ADX, and PAR SAR.  Is there anything else you recommend using, or are these the main indicators (besides volume and candlesticks)?

Secondly, I have read you mentioning the ADX overbought zone (between 60 and 80).  When referring to this overbought zone, are you talking about the ADX line going into these zones, or the +DI/-DI entering these zones?  Also, when the ADX does show any overbought signal, what would be your pivot point to exit the stock?  Would it be the ADX turning downward? Support being broken?  Or a bunch of the indicators acting together?

Lastly, I have noticed that many people on the pincher play forum used the ADX and MACD.  Do you think this would be better than using the MACD and PPO?  Do you look for any other indications to get into a pincher play?

Also, sorry for some many questions.  I have read through many of the forum posts but have not found answers to them.  Thanks!

Paul

[PaulPaulPaulPaul]

I do not see where to edit my original post, but I made a mistake on the last question.  I meant to ask if using the MACD + ADX is better than using the PPO and ADX for pincher plays.  Thanks!

[Dr PennyStock]

Welcome aboard.

I have no idea why it doesn't work for you, as I am using the linkable version of the chart, I guess your browser is blocking images, or doesn't have javaScript enabled.

Can you open the link below?

http://stockcharts.com/h-sc/ui?s=SAPX&p=D&b=5&g=0&id=p49902877319


The screenshots I post everywhere, are always the same template, I never change anything, so I recommend to stick to it, and, do not change anything.

My main indicator is the volume, correlated with the candlesticks, next all the others you talked about.

ADX overbought zone is 60 - 80, I am talking about any of the two lines, ADX, +DI, because if the -DI line is there, the stock is not overbought, but, oversold.

My turning point is mainly the volume, much before any support being broken, or other indicators turning downward. If a stock is overbought in several indicators, and, the volume increases much, it's my signal to sell.

About the pinchers, the real pincher pattern uses PPO + ADX, but, I use MACD + ADX, I feel it much better for me. As with all the other stocks and patterns, the mainly indicator is always the volume, it weights about 80% - 90% in my T/A.

Hope this responded to your questions, let me know if you have more, I will be happy to respond.

Cheers

[PaulPaulPaulPaul]

Thanks for the quick reply.  I will change browsers or try reinstalling Google Chrome. 

You answered my questions very well!  I do have a couple of other questions about how you use volume.  Say for instance, a stock is overbought, but volume is increasing and we an average sized (relative to the chart) bullish candlestick.  Would you see this as support for the current price?  Or would this indicate a turning point for you? 

Anything else you think I should know about volume? 

Also, just to make sure I understand you correctly when referring to an overbought ADX, an overbought signal would be either the +DI line OR the ADX line in the 60 - 80 range.  I am not sure if you meant one or the other, of if you meant BOTH would be in that range. 

Thanks!  Sorry for my noobie questions!

Oh wait! One last question.  I have seen some posts by you refering to dynamic resistance.  What do you mean by this, and what would be the other types of resistance?

Thanks!

Paul

[PaulPaulPaulPaul]

I have another question for you doc!  I have been reading through many forum posts, and you seem to be very good at predicting bounce plays - like really REALLY good. What exactly do you look for, for indication of a bounce?  It must be more than just support and resistance.  I assume it must be something to do with the volume, though I cannot figure out how you almost hit the exact spot of the bounce.  Thanks so much for the help so far!

Hopefully that was the last question for a while...

[Dr PennyStock]

If a stock is overbought and the volume is increasing, it will always indicate a turning point for me, if I am already at a good profit and the chart is overbought, I take my money from the table, if it goes up, no problem, my money is already on my pocket, I forget this one, and, search for another stock to buy.

About the volume, the only thing I can tell you is to look to your streamer with attention, when you see many trades at the bid, I mean large orders, and the bid holds or jump, that is a support, and, when you see many trades at the ask, high volume, but, the bid and the ask drops, that is a resistance.

About the ADX, an overbought signal is given when any of the lines, the ADX line or the +DI are in the 60 - 80 range, don't need to be both there, only one of them is enough.

A dynamic resistance is something that is changing the value every day or with the time, for example, MAs, PAR SAR are dynamic resistances, or supports, if they are under the price. You will notice that these values can change from one day to another.

As I said, my main indicator is the volume, for everything, so to catch a bounce, the volume is the most important, of course that I also look to previous support and resistance points if any, to guide me, if not, I follow only the volume.

[PaulPaulPaulPaul]

Wow you rock!  Thanks for the help!

[Dr PennyStock]

You are welcome, let me know if you have more questions.

[PaulPaulPaulPaul]

Hey Doc,

I have noticed many people are in SAPX right now (Currently I am not), and I thought I would run a "noobie" chart analysis on it and see if I can read that chart like you do.  Please feel free to correct me as I am sure there are many mistakes, and I need to learn!  I made the chart style similar to yours, though I used a different background color so people do not mix up this chart with one of yours.

Here it is:

Positives:

Support:
.30 - PAR SAR
.36-.37 - I think this is very strong support here.  First off because of the rising support trendline due to higher lows.  Secondly, because of the support/resistance line.  Thirdly, because of the MA50. 

It looks to me as though support will be rising due to the higher lows being made.

Also, it looks as though an ascending triangle could be in the makings.  On the 21st it broke through the top of the triangle (which ruined the formation), but it may have just been a false break. 

The RSI is rising over time, and is about to enter the MOMO zone (50).  It has been going in and out a couple of times, but it has always been making higher lows.

The MACD is about to break the zero mark, which is a sign the the short term (12 day EMA) trend is rising about the longer term (26 day EMA) trend.  Also, if you look at the bottoms made on in the beginning of October as well as on Nov 17th they are very close.  HOWEVER, the MACD is rising.  Yet another sign of the bullishness to come.  The MACD is also rising above the signal line.

Volume:  I think I am understanding how to read the volume, though I would like it if you verify this!

It looks to me like many buyers got in on the 18th - 21st (its hard to see the exact day on the chart).  On the 22nd, the stock dropped, and you can see that many people (sellers) got out of the stock.  On the   22nd and 23rd, the stock continued to drop as more people wanted out of the stock, though the volume on these days was very low.  This indicates that there is not much mutual agreement (for lack of a better term), to get out of the stock.  Because of this the stock has entered an accumulation phase.  There are a greater number of people in the stock who expect it to go up.  The last bullish day (29th) shows an increase in volume as well as a rise in the stock price.  If you compare that to the previous days, you can see that there is still more bullish sentiment than bearish.  On the 29th, the stock dropped slightly.  There is less volume on the 29th for the drop than there was on the 28th rise.  Once again, this proves the bullish sentiment within the stock.

So, overall this are more people in the stock who expect it to go up, then there are people who expect it to go down. 

Lastly, the ADX signal line is in a slight uptrend (and it broke the 20 line), indicating that a trend may be starting.  By looking at the chart you can see that an uptrend is forming.  +DI is above -DI indicating more bullish movement.  The +DI is pointing down, but I believe it will turn back around tomorrow (the 30th), as the stock is at a strong resistance point and should move up.  The Green line is also above the signal line which would normally indicate a very strong uptrend, but since we are not in a trending market I do not believe this indicates much.

Negatives:

Resistance:  Just by drawing trendlines I see resistance at .49, .68, and .89.  I think the stock will break the .49 resistance as it is making higher lows and in the accumulation phase.

The +DI is pointing down, but I think it will turn around tomorrow.  The -DI is also pointing down, so that is actually a positive.

The RSI has broken back down over the 50 mark, indicating slight bearish sentiment.  I think it will turn back tomorrow to the upside.


On a side note, the last candle makes a dark cloud cover formation.  I would not be too worried about this since we are not in much of an uptrend yet. 

I think with a good amount of volume, the .49 resistance can be broken quite easily.  I think it will break it within a week or so (due to the higher lows as support).

Wow I did not realize I was going to write this much!  I know it is a long read, but if you could go over it and tell me any mistakes you see that would be great!  Also, if there is anything I missed on the chart feel free to mention it to me!  I had a limit order to get in this stock today at .37 but was unable to =(.  I may get in tomorrow morning, though I am not sure as I have class in the mornings and may not be able to get in at a low point of my liking.

[Dr PennyStock]

Your chart has very small errors, just compare it with this post below I posted on the SAPX thread, and, you will see the differences for yourself, overall you say the same thing I said.

SAPX annotated daily chart including supports and resistances.

Very important to understand how to read charts: previous supports become resistances, and, previous resistances become supports.
 

Supports and positive points are signaled with green, resistances and negative points are signaled with red.
 

Supports: .314 - .31(previous support and also previous resistance zone, horizontal dashed green line), .28(PAR SAR), .26 - .25(Previous support at the end of September, and, at the beginning of October, also this month, 7 trading days ago, horizontal green line), and finally at .221(previous support at the end of September).


Resistances: .37(MA50), .48(previous resistance in September, October, and, also this month), .66 - .675(previous support in August, then, become resistance in September, end of October, and, this month, only 4 trading days ago, it has stopped at .63, but, was to respect the resistance at .66 - .675), .88 - .89(previous double top in August), 1.00(an usual psychological price level), and, finally, that ascending green line(right now at about 1.15, but, will increase with the time).


Positive points:The stock is in a slight uptrend, it's touching strong support zone, it's right above the PAR SAR, the ADX is positive, the +DI has still much room to run, but, the -DI crossed the ADX line to the up side, so the stock must bounce next Monday, in the latest days, the volume was much higher in the green days than in the red days, it means that the buy is much stronger than the sell.


Negative points: The stock has not made support at the RSI50 line, and this line is now resistance, over 50 is the called MOMO zone, the MA50 was also not able to support the price, and, the -DI crossed slightly the ADX line, as I said, the stock MUST bounce next Monday.

[PaulPaulPaulPaul]

OK cool thanks.  I have read many of your posts here trying to learn your trading style.  I have been studying other sites and such for about a month now, but you explain everything very well.  I have started using ADX now because of you as well as paying much more attention to volume.  I also noticed that you seem very positive about the stocks you get into.  I usually have a much more cynical attitude when it comes to stocks I want to get into.  This usually prevents me from getting into some nice plays, so I will have to work on that!

Anyways thanks again for the prompt response to my noobie questions!

[Dr PennyStock]

Well, some times I am too much positive as well, and, this doesn't prevent me from buying a few POS stocks , so I needed to be a little more cynical or skeptic, but, it is very difficult to find a middle point.

[RoagTrader]

This thread is a perfect example of why this is the best stock site on the internet.  Great job guys, I wish I could do TA like this but I'm very thankful for Doc and everyone here who can.

[PaulPaulPaulPaul]

I also agree that this is one of the best stock sites!  I wasted so much time (not to mention some cash) trying to learn from other sites when most of the info I needed was right here!  Being able to follow the trades and see why they were made is indeed priceless.

[Dr PennyStock]

Thanks Roag and Paul for your kind words, it gives motivation to continue the work I am doing, this site was almost dead a few weeks ago, but, I am not guy to quit, so I worked and will continue working hard every day to make it grow to new levels, I can say that the number of visitors and page views increased 7 times since I cleaned up the forum and began working on it as it should be. And this without using any kind of advertisement.

Due to this increase in traffic, I may need to move the site to a Virtual Private Server or a Dedicated Server soon.

Let me know when you begin to feel problems in accessing the site, please.