Tuesday, September 13, 2011

Cycle levels

Just about every stock and other trading instrument runs n a 4 stage cycle, whether you are looking a a monthly chart or a 1 min chart, these cycles are everywhere. Stage 1) Accumulation / Stage 2) Mark up or rally Stage / 3) Distribution Stage /  4) Decline.


Lets take a loon at our most recent cycle starting yesterday.
The white box is where we observed accumulation on Friday and Monday and the line through it is what I would guess to be the average position price. The red box is where most of us bought yesterday.

This was Stage 1 accumulation. We are now in stage 2 mark up/rally. During stage 3, Wall Street will start distributing their shares in to higher or flat prices, that's when we want to be selling as well, after that, we can probably catch a few short trades for Stage 4-decline.

To give you some idea of the move I expect (roughly)...
This chart compares the 3C accumulation of the last move to this one, roughly the same. The last move spent a day in accumulation, then gapped higher and had one more day of gains, but price lost momentum as it was under distribution. So something along the line of 2 days or so I would think.

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