Process vs. Event

A lot of the email questions I'm getting today (interestingly about a wide-array of assets) have 1 feature that I've been pointing out more than anything else today so I figured I'd just address it in a post.

This is about a concept that we talk about here a lot, "Reversals are a process, not an event".

There are reasons for this, a lot of it has to do with scale, turning a jet-ski is a lot easier than turning an oil tanker and when you consider the size of "our" orders and the size of institutional positions, I think the analogy between our typical 100 lot orders and institutional size positions, being a jet-ski vs an oil tanker are probably pretty close to fair.

It's not that they can't execute in micro-seconds, they  can, but there's only so much volume before you start effecting your fill, this is exactly why there are head fakes, to facilitate this process. Read these two articles when you get a chance and you'll see that is exactly why or at least one of the largest reasons why there are head fake moves.

These articles are linked on the members site at the top right for you any time/

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A quick example using AMZN first because where AMZN was in the charting process is not surprising vs where it is in the price process and then quickly the IWM.

 Each stock / asset has its own character depending on size, volume, institutional sponsorship, etc, this is why my Trend Channel self adjusts to each stock rather than have a static setting like Bollinger Bands or an Envelope Channel.

This is AMZN above, bottoms tend to be a little sharper than tops, but there's a proportionality to the moves, like the preceding trend, how long it was, how vertical it was, etc.

The yellow box shows a couple of small reversals, but the proportionality is right on, only the red box has a sharper up and downside reversal than you normally see. I try to explain it this way, "A reversal is more like a "U" or a "W" than a "V" or more of a process than an event".

The orange box is pretty right on, notice the bottom is a little quicker than the top.

In blue I drew in 3 green lines that you can see at the red arrows, if AMZN were to make a move down like that right now it would be out of character considering the preceding move.

The IWM 2 min chart...

Now the same chart with no 3C...

Note the "process" in reversals here.

I'm not talking about the IWM specifically, I'm talking about proportionality because each stock has a little different character.