robert Wrote:
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> Darcy, I enjoy reading your posts because you
> always seem to throw out a new nugget. Today, you
> mention the regression tool. I just started
> playing with it to see if I could follow along
> with your post above. Fun stuff
>
> So my question would be this: do you re-draw that
> regression line each night to see what it's doing?
> I notice that it changes (sometimes drastically)
> depending upon which closing candle you click on.
>
> As always, thanks for sharing your knowledge with
> the rest of us.
LOL Fun...that's what my kids say about their mom!
I only use the regression line on large charts. It helps me see the stength in my shorter trades. I do not always redraw the regression line. It depends for instance when the candle changes position but I leave the original regression line in place until it is broken.
Starting with LNKD use the
red candle on 9/12.Why? It is the one that started to show a change of direction for LNKD and is the one that is closest to the Bollinger Band (BB from here on out).
On this particular stock note that on the daily chart the stock went sideways after 9/12. I did not draw a regression line until I saw notable movement. Sideways... well for me anyway is a fool's trade...you know "A fool and his money is soon parted. To draw this line I start with the candle
on the BB that is the high or low and is
changing the direction of the stock, I drag the tool to the close of the candle of the day and as I said you will need to wait a few days. When the daily candle hit on the center of my gap line (10/8) I drew my regression line. All of this would have kept me out of a longer trade but not necessarily one off my short charts.
On 10/9 there was a candle close outside the BB. Leaving the regression line you drew off the candle on 9/12 wait for a few days and draw a regression line off the candle of 10/9 to say...oh 10/15 on that white candle where it gives every indication the stock will rise. Up until 10/15 the candles show a sideways move. The candle on 10/15 hits the center of the longer regression line.
To test the reading of that regression line off the candle of 9/12 and because you had a candle go out of the BB on 10/9 take the regression line from 10/9 and draw it out to yesterday's close. The trend from 9/12 is still a strong down.
Now you have a regression line up and one down. The longer trend of the regression line is down. The shorter one is up.
When the shorter regression line (up) is broken get out of your trade. Why? Because the stronger trend as of now is down. If the stronger regression line gets broken the stock is changing from a bear to a bull or a bull to a bear. Get out of the longer trade and ait a few days before drawing another regression line.
Regression lines take 3 or 4 days to set up. That is the only problem there. But if you use the bottom as support and the top as resistance and the center as a smaller support and resistance it does work. In between the longer regression lines are shorter trades that can be made. Also using this along with marking gaps helps.
As always I say practice this before applying.