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The Charts Know All, See All – Why Yesterday Was Foreordained

And other Magic 8-Ball lies.

I had had BA short on my Technical Trader chart pick list for weeks. Over the weekend, based on the chart, I decided that it was time to cover it and so indicated for Monday. By the time Monday’s open came around it was too late. What had been a modest profit opened as a painful loss. Yes, I had had buy signals. No, there was no sign that the stock would open 15 points above the established trading range. Orderly, liquid markets don’t work that way.

Anything travel related went nuts on the open, yesterday. I mean, did you see AXP! In the Nime of GAWD, Load Jaysus Powell! That stock closed at 96.69 on Friday! Yes, it had triggered buy signals on Thursday, and I had it on my day trading buy list as of Friday. But who knew that the full potential of a move would be reached instantaneously on the open on Friday?

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So this was my personal day-trading ready list for Friday.

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Check out my only short. Smart, huh?

Not.

Never leave anything open overnight. Never ever ever. This is why. I have no idea what kind of brainfart hit me when I thought that chart might be a good short. It’s always contingent on the minute to minute charts intraday, but Jaysus! WTF was I thinking! I guess I was just desperate for a short, any short, to balance off the lopsided imbalance of longs.

Obviously, there was a reason my screens were spitting out only longs.

But don’t ever let anyone tell you that the charts know all. The charts know nothing. Sometimes insiders keep the lid on tight and nobody knows shit. Charts can only identify the trend and give signs of when it MIGHT be changing. There was no advance warning on the PFE chart that shorts were about to get absolutely destroyed.  There was no sign that the trend was anything but flat and narrowing. Then Monday. BOOM.

Now it’s obvious. Friday? Nope.

Or now maybe not so obvious. By the end of the day yesterday, PFE was back in its long term range. But above the April-November “handle” of a good old William O’Neill cup and handle pattern. This is a classic buy signal, and the various oscillators and linear regression curves that I use agree.

So it’s bullish, and now the positive divergences at the last week’s low are obvious. Why didn’t I see or respect them on Friday morning? Bias, I guess.

Click to enlarge if you want.

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Charts are a tool. They help with probabilities. But they are not foolproof. No way. No how. There are things that simply aren’t known by enough traders to show up on the charts sometimes. And they also depend on the skill and impartiality of the one looking at the chart.

That’s why risk management is so important. One of those risk management concepts is to never leave day trades open overnight. You can wake up to a really unpleasant surprise that a standing stop order won’t protect you from.

And here’s a thought to myself, that I’ll share with you. If you are going to swing trade or position trade, don’t even think of shorting a biotech or drug company working on a cure for COVID, or you might end up with a worse sickness. I’m an idiot for thinking that it was a worthwhile idea. It wasn’t. It was a terrible idea. It sucked, and Monday proved it.

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Lee Adler

I’ve been publishing The Wall Street Examiner and its predecessor since October 2000. I also publish LiquidityTrader.com, and was lead analyst for Sure Money Investor, of blessed memory. I developed David Stockman's Contra Corner for Mr. Stockman. I’ve had a wide variety of finance related jobs since 1972, including a stint on Wall Street in both sales, analytical, and trading capacities. Prior to starting the Wall Street Examiner I was a commercial real estate appraiser in Florida for 15 years. I was considered an expert in the analysis of failed properties that ended up in the hands of bank REO divisions, the FDIC, and the RTC. Remember those guys? I also worked in the residential mortgage and real estate businesses in parts of the 1970s and 80s. I have been charting stocks and markets and doing analytical work since I was a teenager. I'm not some Ivory Tower academic, Wall Street guy. My perspective comes from having my boots on the ground and in the trenches, as a real estate broker, mortgage broker, trader, account rep, and analyst. I've watched most of the games these Wall Street wiseguys play from right up close. I know the drill from my 55 years of paying attention. And I'm happy to share that experience with you, right here. 

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