Thursday, May 29, 2008

My View On The Dow Jones Industrials



As you know I am bearish on stocks and looking for an entry to short. One of my favorite setups is the 1-2-3 formation.

If you look at the above chart I clearly marked off the swings which make up the 1-2-3 setup. If stocks take out the point 2 low, I will get short with my protective stop above point 3 which hasn't established itself yet.

12 comments:

Adam said...

Can u explain this formation? Is it high/low/midpoint? And also the basis for this thesis?

Adam said...

Also, you mention in your post of 5/24 the down side objective is 12300. Shorting Dow when it falls below "2" i.e 12450 leaves you with a 1.25% reward. Is this correct or am I missing something?

ken matthews said...

Kevin
Big admirer.Why are you bearish DJIA?How far can it fall bysayend-July?
Ken matthews

Kevin said...

Hi Adam..A 1-2-3 is simply 3 pivot points. It has nothing to do with a midpoint.

In this example, point 1 is a high...point 2 is a low and point 3 is a high which is lower than point 1. Point 3 does not have to be at 50%, it just has to be below point 1.

Kevin said...

Adam,

My objective of 12300 was for the double top formation. The 1-2-3 is a new trade with a much lower downside price objective.

Kevin said...

Hi Ken,

Thanks for reading. I'm bearish on stocks because of technical reasons. If you've read my posts over the last 2 weeks you'll know why. We'll see what happens.

frank said...

Hi Kevin

Are you short already or waiting for it to go a little higher or waiting for it to cross 2?
Thanks

Kevin said...

I'm waiting for point 2 to be taken out, then I will get short and place a protective stop above point 3.

Adam said...

Do you look for the low of 5/27 taken at close or intra day? If latter, then it is already below that low of 12443, what do you recommend the stop be placed, since the Dow did not form the "3" on your chart?

Adam said...

If you are going short on DOW, is your view of S&P500 or NAZ the same i.e short them too and if so, what would your stops be at?

Thanks

Anonymous said...

Hi Kevin

You are amazing! It looks like market is playing out exactly what you have been anticipating. Today DJIA breaks pivot 2 with heavy volume, Nasdaq also seems to form a double top. I will be happy to wait for your porjections on next down side target.

Thanks.

JR

Steve said...

We almost took out this level today. Kevin, would you require a more decisive violation of that level to enter the trade?

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