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-- Posted Sunday, 27 August 2006 | Digg This Article | Source: GoldSeek.com
Rick’s Picks Monday, August 28, 2006 For investors who’d rather be smart than lucky I’ve been around professional traders for nearly thirty years, but I can’t recall ever hearing a one of them remark that it was particularly easy to make money at the time. It is only in retrospect that we wax nostalgic over the relative felicitousness of the markets at various times in the past. There was 1974, for instance, a year after listed options began to trade on the CBOE. Back then, any floor trader who could tally a bunch of nines would have understood that the ability to put on butterfly spreads for a net credit amounted to a license to print money. This was because put and call premium levels were so amazingly juicy in 1974 that sellers of options almost could not lose. With retail customers locked into the opposite strategy by regulators obsessed with risk, market makers were like piranhas living on a salmon farm.
Similar good fortune would have come to those who pioneered the use of certain technical tools, such as stochastics, Bollinger Bands, relative strength oscillators and Gann lines. Nowadays, though, the most sophisticated technical tools you could ask for are routinely bundled into trading platforms used by millions. The result is that few of the old technical tricks work, at least not for any length of time, and not when they are turned loose on each other in such ambitious profusion.
Even my own little trick, Hidden Pivots, sometimes succumbs these days to tedium that would test the most patient trader’s mettle. The action in Citi, charted above, is a case in point. We see a promising AB impulse leg two weeks ago that implied the rally would end with a finishing stroke to exactly 49.41, an unmistakable Hidden Pivot.. While I don’t doubt that this will occur – Hidden Pivots are not chopped liver, after all – the more important consideration is that it will have taken the stock more than two weeks to effect this very modest follow-through. Amortized over the entire period, and unadjusted for opening-hour risk, our theoretical daily profit would amount to no more than about seven cents per round lot, not including commissions. From these details it should be clear why we would much rather short the shares of Citigroup -- a deflation catastrophe waiting to happen -- at 49.41 than go with the flow.
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Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indicator of future results, so let the buyer beware. Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers’ initials will be used unless express written permission has been granted to the contrary. All Contents © 2006, Rick Ackerman. All Rights Reserved. www.rickackerman.com
-- Posted Sunday, 27 August 2006 | Digg This Article | Source: GoldSeek.com
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