The stock has at least 2-3 days of this type of action to go before it gets to a level where the risk is less. It's all good though. It was WAY ahead of its underlying moving averages and extremely over-bought at $55+. Now, the lines are being given time to catch up and the over-bought condition is being allowed to work itself out.
The 50-day is now $43.23 (last night) and rising by about 21 cents/day. So, in a few more days it will be near $44. The 100-day is $37.93 and rising about 22 cents/day as well. So, in about 10 more trading days it will break above $40. I think the stock will test yesterday's low, maybe even a bit lower depending on the market. But,. that should turn out to be the place to BUY. This quarter should prove to be a good one for the company on the earnings front.
totally makes sense to play the short side a little tighter, weight the shorter-term moving averages more when shorting to mitigate the inherently greater risk in shorting
beyond the fact that MA trendlines are followed by many traders so perhaps predictive at times of group behaviour, I'm starting to appreciate that technical indicators are a nonemotional way to help evaluate a trading position
thanks again for the educational posts, appreciate it
What I have done is hone in on certain indicators that I am most comfortable with and focus on them for the most part. The 100 day being the intermediate term line I use. The 20-day is the shorter term one I generlaly use. Stochastics, money flow and accumulation/distribution indicators are a few others.
Good shorts are ones that have declining long-term trendlines and bad or declining fundamental news. Upward tests of the declining long-term lines become good spots to initiate or add to the short position generally speaking, since the risk is lower there. But, as you said, shorts are at least for me not long-lived situations. So, you want to use the shorter-term lines more closely. I was actually short MELI back in mid-2008 and did very very well, even though I covered well before the absolute bottom of the stock in late 2008. I actually started going long just before the absolute lows and kept accumulating and have done even better on the long side since then.
sure, its smart to look at diff MA's as part of a whole (including fundamentals, other indicators). I think I'm following you, by strategy I just meant "time-frame" strategy- looking at a stock with solid fundamentals, a breach/approach of a longer term (100 day etc) MA occurs less often, signals a better (lower-risk) buy opportunity than a breach of a shorter term (20 day etc) MA which signals a more frequent (shorter-term trading-type) buy opportunity.
It would be interesting to hear if Marduk weighed technical criteria heavily to reach his sell decision earlier in run and if so which ones. Marduk?
Would you approach the flip side (i.e. in a bear mkt where long term MA's are in decline) similarly (i.e. use upside breaches or approaches to moving averages as one signal) to consider shorting (with caveat that shorts are not long term by nature)?
You guys are not fully understanding. There is NOT a difference in strategies here. I said you can START with the 100-day MA, since it is a greta way to measure the INTERMEDIATE term trend and test areas. The 17-day MA is clearly a SHORT term trend line and should be used (some use 19 day and 20 day, while others use the 9 and 10 day) for shorter term trades. But ALL of these trend lines should be used in conjunction with each other and other indicators and NEVER should be used as the ONLY measure you use in your investing. As Marduk will attest, he has missed some of the run and that might be due to the fact that he was only using the 17-day and did not pay attention to the fact that the longer term trend lines and other indicators were still quite bullish....only he can tell us that. (Don't want to speak for him) The point is....start with the longer term trend lines to figure out ypour core position and the very best buy zones. Use the short-term MAs and other indicators to help you trade around your core in a short-term way...while still paying attention to things like the 50-day and 100-day to help you determine decviation levels and possible risk. It is those longer-term trend lines that helped me understand that I should still be long this stock and have benefitted greatly from the 600% return on that money in the last 12 months.
interesting difference in strategies- the 17 day MA will trigger more frequent "buy" signals at prices closer together than the 100 day trend line (looks like the low of today breached the 17 day MA but was 25% above the 100 day MA; and the spike to 55 of last week was 15% above the 17 day, 45% above the 100 day MA's).
thanks this helps me think about formulating a trading strategy
follow the 17 dma stokker, nice correlation with price...i really doubt youll see meli under 46-47 again unless market really tnaks or mali has some bad news come out...40-42 would be adream with the large scale buying that would occur, wont happen-although id love to see it
No problem. I enjoy it, if I can find some time like today. I would generally start with the 100-day MA on this particular stock, to get a feel for the intermediate term trend. You will notice that after the long downtrend MELI saw last year, it began to "struggle" with that line and tested it's strength on 1/05/09. It closed below it, then went well above it the next day only to fail to close above it once again. Note that the MA was still declining at that time. It finally closed above that line on 2/10 while the line was still in slight decline. It then tested under the line one more time, around 2/24 and it then went back above it, the line then turned flat to up after that and every test after that has been successful. But, the last major test of the line was back in the last week of October. It never actually touched the line, but got reasonably close enough. That once again turned out to be the BUY zone. My feeling is that we need to get closer to the line to make it a truly great trade opportunity. So, either more time needs to pass, allowing the line to catch up, or we need to go a bit lower....or both. By December 23rd or so, it will be at or above $40. At the end of October it got within 4 points of the line (or about 11.88% away. Today the line is at 38.13. (tomorrow is about 38.35) Add 11.88% to that and the stock is at $42.90. Each day that target risie with the line of course. Keep in mind that a bad market may cause it to go all the way down to the line.....that would be an even better buying opp!!
ditto on thanks for insights. I have a similar mindset i.e. use fundamentals as basis for establishing a core position, with a second trading position to play the rips and dips but as a newbie trader appreciate hearing specific strategies and technical indicators used by successful investors