[jimmymoorecash]

Hi Dave

Thanks for having this website available.
I've been trading recently following Dr Van Tharp"s insight from his revised version of trade your way to financial freedom.
Although in theory i'm a zillion miles ahead to what i was 1 year ago I'm still open to all new learning. I came accross your info from a fluke internet browse a couple weeks ago and have since then learnt a great amount from you, which has now catipulted my level of trading into a new realm. Thankyou sincerely.

My question is relating to a company listed on the ASX called (paladin energy) PDN. A large Uranium business.

Can you give me your quick thoughts on what their current chart looks like to you. ( sorry i'm unable to load an image via your method you explained on a previous post. yet anyway due to my PC not having the paint program anymore.
Am I corrrect in assuming that the chart has formed a head and shoulders pattern starting roughly from the 20th jan 08 to current day 11th april 08?
Or should my interpretation of the head and shoulders pattern be relevant only when a chart is on an up trend and only within a shorter time span? Or is another way to look at the chart as if the price goes down and supports at around $4 could that be interpreted as a double bottom. ( the first low being around the 20th jan 08?
i've applied an RSI to the PDN chart and it looks at an oversold level.
i've taken into consideration too the current U308 spot price and the companies fundementals which are quite positive.
Or am i completely looking at the pattern wrong within the above date range on the chart and if so what's your educated insight on it please? Please feel free to load a snapshot of the chart in question within your reply post.
thanks in advance as i'm still learning.

once again thankyou for sharing your insight into trading.
sincerely
Jim

[David Waring]

Hi Jim,

Thanks for your comments I am glad you like the site.

I took a look at the chart of PDN which I have included below:

I do not have access to a good charting package with ASX quotes so I am stuck using Yahoo finance but we will do our best here regardless. In my opinion as I outline in my lesson on the head and shoulders pattern, this pattern is valid only when found in uptrend as it is a reversal pattern. So at least on this chart I am not seeing the head and shoulders although it may show up more clearly on a chart with a shorter time frame.

Secondly on the chart here I show that the RSI was oversold but has since turned up and is about to touch the 50 line, which would in my opinion be more of a bullish sign than a bearish sign.

If you do see the stock trade back down to $4 then yes this could be considered a double bottom depending on how sharp the movement is if that does happen.

The pattern on this chart that jumps out at me however is not any of the above but the triangle pattern which I have outlined on the above chart.

If there are any other thoughts on this one feel free to post them below.

Best Regards,
Dave

[jimmymoorecash]

Hi Dave

Thanks for your reply.
On the new chart i've pasted for you current as of 18th April I wanted to ask your further insight into what you would do at this point as a pro?

I'm assuming that if it goes up higher from here and reaches around the $6.40 zone that it confirms my previous observation on my anitial question to you that a double bottom had occured.

Would it be correct to now lower the angle of the bottom line of the triangle to the new lower point recently hit from the lines that you drew on your chart that you pasted?
Or would you leave your triangle in place if it pulls back up to that point of where your triangle was drawn?
Or do you see other pattens now that my untrained eye isn't seeing?
Also does a double bottom have to fall to the exact spot as the previous bottom to ( in this instance to around $3.80 ) to even contemplate a possible double bottom occuring in advance of it possibly rising up to match the middle high point inbetween the two bottoms in this case around $6.40?



best of luck to you and anyone whom might read this post if you trade on this one if this pans out correctly to my possible beliefs as noted above if they become fact.

cheers
Jim

[David Waring]

Originally Posted by jimmymoorecash

Hi Dave

Thanks for your reply.
On the new chart i've pasted for you current as of 18th April I wanted to ask your further insight into what you would do at this point as a pro?

I'm assuming that if it goes up higher from here and reaches around the $6.40 zone that it confirms my previous observation on my anitial question to you that a double bottom had occured.

Would it be correct to now lower the angle of the bottom line of the triangle to the new lower point recently hit from the lines that you drew on your chart that you pasted?
Or would you leave your triangle in place if it pulls back up to that point of where your triangle was drawn?
Or do you see other pattens now that my untrained eye isn't seeing?
Also does a double bottom have to fall to the exact spot as the previous bottom to ( in this instance to around $3.80 ) to even contemplate a possible double bottom occuring in advance of it possibly rising up to match the middle high point inbetween the two bottoms in this case around $6.40?



best of luck to you and anyone whom might read this post if you trade on this one if this pans out correctly to my possible beliefs as noted above if they become fact.

cheers
Jim

Hi Jim,

Glad to hear from you again.

Let me start by saying that I don't trade ASX listed stocks so what I would do here is not trade the stock because I am unfamiliar with the market. I also have to say here that I am not registered as a financial adviser as I am not seeking to give trade recommendations but simply to provide an educational service.

With this in mind from an educational perspective when looking at the below chart it seems that the market did break below the bottom triangle line that we drew in the original post and which I have included in the chart below. It also seems that it did this on relatively high volume which is what I personally like to see with this type of setup.

It seems however now that the stock is rallying a little bit and is testing that original bottom triangle line which is a fairly common occurrence to the point where some traders will wait for a retest before going short.

So with this in mind I think most traders would not move the original triangle line.

If the market does rally from here I think most traders would also agree that this is a double bottom formation as the two points which form the double bottom I think most would agree do not have to be at the same level.

Lastly I think most traders would agree that if the two points which form the double bottom are not at the same level then it is better to have the second point be a little higher as it is here because this indicates that the bears are having trouble pushing the market lower.

If anyone else has any thoughts on this feel free to post them below.

Best Regards,
Dave

The market cap of $2.64bn at $4.30 (AUD) has to in my opinion be taken into account. No doubt this company will face many problems before becoming profitable. It's cost of production in the near future could quite conceivably be quite high. Although I believe that Uranium will be a major future fuel by necessity, the spot price has dropped a lot. In addition, there are a lot of companies coming into production. We also have the major players entering into new contracts at $30 (eg. ERA). I am no expert, and it is only an opinion, but in the short term I would not be surprised if it fell below $4.00 (PDN). Then again, we have ERA trading at a PE of 50. Beyond that, it really depends on the market generally and the spot price. However, given the above, why would the spot price rise in the short term? By the way, do not take Google Market Caps as being gospel. My research indicates that in this case it is near enough for most purposes. In conclusion, in my opinion it's anyone's guess. The big question I have is why would ERA enter into contracts below $30 when the spot price is $75? I notice it has dropped to $65. No doubt that has a lot to do with the stock price. With the price down and unable to sell all output, profits would be down. So, I am not suggesting buy or don't, I am just indicating a few pros and cons. From what I have read, PDN have done everything right thus far, and may continue to do so. Some things however it cannot control, and these are the worry.
Here is a site that provides a little insight :-

Commodity News And Mining Stocks: Buy, Sell or Hold Paladin Energy (PDN:TSX)

Brian

[David Waring]

Originally Posted by Unregistered

The market cap of $2.64bn at $4.30 (AUD) has to in my opinion be taken into account. No doubt this company will face many problems before becoming profitable. It's cost of production in the near future could quite conceivably be quite high. Although I believe that Uranium will be a major future fuel by necessity, the spot price has dropped a lot. In addition, there are a lot of companies coming into production. We also have the major players entering into new contracts at $30 (eg. ERA). I am no expert, and it is only an opinion, but in the short term I would not be surprised if it fell below $4.00 (PDN). Then again, we have ERA trading at a PE of 50. Beyond that, it really depends on the market generally and the spot price. However, given the above, why would the spot price rise in the short term? By the way, do not take Google Market Caps as being gospel. My research indicates that in this case it is near enough for most purposes. In conclusion, in my opinion it's anyone's guess. The big question I have is why would ERA enter into contracts below $30 when the spot price is $75? I notice it has dropped to $65. No doubt that has a lot to do with the stock price. With the price down and unable to sell all output, profits would be down. So, I am not suggesting buy or don't, I am just indicating a few pros and cons. From what I have read, PDN have done everything right thus far, and may continue to do so. Some things however it cannot control, and these are the worry.
Here is a site that provides a little insight :-

Commodity News And Mining Stocks: Buy, Sell or Hold Paladin Energy (PDN:TSX)

Brian

Hi Brian,

Well put and you obviously have some good insight for us on this part of the market so we hope to see you around the forum in the future.

Best Regards,
Dave

[jimmymoorecash]

Hi Dave

Thanks for your last reply.
And also thanks to Brian for sharing your thoughts too.
I thought I'd load another chart of PDN current as of 9th May 08.



Can you add some educational input on what the chart is doing now?
The chart is a slight fuzzy i'm assuming to the uploading method so if anyone hasn't got a zoom function on their PC then just to let you know the last Three days were all up days.
I'm assuming the original observation about the double bottom formation is close to being correct or would you say its correct at this point?
In your last reply you mention about the Setup. Did you mean that the price once fallen below the bottom line would test that line and from a trading point of view would be the confirmation of the setup indicating to go Short at that point. if that is correct then i;m assuming some folks who know these movements went short on it to ccause it to fall to a lower level to which it did which gives us more of a defined image of the double bottom to which the Shorts were then closed hence it then rallying up as it has done.
Funnily enough i read an article a couple days ago how PDN has been one of the biggest shorted socks on the ASX for some time now. On that note whats your educational view on Shorting as apposed to going Long is there a general consensus that one is better for profits than the other. Is shorting a much quicker way to make profits?

couple of educational view questions.

From an educational purpose when it comes to drawing lines to form triangles and such on a chart, is there a rule of thumb of it being only for candlestick charts and also when it appears that you could draw many differnent angles what is the common criteria that makes the most sense to draw lines through for ultra accuracy please, such as should a top line for instance be running accross the top of 3 or more candles over time in perfect line?


Also on another unrealted note to PDN can you elaborate please on your thoughts on GAPS or point me towards some worthy info?
I always see people making comment on things like ( the stock will retrace now as it has to fill the gap). From my own observations i notice gaps on everything left right and centre on all stocks all the time and am wondering if GAPS actually do play any solid fact that they need to be filled.
and if gaps indeed end up being filled would one be correct in interpreting that happening that the stock is being manipulated by someone deliberately or at leeast to the point where serious traders are atemptin to control its movement? I realise its a bit of a far fetched question especially on a stock that has massive frequent volumes on it.

I hope i'm not wasting your time with my questions.
I'm only using PDN as an example for educational purposes myself due to its chart being clear and volumes large enough for my own clarity purposes.
once again thanks in advance for your time and info you provide.
My aim is to one day be in full control of everything I've been learning from you and your website.

sincerely
Jim

[David Waring]

Originally Posted by jimmymoorecash

Hi Dave

Thanks for your last reply.
And also thanks to Brian for sharing your thoughts too.
I thought I'd load another chart of PDN current as of 9th May 08.



Can you add some educational input on what the chart is doing now?
The chart is a slight fuzzy i'm assuming to the uploading method so if anyone hasn't got a zoom function on their PC then just to let you know the last Three days were all up days.
I'm assuming the original observation about the double bottom formation is close to being correct or would you say its correct at this point?

Hi Jim,

Nice to hear from you again.

Yes I would say that there is a double bottom in place on the chart.

In your last reply you mention about the Setup. Did you mean that the price once fallen below the bottom line would test that line and from a trading point of view would be the confirmation of the setup indicating to go Short at that point.

not exactly. When trading triangles some traders will enter a short position on the break of the lower line and some will wait for a break and then enter a position on a retest of the original support line. I talk more about this here:

Nice GBP/USD Trade with Analysis Attached

if that is correct then i;m assuming some folks who know these movements went short on it to ccause it to fall to a lower level to which it did which gives us more of a defined image of the double bottom to which the Shorts were then closed hence it then rallying up as it has done.

At the end of the day there are so many variables that can move the market I don't think you can say that one thing or another was responsible for the move however what you have outlined above is one possible scenario.

Funnily enough i read an article a couple days ago how PDN has been one of the biggest shorted socks on the ASX for some time now. On that note whats your educational view on Shorting as apposed to going Long is there a general consensus that one is better for profits than the other. Is shorting a much quicker way to make profits?

I think this is really a matter of preference however from a longer term perspective I think that the general concensus is that it is easier to make money going long than it is short. The two major reasons I would cite for this are that 1. stock markets as a whole normally go up over the long term and 2. when you go long your loss is generally limited to the price of the stock however when you go short your loss is theoretically unlimited.

couple of educational view questions.

From an educational purpose when it comes to drawing lines to form triangles and such on a chart, is there a rule of thumb of it being only for candlestick charts and also when it appears that you could draw many differnent angles what is the common criteria that makes the most sense to draw lines through for ultra accuracy please, such as should a top line for instance be running across the top of 3 or more candles over time in perfect line?

Here are several good links on drawing trendlines. Generally the same guidelines apply when plotting any line on a chart whether it is a trendline, triangle etc.

Drawing Trendlines : Trader Mike

More on Trendlines : Trader Mike

Afraid to Trade.com Blog » Assessing the Validity of Trendlines

Also on another unrealted note to PDN can you elaborate please on your thoughts on GAPS or point me towards some worthy info?
I always see people making comment on things like ( the stock will retrace now as it has to fill the gap). From my own observations i notice gaps on everything left right and centre on all stocks all the time and am wondering if GAPS actually do play any solid fact that they need to be filled.
and if gaps indeed end up being filled would one be correct in interpreting that happening that the stock is being manipulated by someone deliberately or at leeast to the point where serious traders are atemptin to control its movement? I realise its a bit of a far fetched question especially on a stock that has massive frequent volumes on it.

Here are some good links which go into what creates gaps as well as some different strategies that some traders use to trade them:

How to Trade Gaps from Swing-Trade-Stocks.com

The Three Types of Gaps from AfraidtoTrade.com

I hope i'm not wasting your time with my questions.
I'm only using PDN as an example for educational purposes myself due to its chart being clear and volumes large enough for my own clarity purposes.
once again thanks in advance for your time and info you provide.
My aim is to one day be in full control of everything I've been learning from you and your website.

sincerely
Jim

One of the main reasons this site exists is to have conversations like this one so you are not wasting my time. What I would ask from you or anyone else that has knowledge to share is that you look through the ask/answer question of the site when you have time and provide insight where you can. The main goal of this section is to get conversations going and I could use some help there so anything you can do would be appreciated.

Best Regards,
Dave

[jimmymoorecash]

Hi Dave

Thanks once again for replying with another abundance of info.
Once again i have strictly just some educational questions to put forward.
I've pasted here a current chart of PDN as of close 19/5/08.



If applying the Gap info that i've been learning from your last reply to my last questions and now apply it to this chart am i correct in the possible Breakaway Gap that has now formed?

Also applying the symetrical triangle onto the chart I see that on friday 16/5/08 that the price closed at almost spot on to the point at which the triangles top and bottom lines met.
Its now today 19/5/08 broken above that triangle and upwards its closed. My question on this one is I'm assuming we've now seen a perfect text book pattern develop and end, to make way for new patterns to form.
Are there other chart patterns that you see or is it now fresh to start its next journey? and if no patterns currently showing then what would be a general consensus on how a Pro would consider its next moves?

Also on one of your videos you show how a pro could possibly have part of their business system for people to pay that pro to trade for them and the pro charging such and such for sommision and so on and make a living on your senario of around $450k per annum just by trading for other people with little or next to no risk of ones own capital. Do you trade privately for people and or do you have a run down of your own history in the trading world as a trader?
sorry if i've missed any personal info about your history as I'm still learning.

once again I greatly appreciate your time and insight and help in advance.

sincerely
Jim

[David Waring]

Hi Jim,

Good to hear from you again. My answers to your questions below:

Originally Posted by jimmymoorecash

Hi Dave

Thanks once again for replying with another abundance of info.
Once again i have strictly just some educational questions to put forward.
I've pasted here a current chart of PDN as of close 19/5/08.



If applying the Gap info that i've been learning from your last reply to my last questions and now apply it to this chart am i correct in the possible Breakaway Gap that has now formed?

I am having trouble pulling this chart up on Yahoo Finance for some reason it is only giving me data through the 16th on the daily chart and the image is a little small above so its hard for me to say one way or another as far as any gap goes on the daily. On the hourly chart however which I have posted below I would think that most traders would agree that that is a good example of a break away gap.

Also applying the symetrical triangle onto the chart I see that on friday 16/5/08 that the price closed at almost spot on to the point at which the triangles top and bottom lines met.
Its now today 19/5/08 broken above that triangle and upwards its closed. My question on this one is I'm assuming we've now seen a perfect text book pattern develop and end, to make way for new patterns to form.
Are there other chart patterns that you see or is it now fresh to start its next journey? and if no patterns currently showing then what would be a general consensus on how a Pro would consider its next moves?

Again here a little difficult for me to see on the chart above but yes from what I can tell it looks like it has broken out of the top of the triangle. In addition to this it looks like it has done so on high volume so I think most would agree that this is a good example of this pattern playing out yes.

I think the next thing many people would be watching for is what happens around the 6.50 and then 7 levels which is from what I can tell from the chart above where the next major points of resistance are.

Also on one of your videos you show how a pro could possibly have part of their business system for people to pay that pro to trade for them and the pro charging such and such for sommision and so on and make a living on your senario of around $450k per annum just by trading for other people with little or next to no risk of ones own capital. Do you trade privately for people and or do you have a run down of your own history in the trading world as a trader?
sorry if i've missed any personal info about your history as I'm still learning.

once again I greatly appreciate your time and insight and help in advance.

sincerely
Jim

In my former job I ran a team of people who developed internal funds where we managed client money. The track record for the two funds that were developed during the time I was at the firm which was from inception of the fund to November 1 of 2007 are published here:

http://www.fxcm.com/managed-accounts...formance?id=52

and here:

http://www.fxcm.com/managed-accounts...formance?id=81

In addition to those two funds there was a third fund which was launched by the same group of people under my watch that was closed due to losses of approximately 20%.

Aside from my role of managing the team of people who put those funds together I have never and don't foresee a scenario under which I will ever manage other individual's money.

As I am not looking to put myself out there as a trading guru I also do not plan on publishing my own track record. As you can see from this site the information that I put out is on the very basics of trading which can be found many places. I do not put out trading recommendations or strategies other than information on basic strategies for trading common patterns and using indicators which are well documented in other technical analysis works written by people who are much smarter than I am. With this in mind I see my role here as the following:

1. Give traders a sound understanding in the basics of trading by putting together in an easy to one understand format (my videos) information that is scattered around the internet, books, and is just general knowledge that every trader who has been trading for a while knows.

2. Use my knowledge of the basics of trading and the internet to filter third party trading information from around the internet with the goal of having only the quality information on this site without all the crap thats out there.

3. Use my knowledge of information architecture to organize that information into a more easily digestible format.

4. To build a platform which a community can then come together, discuss that information, and leverage each other's knowledge so we can all help each other become better traders.

So in short I do not want to be a trading guru but simply a person who people are comfortable with knowing enough about trading to be able to filter out the good information from the crap information and to be able to point people in the right direction.

Hope that helps.

Best Regards,
Dave