Teaching You to Trade Stocks 46: Classification of Daily Movements
2007/4/18 15:36:09
I had originally planned to continue writing about the classification problem of trend types after the first hub forms, left over from the previous lesson. But I've discovered that too many people can't even figure out how to read daily charts, and this issue may be more urgent, so let me address it first.
Of course, if you're operating strictly at a certain level, how the day specifically unfolds is largely irrelevant — the trend won't be fundamentally different just because trading is organized by days. But classifying each day's movements is at least a useful auxiliary tool.
A day's trading is 4 hours, which means the system is composed of 8 thirty-minute K-lines. If we treat the overlapping portion of 3 adjacent 30-minute K-lines as a hub on the daily movement, then generally speaking, obviously, any day's movement falls into just three categories: I. Only one hub; II. Two hubs; III. No hub. Their strength increases in that order.
I. Only one hub
This is a typical balanced market. Generally, the first three 30-minute K-lines determine the entire day's fluctuation range. And the day's extreme positions — at least one of them — basically appear within these first three 30-minute K-lines, creating either the day's high or the day's low. Of course, this isn't absolutely certain, so this situation can be further sub-classified.
- The day's high appears within the first three 30-minute K-lines
This can be called a weak balanced market. The weakest of these closes at the day's low. Note, this has nothing to do with whether the day closes in the green or red — a gap-up open that still closes positive can form this weakest type of weak balanced market. Next weakest is closing below the hub; closing at the hub is a typical weak balanced market; closing near the day's high is the strongest type.
- The day's low appears within the first three 30-minute K-lines
This can be called a strong balanced market. The strongest closes at the day's high — again, whether it's a positive or negative close is irrelevant. Next strongest is closing above the hub; closing at the hub is a typical strong balanced market; closing near the day's low is the weakest type.
- Neither the day's high nor low appears within the first three 30-minute K-lines
This can be called a transitional balanced market. Its strength can similarly be defined by closing position, as described above.
Note, in all three situations above, the hub's position is not necessarily the overlap of the first three 30-minute K-lines — it can be formed by later K-lines.
II. Two hubs
Obviously, based on the directional relationship of the two hubs, this divides into upward and downward types. Generally, let's discuss the upward case; the downward case is simply the reverse.
Two hubs obviously cannot have overlapping areas — otherwise it would transform into the situation above. Therefore, the most distinctive feature of this pattern is that between the two hubs there is at least one 30-minute K-line, part of whose range doesn't belong to either hub. This range is called the unilateral zone, which is the most important characteristic of this type of movement and is the key position for subsequent movements. Note that the K-line containing the unilateral zone does not belong to either hub.
Since there are only 8 thirty-minute K-lines, based on where the unilateral zone is located, there are only two possibilities: 1. The unilateral zone is in the 4th thirty-minute K-line. 2. The unilateral zone is in the 5th thirty-minute K-line. This is why, for all unilateral movements, the reversal time always falls within the 30 minutes before or after the midday close.
Of course, the 4th and 5th thirty-minute K-lines can both simultaneously have unilateral zones. In the case where only the 4th K-line has a unilateral zone, the 8th K-line might produce a penetration of the unilateral zone. For example, yesterday's (2007/04/17) movement.
Obviously, for an upward case, the strongest is closing above the second hub; the weakest is when the 8th K-line penetrates the unilateral zone, ultimately closing below the first hub. Other strength levels can be determined sequentially based on closing positions.
III. No hub
This is the strongest unilateral movement. Among 8 K-lines, no 3 adjacent ones have overlapping portions. Once this occurs, it's a typical violent movement, and that day's K-line carries significant importance. Generally speaking, this kind of movement is very uncommon. For example, the February 27th movement was one. But don't think such a movement necessarily means the trend will continue — many false signals deliberately use this type of movement, especially when it occurs within a large daily-level hub, where false signals are even more likely. For example, February 27th. However, if this type of movement appears after a third-type buy or sell point, the probability of a major strong trend at a larger level is extremely high.
Time is tight, so I can't write too much. How to use daily charts for auxiliary operations will be covered in Friday's next lesson.
Replies
缠中说禅 2007/4/18 15:49:58
[Anonymous] 新年好
2007-04-18 15:41:14
Greetings to Sister Chan! You've worked hard!
Sister Chan, why did the market shoot straight up at 14:16 today? I cleared my positions around 2 PM and was feeling pretty happy watching it fall, planning to buy back after it stabilized. But at 14:16 it just shot straight up, forcing me to buy back around 14:40.
Today's decline was almost identical to yesterday's — how come the result was so different? How should one judge this? Moving average deviation and such don't make sense — yesterday was the same! I went full position by the close — could there be short-term danger? What will happen tomorrow?
=
Why can't it go straight up? For example, with three segments ABC, the first two already completed, so C can naturally go straight up in one shot.
缠中说禅 2007/4/18 15:51:39
[Anonymous] 袖手旁观
2007-04-18 15:47:58
Chan MM, haven't posted in several days. A question:
Measure theory should be able to solve the force measurement, but the "divergence necessarily leads to reversal" rule can't be directly derived from measure theory alone, right?
==
It can be used for the proof.
缠中说禅 2007/4/18 15:53:58
[Anonymous] 钢股份
2007-04-18 15:42:26
The Q1 GDP data originally scheduled for 10 AM on April 19 was suddenly delayed to 3 PM — and 3 PM is exactly the A-share closing time. It's understood that Q1 GDP data may exceed previous expectations, and this is reportedly to avoid triggering even larger rallies. Also, market participants believe the central bank may raise interest rates early and accelerate new measures to cool down the stock market.
Your Majesty, how should us retail investors respond? Looking at charts, like today's afternoon sharp pullback, there's no time to react!
==
If you can't react in time, don't participate. Market information channels are naturally never completely fair — that's just how it is.
Only participate in what you can grasp. Remember that.
缠中说禅 2007/4/18 15:56:39
[Anonymous] 可惜了
2007-04-18 15:51:02
I entered the market a bit late. I'm holding 938, which unfortunately hasn't gone up much. I suspect 938 has the smallest gain among sister's stocks.
==
This was the last one mentioned, in early February, around 10 yuan. It's up 50% by now — that's a bit low, but this stock has come down from 100 yuan. This ID can only say that much.
缠中说禅 2007/4/18 15:58:50
[Anonymous] 呼呼
2007-04-18 15:52:03
Sister, that's not right, have all of them gained 100%?
938 doesn't seem to have?
=
I didn't say all of them have. There are 3 or 4 that haven't, probably. This ID is talking about the average of all 14.
缠中说禅 2007/4/18 16:01:15
[Anonymous] Sina User
2007-04-18 15:58:26
Beautiful sister, can 000778 still be waited on to double?
==
This one has already doubled. The first batch was all mentioned before New Year's. If you bought a bit high, that's also not a big deal. With all that gain, have you heard any rumors about this stock? Do you know its shareholder background?
缠中说禅 2007/4/18 16:04:16
[Anonymous] 新年好
2007-04-18 16:00:32
"Note, in all three situations above, the hub's position is not necessarily the overlap of the first three 30-minute K-lines — it can be formed by later K-lines."
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Sister Chan, which category did the market fall into today? One hub? Is it the overlap of the first three K-lines?
Also, I saw your answer to my previous question, but you didn't teach me how to judge that I should buy back at 14:16! I still can't see it. If this kind of situation arises, how should we judge?
==
Today the first three have overlap — that's it.
For the other question — starting from 04/17 at 14:53, compare the force using hub oscillation. Was this morning's stronger or this afternoon's?
缠中说禅 2007/4/18 16:06:29
[Anonymous] 机会在哪
2007-04-18 15:58:09
May I ask, can I still make money short-term entering the market with 500K now?
==
That mentality is fundamentally wrong. First go read those lessons this ID wrote about the nature of stock market capital, and read the tragic story of that certain person in them.
缠中说禅 2007/4/18 16:07:41
[Anonymous] 大鱼小鱼落鱼盘
2007-04-18 16:06:28
Chán Zhōng Shuō Chán
2007-04-18 16:01:15
[Anonymous] Sina User
2007-04-18 15:58:26
Beautiful sister, can 000778 still be waited on to double?
==
This one has already doubled. The first batch was all mentioned before New Year's. If you bought a bit high, that's also not a big deal. With all that gain, have you heard any rumors about this stock? Do you know its shareholder background?
--------
Master Chan, can I still buy 000778 now?
==
This ID only recommends buying stocks at buy points. If you missed it, wait for the next one. You absolutely must not develop the bad habit of buying stocks not at buy points.
缠中说禅 2007/4/18 16:10:05
[Anonymous] 悟禅
2007-04-18 15:54:40
I feel the teacher is truly well-intentioned. Thank you so much! Here's my report: from New Year's to now, my stock account (with no capital in or out) has exceeded 100% returns. I know I'm still far from the teacher's standards, so I can only keep working harder.
=
You relied on yourself. This ID is merely a supporting cause.
缠中说禅 2007/4/18 16:11:21
Wei Wei Guo Er
2007-04-18 16:07:30
Oh my, I need to skip forward and repeat a grade!
From New Year's to now I've just barely broken even!
Half my position is in bank stocks — completely wrong rhythm!
Too many different stocks — another mistake for small capital as sister mentioned!
555555555
Sister Chan, is it still too late to correct?
Should I clear all my current stocks one by one, then focus on just one or two?
Please instruct me on the correction method.
===
Study first. Sometimes waiting is also a form of correction. Once you've learned the lessons well, there are always opportunities.
缠中说禅 2007/4/18 16:20:01
[Anonymous] 缠心雕龙
2007-04-18 15:44:56
Hello blogger.
In an upward trend a+A+b+B+c, where A and B are 30-minute hubs, if c is a strong 1-minute movement, and it's already clear that c versus b shows no divergence (but B hasn't produced a strict third-type buy point) — can B be considered complete?
==
Completion is a pattern, unrelated to magnitude. This situation is very normal. Sub-levels always grow from sub-sub-levels, so as mentioned in earlier lessons, a sub-sub-level pullback constitutes a sub-level third-type buy/sell point, which comes a bit earlier than the corresponding level's. In actual operation, you can also use this to operate first — there's absolutely no problem.
As a follow-up, if a small-level divergence in c leads to a 30-minute level reversal C, from the same-level decomposition perspective, can we consider the small-level divergence point in c as the decomposition point, and a+A+b+B+c as a complete trend?
=
This has been discussed before — that's exactly how to decompose.
缠中说禅 2007/4/18 16:21:20
[Anonymous] 窗外
2007-04-18 16:18:42
Chan MM, in today's lesson, the hub is defined by the first occurrence of overlap among 3 K-lines within the 8 K-lines, correct?
==
Yes, but this only applies to daily movement charts.
缠中说禅 2007/4/18 16:23:27
[Anonymous] longs
2007-04-18 15:55:01
Chan MM, do you feel funds are increasingly being marginalized now?
==
What goes around comes around. The market is open — as long as they can reform, they're still good kids.
缠中说禅 2007/4/18 16:24:01
[Anonymous] 朗月无花
2007-04-18 16:07:44
For someone who can't guarantee watching the market every day, what's the best way to operate????
==
At minimum, operate at the 30-minute level.
缠中说禅 2007/4/18 16:25:12
[Anonymous] II
2007-04-18 16:09:26
Thank you Chan MM.
Giving us money again!!!
I'm going to concentrate my firepower. 938!
==
This ID never tells people to buy stocks at non-buy-points. Even the best stock needs a good buy point.
缠中说禅 2007/4/18 16:27:37
[Anonymous] 三藏
2007-04-18 16:23:08
Boss, please explain the Shenzhen 5-minute consolidation divergence today.
Why did it hold up until the third one before dropping?
I exited at the second red histogram.
Also, after the drop, I couldn't figure out when to add back.
Please be sure to explain!!!!!!
==
Look at the 1-minute chart and you'll understand.
缠中说禅 2007/4/18 16:29:35
A Grain of Rice
2007-04-18 16:09:22
Hello Chan MM!
A question:
As retail investors, after making a profit, is it better to convert it into zero-cost shares, or convert it into cash and move on to a second stock? I've found that shares left from months ago have their profits automatically appreciate. And now I can't buy at the previous low prices. But managing too many stocks gets annoying. Do you have suggestions? (My capital is only 30K). Thanks!
==
You can select a few stocks with offset rhythms as a stock pool, then continuously operate these stocks by buying and selling based on buy/sell points, switching between them. Only operate one at a time, at most two.
缠中说禅 2007/4/18 16:34:18
[Anonymous] Hindsight
2007-04-18 16:22:21
Master Chan, I've already copied it 12 times now:
-
I saw what Master Chan said about the funds. Additionally, I don't know what QFII are trying to do? Perhaps they have other plans — using Hong Kong financial futures to hedge and short the mainland stock market? Logically, they shouldn't be this foolish right now, right?
==
Why can't foreigners also be foolish? Everyone makes mistakes sometimes. Of course, many foreign entrants have done very well, just not on the surface. -
Please help, Master Chan: 002128, based on my methodology I bought in, and classmates followed. But the tail-end close fell sharply, probably trapping them by 2%. I believe that was its short-term extreme low point.
In the group I've already publicly apologized. Perhaps I misjudged. The responsibility is significant. Please provide necessary guidance on this new stock!
Thanks!
=
Look at the 1-minute chart — the movement above is very standard.
缠中说禅 2007/4/18 16:36:35
[Anonymous] 白玉兰
2007-04-18 16:17:39
[Anonymous] 白玉兰
2007-04-18 16:04:22
Chán Zhōng Shuō Chán
2007-04-18 16:01:15
[Anonymous] Sina User
2007-04-18 15:58:26
Beautiful sister, can 000778 still be waited on to double?
==
This one has already doubled. The first batch was all mentioned before New Year's. If you bought a bit high, that's also not a big deal. With all that gain, have you heard any rumors about this stock? Do you know its shareholder background?
+++++++++++++++++++
Many institutions have jumped out to recommend 915. Will this affect the operation and movement?
+++++++++++++++++++
Sister, please answer my question.
==
That's also very normal. The market is public. This ID can't say that no one is allowed to discuss this ID's stocks. They can say whatever they want. What matters is the company itself.
缠中说禅 2007/4/18 16:41:09
[Anonymous] 小八
2007-04-18 16:36:25
Chán Zhōng Shuō Chán
2007-04-18 16:04:16
[Anonymous] 新年好
2007-04-18 16:00:32
"Note, in all three situations above, the hub's position is not necessarily the overlap of the first three 30-minute K-lines — it can be formed by later K-lines."
-------
Sister Chan, which category did the market fall into today? One hub? Is it the overlap of the first three K-lines?
Also, I saw your answer to my previous question, but you didn't teach me how to judge that I should buy back at 14:16! I still can't see it. If this kind of situation arises, how should we judge?
==
Today the first three have overlap — that's it.
For the other question — starting from 04/17 at 14:53, compare the force using hub oscillation. Was this morning's stronger or this afternoon's? ————————————————————Sister Chan, Boss, I feel like this afternoon's is stronger looking at MACD? The departure force from 04/17's segment seems weaker. The afternoon's histogram bars are much longer. The force seems greater. Based on hub oscillation force comparison, I feel today should have gone further down? Please enlighten me, I've been studying for so long and still can't understand.
==
From 04/17 14:53 to 04/18 10:01, versus from 04/18 13:35 to 04/18 14:16 — which segment is stronger? Which green histogram area is larger? Obviously the former is larger, the former is stronger. That is, the downward force in the latter hub oscillation isn't as strong as the former. If the former could pull back to the hub, why can't the latter? This is all covered in the lessons on hub oscillation — please study it again.
缠中说禅 2007/4/18 16:43:32
[Anonymous] Sina User
2007-04-18 16:38:06
Hindsight, sister finally responded to you. Poor thing — it's probably because you're usually too brash and sister doesn't like you.
==
That's not the reason. It's just that this ID has other questions that haven't been answered yet. There are too many questions, and this ID can't possibly answer every single one. My apologies.
缠中说禅 2007/4/18 16:49:01
Everyone, I'm sorry, but I must head out immediately. I need to go somewhere quite far. If I don't leave now, I won't be able to make it — traffic.
Heading out. See you tomorrow.
缠中说禅 2007/4/18 15:38:33
Today is a relatively strong version of a strong balanced market. From a purely technical perspective, once tomorrow fails to break immediately upward from here, at least a consolidation-level extension will occur. That is, if tomorrow doesn't produce a third-type buy point above the hub formed by the past two days of volatility, the probability of breaking below the 5-day moving average increases. Of course, if tomorrow the market quickly stands above today's consolidation range and oscillates upward, then continue observing the upward shift of the next hub.
The above addresses purely short-term technical issues. On the fundamental front, the expected news was postponed, which is also a direct cause of today's movement. But this will definitely come out this week. However, how much significance it has is estimated to only affect funds and the like. But in this round of market action, funds have shown their ugly side.
The most amusing thing today is that the traitor fund's fiasco was publicly exposed. Of course, this ID knew about it long ago. Moreover, among this ID's 14 stocks, two of them — 999 and 343 — the traitor also held. So when 999 was beaten back below 14 yuan, this ID said I didn't want to let the traitors and the rat-traders exit at too high a price. This ID has said before that I wanted to experiment with ambushing funds and explore the possibility of getting funds liquidated. This ID's words aren't empty talk. The articles are still there — those interested can review them.
Today, this ID feels like sharing some gossip. Because today 000416 became the first to more than double — this was one of 3 stocks mentioned after New Year's. Investigate: who managed to hold from 3 yuan until now? Also, 000777 will soon double too. Is anyone still holding? If nobody is, then why? Are there operational problems that need solving? Those 14 stocks, on average from New Year's to now, have exceeded 100% gain. If you haven't exceeded 100% from New Year's to now, you must thoroughly reflect on your operations.