Forum Archive Index - November 2001

[Phaedrus <Phaedrus@techemail.com>]

 THL closed below its trendline yesterday, giving a sell signal. Anyone using 
trendline breaks to trade this stock would have bought at 110 and sold 2 months 
later at 120. At first glance, this does not seem much of a trade. Look at it 
this way. A gain of 9% in 2 months equates to over 50% pa.
 I am trying to demonstrate that an ultra simple trading technique like 
trendline breaks can be profitable on its own, winning far more often than 
losing. It is not sound practice, however, to use any single technique in 
isolation. This is a trade I would not have taken exactly as recorded here. 
Look at the day of the trendline break buy. The Close was below the Close of 
the previous day. The stock was still going down. Note also the long upper 
shadow. There was still a lot of selling pressure. Note also that the Close was 
well below the open - a down day.
There is no way I would have bought - trendline break or not. The next day was 
very similar. Now, note how everything changed the day after that. Long lower 
shadow (buyer support), and Closing at the High for the day. (White Closing 
Marubozu) All bullish. That is when I would have bought (at 105) This would 
equate to a 14% gain - over 80% pa. 
            Phaedrus.

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