Sunday, February 25, 2007

Monthly Charts - Blow Off Bottom

I often say that you can find a blow-off bottom (BOB) on every chart frequency from minute to monthly - here are some monthly charts proving the contention.

These are all past of course - I've gone through a number of charts and the only one I could find that is current is this one -

And, of course, this is not an invitation to speculate in the stock market - as always do your own due dilligence. More importantly get several hundred charts, set up a two-year monthly view and see how many BOBs you can identify and then make note of how many BOBs failed. It might be the most important thing you do (stock market wise) this month.


Anonymous said...

On the subject of monthly charts, does BOOM qualify? Looks like a BOB accompanied by a cross-over.

Just wanted to thank you, sir, for getting me to focus more on volume as it relates to price. Duh, right? Sometimes it takes a while for things to sink in and make sense.

Hope you're enjoying your weekend. We're getting whacked with snow here in the land of cheese. I just got in a little while ago from shoveling and I weigh 5lbs less than I did before I went outside!


Marlyn Trades said...

We seem to have picked up a little bit of snow here in Maryland too. Supposed to start raining though and that will really make it messy.

Blow-off bottom is simple - 2 down days where the volume of the second day is higher than the volume of the first day. BOB is confirmed on the third day by a higher low and a positive (close higher than open) candle. I've tried to cheat on the set-up and nearly always regretted it.

The cross over is also simple - I use EMAs and a cross over is a stock that opens below the EMA 4 and closes above the EMA 21 (if the 4 is below the 21 - preferred).

I don't see either of these on the monthly BOOM chart - what I see on BOOM is a stock in a consolidation phase looking for a breakout. Draw a line along 37 or so and if it busts out of there it might get you to 40. It's triple topped up in this area already.

Anonymous said...

I get it now. I thought for the BOB that the volume for the second day merely needed to be > than the first day regardless of it being an up or down day. That makes sense. Also, I saw the 4ema cross the 8ema. I guess that really doesn't signal buying conviction as opposed to closing above the longer 21ema. I looked further back on BOOM and found the crossover that you're talking about in July '03. That put it in perspective for me. Thanks!

We also got rained on overnight. Now we can skate down our driveway.



Some excellent charts.