PATH OF LEAST RESISTANCE..( Advanced TA )

[Grey1]

In Advanced Technical Analysis the "Path of least resistance "discusses the behaviour of those stocks that show less oscillatory behaviour while trending .. As a trader if you can identify these stocks intra_day then you are going to win most your trades .. I have discussed this technique in the chat room with two real time calls .. Does any one know what I am talking about ?

I will elaborate later...

 

[Trader333]

I have to say I dont know as much as I would maybe like to think that I do concerning this so I look forward to more on this.


Paul

 

[BBB]

Same as PAul really, but if I was pressed, I'd say that Path of least resistance - implies price goes where the orders are (so whats new!). So if there are few oscillations, that would perhaps suggest a steady flow of orders and little profit taking - this could imply that the lack of profit taking could be because people are gradually taking the positions for the long haul - thus the trend could continue for some time. Of course, the angle of the trend could also be of use in the analysis. A MA could be a good stop mechanism for such a market.

There you go - others will disagree probably! I'm all ears.

 

[TheBramble]

"...less oscillatory behaviour while trending ..."

I thought price would either be (a) trending (b) oscillating or (c) flat. So I'm a little puzzled by the question.

Path of Least Resistance - well, that's got me hooked. What would a price normally be resisted by? Support and Resistance of course, but I don't think that's where Grey1 is coming from, is it?

If it's NOT oscillating then it's either flat or trending. Path of least resistance = doing whatever it's currently doing...?

 

[BBB]

Bramble

I take oscillations in a trend to mean large waves where the lows/troughs get higher as the (up) trend continues, and the peaks....you know the rest.

INTC may be an example of this, where as AMZN has less oscillations (on a quick eyeball test) during its uptrend on the daily charts. OR the final part of the uptrend since 12/03 in SPY vs the general trend in QQQ

 

[bonsai]

remind me of 'ohms law'

there are a lot of parallels between electric circuits and market action.

I also seem to recall an indicator by the name of 'Ease of movement' but not one of my favourites.

 

[ianp]

Hi ,

My interpretation of the path of lease resistance is finding
Strong trending stocks e.g. ones hitting 52 week high/low that
will be of interest to institutions program buyers/sellers.

METHOD ,,,, wait for pullback , watch level 2 for large orders (against the direction of the trend) waiting to be filled ,dont enter until order book is in you favour,
only trade with the futures direction..

G1 am I on the right track or a distant tangent ?

cheers ian

 

[Grey1]

Guys,

Path of least resistance is referred to stocks that trend along side the market momentum with MINIMUM pull back or oscialltions when market weakens..

These stocks are ideal for trading the momentum .. These stocks offer very little drawdown on the day .. In fact if you get your entry wrong you still have agood chance of winning the trade..

This is one of the beauty of trading stocks compare to indecies as you have the choice to isolate high probable trades such as those which offer the path of least resistance..

We traded MCHP and CHKP on Friday based on the same principle..

Both stocks had no or little draw-down even though market weakened by 10 points..

How do we identify them ?

Read ian 's post ... He is spot on ..

PS:-- if you want to momentum trade then you better do it right as it is a dangerous play


PS:- We trade these stocks as early as possible but we ignore the first 30 minutes

 

[TheBramble]

OK Grey1 - you talked about waiting for the pullback on Friday in the TT room, in order to get he 'best' price for entry.

But isn't what you're saying here that these POLR stocks exhibit minimum pullback when the market weakens?

Minimum when compared with what?

If we wait for a pullback on these types of stocks and they're going to show minimum pullback - we may never get filled...

I guess I need clarification on what the criteria for minimum might be in these circumstances.

Also, I presume the reverse is true - stocks at a 52 week low with the market moving down; when the market reverses up, the stock shows minimum deviation from its downward trend?

 

[Grey1]

Tony ,

I think you missed the first 30 minutes of the discussion ..

Stocks that hit their 52 week new high or low trade differently than those which simply hit new high and low ..

Most trackers join the queue to buy/ dump 52 weeks high/ Low stocks and as a result they suffer from little drawdown on the day .. This is not true for those stocks that trade new high or low only ..

If I was trading a stock which hit its new high/Low for the day such as YHOO or AMZN on Friday I would be very careful in judging the correct pullback ...

The pull back rule is more than IF .. THEN analysis.. There are too many dimension in judging a correct pull back and I will rather to show you in real time than simplified version of it on a few line on the BB..

 

[TheBramble]

Sounds good to me Grey1, thanks.

I'll look forward to Monday's session.