Profiting from Technical Analysis and Candlestick Indicators: Powerful Methods for Accurately Timing Trades by Michael C. Thomsett

Author:Michael C. Thomsett [Michael C. Thomsett]
Language: eng
Format: epub
Tags: Business, Personal & Professional Development
Publisher: PH Professional Business
Published: 2014-12-11T16:00:00+00:00

Contradiction as a Different Kind of Relative Correlation

Focusing on successful confirmation (whether strong or weak) is only one of the possibilities in chart analysis. What happens, in comparison, when instead of confirmation you discover contradiction?

A signal that indicates a forecast opposite the initial reversal or continuation signal confuses the issue. Contradiction is puzzling because, unlike the expectation of raising confidence, it brings the entire forecast into question. Three points to remember about contradiction are the following:

1. A contradiction in place of confirmation is a direct factor of the initial signal and its strength or weakness. A weak initial signal is more likely to be contradicted than a strong signal.

2. Contradiction does not always mean the initial signal was wrong. It does tend to neutralize that signal, however, meaning the net result between initial signal and contradiction is that no signal has been found.

3. Reversal and continuation signals cannot be reliably transferred, meaning that such signals in the wrong location are likely to provide no usable signals whatsoever.

An example of a contradictory signal can be found in the chart of Nike (NKE), shown in Figure 7.11.

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