July Commentary

Again we will look at Digital Think (DTHK) to find how it moved since our last assessment. I have kept the May chart and added the July chart. The idea is not to brag about how accurate or good the previous evaluation was. What we need is a second reading that will factor in what was wrong and from that point we will make another projection.

 

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We are still on a 10 minute bar chart and DTHK has moved beyond the trigger we were expecting for an impulse. In fact, if we had placed an order in the manner said, our capital would have appreciated by 42%. While it looks nice, we would have gone through a correction and assuming we would have stayed in, our nerves would have passed the test. All this took place in 11 trading days! What can we learn from the way we assumed the position? Is there a way we could avoid going through the correction? The answer is a partial yes, you can avoid riding the correction by placing a stop loss and exiting when it is crossed. It is partial avoidance but cheaper than finding the trend has reversed. In this case, we would be stopped only once for a commission cost that is trivial when compared to the capital risk. We can also learn that the Elliott statement about wave four not retracing in wave one territory is quite reliable. We also learn that planning the events keeps you in control of the trade.

Now looking to the future, what can we read in DTHK price evolution? An obvious parameter is the volatility that has increased greatly. Our expert tells us to migrate to the next level to secure a better reading of the waves. The LC appearing at major peaks or troughs means LARGER CYCLE! When moving to the next expert, we find that the price behaviour is too erratic to be traded longer than a few days. This situation is exactly the same we faced in May on a smaller scale. Yet we are missing some key elements; for example the demand index is rising very slowly just like if it was waiting for a signal. Many Elliott rules are violated making the count incoherent. We learned from our May study that we should have confirmation from other indicators, that is lacquing now. We should trade only short term for the time being.