A Rock is Not Hard

Trading was fun to watch yesterday. The market dropped to 11,324, a 200 point plus drop on Exxon having record profits, Motorola showing surprise profits, and the GDP suddenly rising. Traders weren't impressed, and the August580P, our OTM trade, hit profit goals at 1.15, with one day left today for sale, and more potential downside. Here's how an astute Level 3 trader played it:

"Got 20 filled at 1.15 after hours.....holding 30 for tomorrow.

Another 50 gone @ 1.00

Holding 50 @ 0.85 sell order in for 1.25."


And, by popular demand from our Blue Chip service:

A rock is not hard is a tough statement to understand. Even tougher...all rocks are soft.

This type of new age mumbo gumbo frustrates many thinkers, as it is obvious a rock is hard. We emphasis understanding facts in our study of the market, however, and believe that most facts are falsely interpreted, thus leading to a market that is lead and influenced by a lack of reason. It is the astute trader that sees past this.

Using the rock:

1. It is our rules of solidity that define a rock is hard. Other rules might define it another way. We see our rules as absolute, yet have no fact that the true definition of hard is a rock, only our fact definition.

2. If a rock is hard to our definition, it's clear cut. However, if a rock were perceived by particle, atom, or neutron, or compared in a non gravity field, or....etc., etc., etc....the core definition of a rock would change.

Devout Christians might argue that oral sex is immoral. Other devout Christians have recently been promoting healthy marital sex as part of their devotionals (Time Magazine, July 2008), however, and quote lines from scripture that describe a healthy heterosexual oral sex practice. What is "absolute" is only what we SEE as absolute.

Uncomfortable as this discussion may be, it is paramount to successful trading. One must divorce him/her self from perceptions and interpretations, and use logic only in analysis.

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We use Relative Strength as defined by IBD's CANSLIM in our stock analysis methodology for Blue Chip Options (www.bluechipoptions.com), for example. We use relative strength in point and figure charting that point out sells when there is a violation of the 45 degree bullish support line and a triple bottom sell off occurs.

Clay Allen, Winning the Performance Game, summarizes several visual Relative Strength approaches that are age old point and figure methodologies. Traders may want to consider study here.