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Preface from Tim: It’s been a long time since we’ve heard from Binkius Hippo (this one was from three months ago), but he emailed me this morning and, at my request, has allowed me to share his email here. I always appreciate his intelligent, well-informed perspective.
“You go to war with the army you have, not the army you wished you had.”
I last wrote about China’s Shanghai Index (SSEC) on March 25, at which time I identified 3150 as major resistance. Price had closed at 3043.03 that day.
Since then, price briefly broke above 3150 to hit a high of 3288.45 on April 8, and, after retesting that level several times over the next few days, it finally broke and closed below on April 25. In Sunday’s overnight trading it closed today (Monday) at 2906.46.
It has been a while since we’re introduced any new technical studies to SlopeCharts, but we’re going to be beefing up this portion of the product. The newest entry, available to you right now, is the Average Directional Index (ADX).
The most important thing to understand about ADX that makes it different than most indicators is that, in spite of the word “directional” in its name, it actually should not be heeded for guidance about direction. The indicator is all about trend strength. In other words, the ADX could be moving higher and higher while prices are moving lower and lower, and all the ADX is telling you is that the trend is strong and getting stronger. The fact ADX is going “up’ doesn’t mean prices are doing the same.
Let’s step away from the China trade deal collapse (since it evidently had only a multi-hour effect on the market) and look at a specific idea: Beacon Roofing. The symbol is BECN, and they report earnings tomorrow after the close. I have shorted it with a stop-loss price at 38.95, which is 3.5% away.