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Ep 38: What is the Stock Telling You? Are You Listening?

May 21st, 2015

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Welcome to this week's Rapid Recap I'm Sasha Evdakov and it is May 21st 2015. This week's Rapid Recap we are going to cover “What is a Stock Telling You?” and the foundation behind this is really about communicating between you and the stock.

It’s about relaying that information of what is the stock telling you, how is that communicating to you, and the question is are you listening and are you able to understand that language. So stock communication is really what we're going to be kind of honing in and focusing about during this presentation and during this Rapid Recap.

We will cover a few different stock so I have ATVI, BABA, Facebook, Footlocker, GMCR, GoPro, GTG JetBlue, OCR, SAGE and SAVE on my list and those are the ones that we will cover today here during this week's Rapid Recap but the focus, I want you to focus on during this week's Rapid Recap is hone in on what is a stock telling you, how is that communicating to you and are you listening properly.

I'll relay some of this information along with some life examples as well. Let’s kind of get started on this and let's just take a look at a brief market overview. Overall the markets are not as exciting as let's just say some days. Things are a little bit Idle, Dow Jones up four points.

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SPY you know we're making 59 here and the SPX really is just five points up. Now you can see we're heading nearly the highs here the same with the Dow Jones and the volume isn’t anything exciting at the moment, we’re kind of isolating near the highs and this could be building for something new.

To me what is this telling me, it's telling me that we could be building for something new. It could be due to just the summer months, it could be just in the position of where we are in the market or it could be a lot of different things and as we go into some of these stocks and we cover the communication behind these stocks then maybe you'll start looking at these indices as well in that same fashion or just a little bit differently.

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Let's take a look at some stocks here and kind of get going. We'll start off with alphabetical order of ATVI so ATVI when looking at this stock. Let me remove this and use this as the beginning example. Normally we as humans have a very short sight. Meaning we only see things about the size of a quarter and if we were doing a video on this specifically we would really hone into probably something around this area.

That's about the size of your thumb. Really the majority of most people's eye focus is about this size right here. The problem with these charts and monitor sizes is this, when we look at a monitor we see about 20 inches, 25 inches, 32 inches, depending on your monitor and a lot of people they will focus in on still that specific previous a region.

It'll be something along the lines of… Let’s move this over… We only really see something like this and this is what we're focusing on typically as humans because this is what our eyes focus on. As we start moving things we focus on specific points and it's not a smooth the movement really because you have to concentrate on a certain point.

This is kind of the problem that happens when looking at a stock chart so I might point this mouse over here and you’ll start looking at this point but you're forgetting about the point over here. So for this reason we have multiple time frames and if you're not looking at multiple time frames, like the weekly and the monthly it's a good habit to get into because now you can start seeing the high points and the low point and a lot of other things.

Now you're compressing that little bit of view that you as a human can see, thumb size right here in this one region. We can see that right here in the monthly as we look at it you can see what's happening, we're hitting the highs here. Now as we start are going into the weekly again we can only see that amount and you have to actually do some scanning with your eyes going from here to here, you're watching my mouse and you're watching this drawn-out, these trend lines and that is how you need to be looking at stocks.

Some people they really only just hone in and focus on that last little bit. So make sure you don't get wrapped up into that habit or that mentality when looking at a stock. So you have to look and train your eyes to see these things.

This way you can understand what the stock is telling you, if you are only listening to part of the message then you're only going to get back a portion of what is being said or what is being communicated to you so make sure you look at you know the daily what's being said, what is going on recently, what's going on here on the weekly and also the monthly because now it really gives you a larger perspective this is about communication.

Again, since we only can see just that small little bit and really then simplifies things for you. I hope that kind of relays some information to you and just gets you to absorb some content that I'm outputting. In that way you can decode what I'm saying and then use it to your advantage. So it’s a matter of me out putting information right now to you and you decoding it properly and also doing the application, applying that contact.

Make sure to look at multiple areas of the stock because as we start talking about different segments that a stock goes through. If I start talking about this area here's our A to B, B to C and C to D, you focus on these regions but then we don't focus on other areas.

Looking at those multiple timeframes it's important to digest and understand the communication. So always try to communicate as greatest possible and in addition try to listen as much as possible and by this I’m talking about listening to the stocks. Now you can use this as well to apply to everyday life, the communication part in everyday life.

I get a lot of feedback from people saying that the way that I teach, the way that I present is things are very clear, they're very concise. Now they're not always quick because it takes me a longer time frame often to explain what I'm trying to get across or the point that I'm trying to get across and that is because my goal is always to over communicate, oversimplify things and see.

In general we use basic words to describe something but in fact it is actually better to show something than it is to just speak or say a word you know if you're communicating one on one face to face with someone.

Sometimes I get emails from people that say or asks me some ambiguous questions about how can we do that and you know there might be 4 to 5 other messages in there and do that, what is the meaning behind the word that, because we make assumptions that we already know and understand what the word that is or the word it is.

If we’re using the word it, that, he, she and any of these things rather than using a name or someone specific or even adding the description behind it, it really makes things a little bit more difficult. So when looking at stocks this really applies in the same way so when you're looking at the stocks first you need to know and understand the language and the language here that we have is really crowd behavior, it's about charts, it's about prices and it's about crowd behavior.

The language, the alphabet that we're using is the price history, we’re using the volume bars. So all this is really telling us a story. It's telling us a book, it's getting us a history of what has happened in that conversation.

Now if we take this story and you know we see what goes on, we noticed this stock started to go down. It went down a certain amount to a price level of about eighteen dollars. If I said the stock went down the stock went up the stock went down stock went up you don't know what's going on to the stock.

The stock went down fairly sharply to a price point about eighteen dollars. It retrace nearly to a point of twenty two dollars and then it continued to sell off for a couple of months to eighteen dollars and fifty four cents. We retraced higher to the upside to about twenty four dollars and at this point shortly after the stock started to push higher against the 24 dollar level which was the highs.

Now when we got to these highs the stock was pushing against and finally broke out with heavy volume. So notice the description that I’m telling you and the stock and I'm getting into it.

Now all these things are going to tell you a message. So the question is, is how deep and detailed the message is going to be and also how can you read it. With stocks we only get a certain specific message. We get the price, we get the volume and it is our duty to understand the language.

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In something like Activision over, here we have price, we have volume and then we need to understand the language. The people that struggle understanding language or don't understand looking at the charts they will look for more indicators, they will look for something that substitutes that language to try and translate it in another way.

The problem with translations is they are not always accurate. You may get a native speaker, you may get someone that doesn't speak the language that well or again something in the decoding and encoding process there's something lost in translation. It is always best for you to learn the language and then again make the application and adapt it to stock so that way you learn how to speak the language, read the language and understand the language.

In this instance here we’re looking for at the highs. Over here stock created this resistance level, at this level I’m waiting for that language when is the signal going to speak to me, talk to me and when it finally breaks through that its telling me, what is it telling me? It’s telling me that I'm ready to go higher.

There was some room to play around in the past. There was some room that I needed to just wait patiently I was a ready to go higher or go to the upside. I wasn't ready to go the bathroom. I wasn't ready to go to the bathroom yet and if the bathroom is to the upside and we're just using the word to substitute things.

So if I wasn't ready to go to the bathroom yet we’re waiting for this digestion period, this digestion period and this can take some time depending on what happened previously in the story, depending on what you drank in the past, depending on what you ate and how much fluids were built up. When you're ready to go to the bathroom or in this case when the stock is ready to push higher it breaks and it's ready to relieve itself and move higher to the upside and notice what's happened.

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Right there the stocks pushing higher breaking out and we can zoom in and you can see that's what happened. The stock was ready based on what happened previously in the story. I hope this kind of example illustrates things in some detail of what happened to the stock and you can do this to any stock you like.

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Let's just take for example GT, Goodyear. It’s one we talked about last week as well and again this story plays out and it's a long story every day something is happening. (f we break it down to the weekly if we break it down to the monthly you can see that last March 2014 you know the story starts unfolding or reaching the highs.

Let's just say we pick up the story there even though they're story has much more context behind it. So you know we're reaching the highs were watching a high point. The stock wasn't ready to breakout higher, it wasn't ready to explode, it wasn't a ticking time bomb. If we have a countdown timer and we're waiting for price level to hit, the stock isn't ready, the bomb is not ready to explode so we'll use a different example this time that way maybe you can resonate or connect to it in another way.

Here the bomb is still ticking around, maybe here someone's trying to defuse it then again it starts ticking again, someone's trying to defuse the bomb. Again it starts ticking diffusing it and then again it accelerates. The bomb starts ticking faster and faster and then all of a sudden it gets to its countdown and breaks out and unfolds and explodes and now it goes higher.

Your entry point of course right there on the explosion and then you get in and the stock moves higher. Here we have on the daily you can see the high was over here and in between we had a lot of different things that happen. The story, there are so many elements from who robbed who to who gave somebody a flower to you know who met someone else to the coffee that they drank two, everything.

There are so many little things. There's a mess, there's a clutter of communication that goes on and if I tell you that this girl over here wore a yellow dress, does it matter what happened to the bomb? No it doesn't, it's a story it unfolds.

You got to remember what are you focused on in the story, you're focused on this one specific object on this ticking time bomb or this energy level developing and when it's ready to blow up when it's ready to go to the upside when you're ready to start your race, when you're ready to go to the bathroom, when you're ready to do whatever it is, whatever example you want to use here then that's what you're waiting for  but in between here there's this noise.

There's the little red riding hood what you wish she’s carrying in the basket, Apple's, what color hair did the wolf have. There's all these different things that happen in between that are irrelevant, you're looking for that one specific trade for you and it's about learning the language that the stock is speaking about, it’s speaking to you and you have to pick it up.

Remember the point of communicating is really to get a point across and communicate the language between one human to another or an animal and another animal. So the point to communicating is to actually get something across to the other person, to the other thing, to the other being.

If you don't get that point across, if you have some something that's a lost in there, there's going to be a lot of other variables and the most clear way that you can do that, the most effective way the better off you are. There's always little things that happen, when you speak to someone in person there's going to be a little details about their hair, about the t-shirt that they're wearing that is still part of communication.

However, what is the important point that they're trying to get to show you or two tell you or to get across to you it's going to be different in every conversation and the same thing here with stocks.

We have Goodyear we are looking at a specific line of communication, we're trying to pick up a specific message from that communication and if I want to really know about how they perform exceptionally well on the sport's core or how they perform so well on the basketball court then that is just something that I'm listening for, that is what I'm watching.

If they're talking about swimming then I may not care. If they're talking about skiing I may not care but if something about basketball I care and now my radar goes up BOM, spikes that's what I'm looking for. So that is somewhat in context, what we're referring to is listen to what the stocks are telling you, the communication.

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Now you won't be able to learn the language until you learn about these different swing point so let's go to another stock. Here we have GoPro some of you veterans in here know about the A to B, B to C and potentially C to D patterns. So what is the stock telling you on the weekly? What was it telling you on the monthly? You're listening to these signals.

If you know this is a swing point this is a language, this is something you're looking for this is part of the language. If you don't know what that is then you need to build your vocabulary up and I'm not saying vocabulary in terms of the English vocabulary. I'm talking about learning what a swing point is.

I’m talking about the vocabulary of learning what a breakout is. I'm talking about learning how not just knowing what they are but knowing how to spot them so this over here is a swing point, right?

Here we have a trend line so you're learning that okay now I see that this is a trend line and potentially the stock can head lower. By the way right here what we're discussing we’re giving a point across in the lesson and I'm also sharing with you the stocks of what's happening.

You have GoPro, we have GT that we talked about. JetBlue, again here's a good one to communicate, we had some energy that was built, stock broke out, this was our story our most recent story. The stock went moving really well and what do I always say, take profits in the strength and then the stock came off the highs on heavy volume and if a stock does that you definitely want to be extra careful.

Stock that comes off the highs on heavy volume something is happening, something is going on. So if we do an example you know we have something that happened and in effect, we have our cause and that effect we went up to the upside and then again we had some cause coming in here and the effect.

There's always cause and effect interlaid in all these aspects, in all this movement. It’s a lot of noise and you have to read the signals. So what is the stock now telling me? It’s telling me as I zoom in that coming off the highs on heavy volume, something is wrong, something isn't happening correctly meaning if we’re talking about Red Riding Hood maybe the Red Riding Hood saw the wolf, something is wrong, something isn’t going correctly.

The question is, is she going to run away with him and survive or she going to run away from the wolf or is the wolf going to eat her. So are we going to come down or we going to pop higher, got to watch and listen for these things and watch what the stock is telling you based on the communication.

Let me change the language here and we’ll talk specifically stock language now so if it was a little more difficult to discern the examples I apologize but I wanted to use something a little more simple about communicating the language of stocks make sure you're listening to the stocks and what they're telling you.

Here in this example here we have the highs the consolidation building stock is pressing against it with potentially heading lower in getting back into this region or this level.

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Let's go back to Alibaba here the stock was building for some time here. Watching the swing points right here and this gap this gap is being filled this was our digestion period right here. So take a look at this box right here and now we're getting back into it, you know confidence-wise I'm not overly confident with Alibaba at the moment but we do have this light volume picking up right here so that is a good sign and we could see higher prices to 95-97 level and there would be nothing wrong with the stock at that level at this point in time.

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Facebook again looking at the story looking at the picture the highs over here, highs again, highs over here, we came back up to test these highs bouncing up from this level, from this one point and the stock popped higher rejecting those prices. For now it needs a little more time to build and then it's selling off at that level.

Watching these highs you can definitely see that if we take it across that was a solid resistance levels so for now it needs more time you know is pulling back on lighter volume so potentially we could see higher prices for it to come back and retest this level. This is really over the key level for a longer term position you're watching for that, let's see what we have 8610 level to break so watch that level.

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Now we have Foot Locker it's been moving really well lot of volume coming in the last few days. If we take a look at the weekly again looking at the overall picture here of this stock let's just move it over, you can see that we have A to B, B to C and potentially C to D if you're looking at the shorter view here and then we're looking at the swing highs here, volume is picking up this is the weekly.

If we look at the daily again let's move it over let's take a look. Here it is popping, pushing, pushing and it's breaking through now when this stocks break you got to learn to hold on just like we do with the GT, right?

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This pattern, this story went for about one point two years. We we're consolidating and building this one point two years. Does that mean you could've traded it somewhere in here? Yeah you could've also traded the stock somewhere in this region for example right here at this level.

Let's go to the daily and zoom in, if we look at this story right here if I take this little piece of the story I so cant a stock in that these lows I'm going to wait stocks sold off heavy volume at the energy coming down so when it comes up I could short the stock and there's my little run and that's okay you can do that there's nothing wrong with that.

Could you do it the same way in the other direction? Yeah of course you could wait for it to break that level and then get in up here. Now the run didn't last as long because we're looking for a shorter time, we're looking for a shorter story this is a short story. The longer story was this story right here that's why you want to watch the longer time frame view.

If you watch the longer time frame do you have a higher probability of success. So here looking at the weekly that's the longer story the longer the bigger bomb you know whatever context you want to use to help you that's what you're watching for the longer view and that's why the stock for multiple weeks now has been breaking to the upside.

We have about two weeks where it's been just trending higher that's all you need to do when you get into the right stocks at the right time you just sit and be patient let them evolve and take some profits because what can happen.

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We have JetBlue here that you know broke out here we have, it was a twenty one-day gain and now it's selling off again they pull back okay. That's the same thing here with Foot Locker, here’s our story, here’s what we’re looking at, stocks breaking higher, looking good for higher prices as long as they can stay above that level and if we have a second a follow-through.

GMCR same thing longer story here's stock went higher. What was the story telling me? Tried to push on it down here popped higher rejected it on heavy volume right here there's that big bar right there came back retested here, it wasn't ready to break, retesting it again wasn’t ready, retesting it finally broke heavy volume BOM see you wouldn't want to be you.

That's what we're watching, nice story played out in a good solid 13 ten-point high gain to the downside.

We got OCR, moving well this last couple weeks as well, I didn’t catch this move until recently actually and add this one again build up energy pop to the upside. Moving well, don’t chase it here if you're not in it but good one for those that were.

SAGE, also the same thing we got some highs here stock tried to break higher, couldn’t, rejected those prices and was not ready yet so came back second time at that day, look what happened that day. Let’s zoom in on the let's say a ten-minute, broke out to the upside rejected that level wasn’t ready. Again over here broke out up here still wasn't fully ready, had to come back to retest it and then finally broke out.

You got to look at it things on the bigger picture, what is that stock telling you. Again here multiple times we failed them, multiple times at this level and at this level wasn’t ready but finally at this level we broke out.

You might have had three scratch trades there or three failing trades just was not ready and then the third one right here you would’ve got in probably right here at this point again and re attempted it and you know this is what you do this is what do the day, the week before, is you’re looking for these different highs.

You’re looking for these trend lines. You're reading the story of the stock and then you're trying to predict what's going to happen in the story. It's like the crime fighters the bad guys, chances are you can predict what's going to happen in the future and that's what you're doing.

Same thing here most often the good guy wins, same thing here you predict what's happening to the stock after multiple repetitions of looking at charts.

Here we go SAVE take a look at the weekly you can look at the monthly even. Look at the monthly look how we line up. What's the story telling me? Every month we’re coming down to this level if you can’t see it look at the weekly we've tried right here one time came down wasn’t ready came down again wasn’t ready, came down wasn’t ready, came down wasn’t ready, building cost now it could have been building costs for the upside right here as well you just be ready to go either way.

You’re watching and where the volume go it went to the downside here sold off and it continues lower and chances are where am I predicting this story to end? or at least come to, I can estimate highly probability that the stock could come down to this level. It’s kind of like you can predict that the good guy isn't going to get away with no scratches.

You know it's going to get a little beat up something's going to happen in order to create some drama. Same thing here I understand there's going to be some drama, meaning some bounces to the upside and then eventually it'll still attempt to get to our you know projected area. So will get some drama in there and then eventually the good guy will still win or it'll come to where we want it to go.

Those are some stocks that we covered I hope you've got a lot out of it.

We got the ATVI moving on to the upside, we got BABA kind of pushing into the upside here. Facebook rejecting the prices off for now but we're watching the higher price level there. GMCR as well you got those prices rejecting at that level.

You got the footlocker over here trying to push higher. We got GT, we got JetBlue. OCR, moving well don't chase that one stay away meaning, unless you're in it.

SAGE, also pushing higher and SAVE has been moving lower so a lot a good trades there are a lot of different people writing to me.

Again trading volume usually is lighter in the summer but always keep in mind that you know this is about communication and how the stock is communicating to you and also how you can interpret that communication and learn from it.

If you're not willing to listen then you will get a mixed message. Some people try to communicate very quickly speak very fast and you may only get 20 to 40 percent of what they're saying rather than slowing it down, if you think about this in stocks if you’re trying to look at the chart within just two seconds chances are you won't get the full message that it’s trying to tell you.

Take it step by step break it down and then you know listen to what it has to say. As you get better to it you can listen to things and look at things and really just understand what's going on and what's happening you can listen to things three or four times the speed and kind of like speed reading as you start reading initially you start slow and then as you get better you’ll speed read things and you’ll speed read the stock charts later as well because you know the things you are looking for.

In either case I hope this video was helpful. Just listen to what the stock chart is telling you it's communicating something to you and you really got to interpret that message. You got to build up your vocabulary, you got to build up your sentence structures and eventually you can get into writing complex sentences then may be writing a book and so on reading a book.

Take it all in slowly stop by stop and you'll get better with time it's just a matter practicing and putting things in the practice thank you for joining me. I hope you got a lot out this video. If you have questions don't be shy to email me and I hope that this video helped you out.

Thanks again and I will see you next week, remember spend some time with your friends, spend some time with your family communicate with them enjoy part of that life that you have because again there's more to life than just the financial gain.

Spend that quality time and then if you're trading poorly maybe this week as the market’s idle you don't need to force the trade, listen to what it's telling you choose the stocks that are speaking loudly to you and go after the highest probability trades.

Thanks again and I'll see you next time.

Author: Sasha Evdakov

Sasha is the creator of the Tradersfly and Rise2Learn. He focuses on high-level education speaking at events, writing books, and publishing video courses on business development, internet marketing, finance, and personal growth.

I'm Sasha, an educational entrepreneur and a stock trader. In addition to running my own online businesses, I also enjoy trading stocks and helping the individual investor understand the stock market. Let me share with you some techniques & concepts that I used over the last 10+ years to give you that edge in the market. Learn More

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