Active Trader - Voodoo Clues - Part 3

Welcome back Active Traders and Wealth Builders.

It was truly an amazing week, not because I made a pile of cash in the markets although I did okay.  The real reason is that after 25+ years of looking at the markets, I see prices in a completely new light now that I know how to calculate the Voodoo lines.

Recall from last week's post Voodoo Clues - Part Two, that I found a video which explains the logic of the Voodoo lines. We got as far as calculating the red lines and ran out of time. In this post, we're going to wrap it up and show some examples about how truly amazing a discovery this really is.

Note that when you draw the red lines, it divides the prices up into 4 unevenly sized regions.  These red lines are called the "fire" lines and are the most significant areas of support and resistance on the chart.

As for an example, check out the way prices first paused at the 281.1% line at 1102 and pulled back.  Later, note how this area, once breached became an area of support which has since contained prices on the downside.  And note how prices are now camped out just below the treeline at 1200 and once they break $1200, the next target is ....  $1261.  How that's for predicting the future?

At first I had a hard time drawing the lines.  But after a little bit of practice, it comes very easy.  Whenever I see a chart on Simpler Options video, I pause the video and make note of where the red lines are.  With as little information as a single red line (and a rudimentary knowledge of Elliot Wave) I can find Wave 1 and everything else is mechanical from there.

Using Thinkorswim charting to draw the lines is a snap. Simply select the top to bottom of Wave 1, then hide all but the 0%, 100%, 161.8%, 2.618% and 423.6% lines.  The graphic on the right shows the configuration for the fire lines.

The next step is to further subdivide the 4 regions between the red lines at the 0.382 and the 0.618 lines.  Those are the green lines which JC calls the "tree" lines. Now sub-divide those regions once again at the 0.382 and 0.618 levels and color them white to get what Carter calls the "snow" lines.

Within a day or 2, I calculated the Voodoo lines on most of the popular charts I look at.  This was very exciting stuff.  Not only did I save the $995 to buy the Voodoo lines indicator, I saved $50 a month in on going maintenance charges for the rest of my trading life!  Now you can understand why I don't like to spend money on indicators!

Using my new found knowledge, I did swing trades in AZO and NFLX on their breakouts to new all-time highs.  Unlike the past, I knew in advance when to take profits!

Here's another one of my favorites, Facebook.  I'm loaded up long.  Use this information to you own benefit and have a great weekend.