One of the Most Widely Followed Technical Analysts Answered 30 Trading Questions Live

We had a Chartered Market Technician share how he uses price to trade the markets.

Michael Bozzello
The Stocktwits Blog

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J.C. Parets is the founder of Allstarcharts.com and is one of the most widely followed Technical Analysts in the world. All Star Charts is a research platform for both retail and pro-investors covering stocks, interest rates, commodities, and FX markets. In 2008, he earned his Chartered Market Technician designation. His work is regularly featured on Bloomberg, CNBC, Fox Business, ABC, CNN, The Wall Street Journal and more. You will often see JC as a speaker at some of the top investing conferences and has also been invited to speak at Harvard and Duke about Technical Analysis. JC specializes in finding the most opportunistic risk vs reward propositions while at the same time bringing a top/down approach to the marketplace whose wide spectrum is rivaled by few.. For the full transcript please GO HERE.

@allstarcharts

JC @StockTwits HQ we discussed a great way to play false breakouts. Care to explain here for the community? It was awesome! — michaelbozzello

False breakouts are something to look for, not to be afraid of. Most technical analysis books tell you opposite. The books says what should happen after a breakout, “but be careful for the whipsaws”. I say do the exact opposite. Look for them. Expect them. Trade against them. They offer the best risk vs reward opportunities of any setup.

Do you have a particular indicator or setup that works best for you? — StocksAndStones

My favorite indicator is the “JC Breadth Indicator”. A weight-of-the-evidence conclusion based on thousands of charts. It’s impossible to quantify. But, when you start to see the same patterns again and again and again, we call it a trend filters are by definition built to fail. You can’t know what you’re looking for if you don’t know the environment filters help you find specific scenarios. But without first identifying the environment we’re in from a macro/intermarket perspective. I think you need to put in the work. there’s no question. That’s the best way I know to identify the trend.

How much have you lost YTD? — trader1259

More than I should have.

Nigam Arora once said that no one ever got rich by just using technicals. How would you respond? — Tripleeight

That’s just ignorant. Do some homework, you’ll find billionaires.

What are the one or two most important things that you can say that would help technical traders? — rubenb27

Keep it simple stupid. Don’t over complicate your life and don’t fight the primary trend. “The Trend Is Your Friend With Benefits” — that better be the next StockTwits t-shirt.

What are the technical analysis basics for someone starting to dabble with equities? — Waelmashini

You can go to allstarcharts.com/technical… and see how I explain technical analysis in very simple and easy to understand terms. The idea is to identify the primary trend. This is step 1. All of the technical tools are supplement to price to help you do that.

Do you set stops based on technical indicators or do you use $ based, tick based, or some other stop metric? — patrickrooney

I set stops based on where my thesis is proven wrong. Then, I position size accordingly after that.

What do you see as the most misunderstood aspect of technical analysis and what do you say to people who mis-characterize it thus? How do you avoid “confirmation theory” — whereby tinted glasses show you what what you sought, not what’s there? — bearcharts

You have to be really ignorant to think that analyzing price behavior does not help in identifying trends and managing risk. Because, I don’t give a shit if the market doubles or gets cut in half. That’s not my problem. I just want to be in right direction.

Is the stop-loss a scam? — supertrader_1

No, it’s a tool. But, you cannot be afraid to get back in after your stop has been hit. Even twice. Deal with it. Just because your execution wasn't perfect on the entry doesn't mean you’re wrong. But, you still need to manage risk responsibly.

Do you trade short squeezes? If so what’s your strategy? — WheresMyAlpha

I like being long stocks with high short interest. Of course. But, it’s not the starting point for my analysis. Not at all

Is there a stock out there who’s trend you just can’t figure out? If so, which one? — JayHead13

Anything near a flat 200 day moving average. It’s something I specifically try and avoid being involved with at all costs.

Can you chart $ABX? — Aushie

Here is $ABX on a longer-term timeframe digesting last year’s gains. Until it breaks out, there’s no trade.

@allstarcharts

$ABX short-term in a huge consolidation between two converging trendlines and flat 200 day SMA. Hot mess.

@allstarcharts

What was your worst trade ever? Best trade? What does journaling mean to you? — howardlindzon

I was long uranium stocks before the Fukushima earthquake years ago. Didn’t cover right away like I should have! I got crushed. The best trade ever was natural gas buying that low in early 2012. The perfect bottom $NG_F $UNG.

@allstarcharts

I think every investor should do it(journal). It keeps you honest. Even if you don’t publish it like you and I do. You gotta write your ideas, what you’re thinking, reasoning for trades, and all that. How can you not?

In terms of identifying & analyzing price trends — is the methodology the same across all asset types/classes? — Lonesome

Yes. Also using information from those other asset classes to help you analyze trends for individual assets is universal.

From your site you seem to be a John Murphy fan. What do you think of ‘methods’ like O’neil and Weinstein? — 1SimpleTrader

I’m a huge John Murphy fan! Always have been. You can see it in my work for sure. I’m a sucker for intermarket so JM wins. Nothing against the other two. I’ve studied there work as well and I’m sure you’ll find some of their methods in my process.

Do you use time stops? How do you manage your laggards? — Mikeromard

Yes, especially with patterns that should have resolved earlier. When markets don’t do what their “supposed to” its telling. I try not have any. Other than the occasional mean reversion trade, I want to own strength and sell weakness. The only way to guarantee that you own strong stocks is to buy strong stocks! (there’s another t-shirt)

Does technical analysis even work in today's data driven algo trading world? — asrao316

Yes I’d say more than ever. What do algos have to do with it?

What is the best source to read up and learn about charts/technical analysis? — dan5497

Here is a list of my 10 favorite books on Technical Analysis allstarcharts.com/10-favori… I’ll be publishing mine soon.

What’s currently on your radar? Also, what was the turning point for you in trading? — michaelbozzello

I think if there is strength in European Banks, it’s hard to be bearish stocks as an asset class. That’s what I’m watching. If things like $DB start to break down from this consolidation and Germany can’t get going again, it’s a problem for stocks. The turning point for me was when I bought a ton of this stock, $MECA it was a horse-racing stock that had some 13-D filings. I got crushed for the first time in my life. I knew right away I needed to learn something. Listening to analysts is not a strategy. So in 2005, I started to study for the CMT(Certified Market Technician) designation. It was the best decision of my life.

What are your top short and long ideas for the rest of 2017? Any correlative trades or “avoids” also? — EdHiggins

Hard for me to go over all that in this format. You can see all my analysis here risk free for 30 days.

Do you prefer adjusted or unadjusted data for things that pay moderate dividends like UTES or bond ETFs? Why? — ATMcharts

Always price only. Supply and demand is based on prices paid, not total return. We remember what we paid for it, or sold. I know stockcharts default setting is dividend adjusted, but it’s just something I cannot agree with them on. Price pays. Period.

Will $AAPL buy $MU to insure NAND, DRAM is available exceeding expectations instead of shortage? Would $MU welcome this? — tomwade

I thank the holy lord above every single day that I am a technician and I don’t have to think about things like that.

JC, with charts, you once showed us how to BTFD, now if you can, what’s a smart way to STFR (sell the f’in rip)? — scheplick

Flip the charts upside down ;)

In the early days did you ever have an almost “go bust” trade? How did your risk management process develop over time? — edwardrooster

Yea for sure. I got killed in this $MECA stock back in 2005. I was long Uranium stocks during fukushima earthquake.

Do you use Elliot Wave analysis? — Mikeromard

I use the Fibonacci principles on a daily basis.

Why don’t you like the 50 day? — 1SimpleTrader

It’s too fast for my time horizon. I only use moving averages to help identify the direction of the trend. 50 day is too noisy. PTJ also incorporates a 200 day in his process. Not a 50 day. If that means anything to you

We hope you enjoyed this Q&A! Press the blue heart 💙 below if you really liked it and feel free to highlight or comment on any part. We also have a newsletter for anyone interested in getting daily updates about the stock market.

I am the Community Manager for StockTwits. Follow me @michaelbozzello.

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Product Manager @StockTwits | Personal trader for 15+ years | It takes passion from great people to build great products