LSG Lake Shore Gold Island Reversal Potential – Predictive Charting vs. Reactive Trading

by Olivier on January 5, 2014

I am starting to see the possibility for LSG – Lake Shore Gold to put in a meaningful bottom. If the outlined scenario in my annotated chart indeed materializes, the highest odds chart formation for such a bottom to form would be an ‘Island Reversal’. For those of you not familiar with island reversals and gaps in general Jiler – ‘How Charts Can Help You In The Stock Market’ is a book with a decent chapter on that topic. Overall an excellent primer for those starting out with Technical Analysis and who don’t know where to start.

The reason I decided to actually chart LSG and to write this post is to outline the important difference between ‘Predictive Trading vs. Reactive Trading’. It is important to understand that having ‘strong opinions’ as I often say and ‘seeing’ how a chart pattern could ultimately unfold is absolutely fine. Putting on a trade though should be REACTIVE in nature. You patiently wait until a specific scenario you envisaged unfolds. Stay disciplined all along the way and only strike when odds are in your favour. Odds being in your favour means that you wait for enough pattern pressure, successful retests and shakeouts so that a new trend is sustainable. Then enough momentum has to develop so that you don’t end up being stuck in a stock that is going nowhere in order to avoid opportunity cost. A quote I recently used captures the essence of what I want to convey:

  • Don’t anticipate, just participate. – Richard Weissman

Click on the chart to maximize:

Again: I do not know what is going to happen and I couldn’t care less. This is intended as an educational post. LSG is on my radar. Nothing more nothing less. Whatever you decide to do, if you agree with my take or not, whenever you put on a trade you have to decide at which level you exit. Simply put, it is the difference between professional trading and wishful thinking.

More on: Predictions in general and Reacting to price.

Excellent short 3 min educational trading psychology videos that will help you deal with:

While you do nothing, less able traders lay the foundation for your success. – Mark Minervini


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