[arkyuan]

hi isa,
I have some questions again
1. I never fully understood why we need to watch for a contraction in volume when the pullback occurs? and how is that will guide us whether it's suitable or not to consider?
2. Some of you charts have ichimoku clouds and other charts don't have. Is there a particular scenario you use the clouds indicator on top of other indicators?
thanks,
ark,

1. A volume contraction on a significant pullback once a stock has broken out is a key requirement of the method. As the strongest stocks should show stronger volume on the adancing periods and then less volume as they pullback. As strong volume on the pullback would signal something was wrong and that it maybe the end of the advance as buyers are not holding the stock through the pullback, whereas weak volume on the pullback helps to indicate that it's just a normal reaction, and that most are holding the stock through the pullback with a bit of profit taking and then you should see expanding volume again once the advance resumes as people add to their positions and new buyer get on board. However, this is harder to see in large caps as their volume is manipulated becuase they are part of ETF and index funds. So you'll rarely get the volume requirements in large caps which is why they don't often appear in the watchlist scans.

2. I do my custom scans each night in stockcharts and then view the results in the 10 per page view. So that I can quickly scan though the results manually as weekly charts and look for stocks with the requirements we look for. This generates about 100 or so stocks and then I manaully go through the charts from this view to show the most interesting on here. However, sometimes when I see certain patterns I can tell that the stock might be in or under it's near term resistance, so I'll open the chart and change to the ichimoku chart to see. Most of the time this will result in me not including the stock in the watchlist as I only like to include stocks above their resistance, but a few will be on the edge of the resistance or only under thin resistance etc, and so then I show the chart and include the cloud to help highlight that it's different to the other stocks I'm showing. As resistance takes energy out of a breakout, so if a stock has to pass through resistance, it is likely to have an earlier pullback and may need many months after to base again at a higher level. Heavy volume can negate this effect though, but generally if a stock has a heavy resistance to get through, then it will likely need a lot more time in most cases, but not all.

I hope that helps

thanks for the detailed explanations, I learned something new today.