Click on the chart to enlarge it.
Lastly, note the final NMC ZeroHit setup and entry (#5). Here again, prices came down to the Fast NMA at the time of the ZeroHit, and after our entry kicked in prices exploded another 10 points (30%) in the next 8 weeks.
Notice the 'bleeding right edge” of the chart, where another zero hit is potentially setting up (chart created July 23, 2004). Either a valid Ocean entry signal will occur or the NMC setup formation will abort and the almost 2 year bull trend will meet its demise.
There are a few troublesome signs for the bull camp:
1. NMC2 recently tagged its upper boundary (see down arrow on bottom sub-graph in late June 2004), a warning flag of a mature and over-extended move, and a good reason to have taken some if not all of the accumulated profits off the table.
2. Prices have broken down below the Fast NMA and are threatening to violate the NMA as well. The Ocean entry techniques will almost always prevent an entry where termites are eating away at the foundation, and of course if NMC or NMC2 crosses below zero the potential trade entry is automatically aborted.
An important lesson: The fastest way that I know of to lose money in the market is to get an idee fixe about what the market is going to do. The proper application and trading of Ocean is not about holding to fixed concepts.
That is, either the market will trip an entry based on Ocean techniques or it won't. If it does, we'll either make some money or, as a result of the unique risk-management qualities of Ocean trading, we'll then be stopped out with
the smallest possible loss that could have been taken to assume the trade.
Profitable trading is always about managing the risk. This is truly the only thing that we have any real control over, since the market can do anything at any time.
Consequently, we have to assume that surprises from the market won't always be in our favor and must constantly act to minimize risk and protect trading capital. Ocean Theory superbly assists us in doing this.
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