Friday, July 31, 2009

Belveal, Charting Commodity Market Price Behavior

I will never understand why some perfectly dreadful trading books are touted as classics while books that could actually help the trader add to her bottom line remain in the shadows. L. Dee Belveal’s Charting Commodity Market Price Behavior (Traders Press, 2000) belongs to the second category. A commodity speculator for more than twenty years, Belveal is a sophisticated strategist. For the most part he traces the ebb and flow of buying and selling pressures using only price, volume, and open interest (with additional input from the Commitments of Traders reports that identify the strong and weak hands). His charts are not as clean as price action purists would desire but are, he contends, as clean as is necessary for him, at least, to make money.

Belveal contends that “the successful technician isn’t so much analyzing and forecasting the course of prices as he or she is analyzing and forecasting the behavior of an assortment of people whose amalgam of actions will determine the course of prices. The astute technician looks behind every event that’s traced out in his charts, relating it to the market participants whose interests were hurt or helped by it.” (p. 15) This point, I believe, is critical. Where would the strong and weak hands most likely have placed their stops? Would the event empower the bulls or the bears? Or is it only a head fake?

Belveal offers some rules incorporating price, trade volume, and open interest as his guideposts. These rules indicate, for instance, whether new buying or selling is present, whether the situation is technically strong or weak, or whether the situation should be viewed with suspicion. All the rules, as well as the conceptual principles underlying the rules, are illustrated with large easy-to-read charts.

This is not a book that can be absorbed in a single reading, which I consider a plus. The principles aren’t complicated, but it takes practice to apply them as a savvy trader would. Fortunately Belveal walks the reader through many trading scenarios, thereby accelerating the learning process.

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