Archive for the ‘Chart of the Day’ Category

Stops…

A winner that could of turned into a loser without a stop.  We can always enter again once the chart looks highly probable.

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Chart of The Day

We put out a post on QCOM on 3/29/2010.  We anticipated weakness before strength based on the lower gap being filled first.  The stock gapped down again last week.  Now an upside gap exists.  Will it be filled soon?  Maybe.

Technical Analysis  enabled us to predict market direction with high probability. 

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Chart of The Day

There are plenty of advisers who will tell you to buy a stock or commodity on the way down.  This is dangerous and the exact opposite of what you should do.  

To increase your probability of success, you should buy stocks or commodities coming out of long bases and therefore breaking through resistance.  (See charts below).

Do not try to catch a falling knife and add to stocks that have broken support.  At a minimum, let them find a bottom first.  Then use a stop in the event you are wrong.

The markets are not like buying food, cars or real estate where you should try to buy on the cheap.

Strong stocks get stronger and weak stock get weaker.  Go with the trend.  The trend is all you need to know.

Simple stuff works and complicated stuff breaks. 

Expanded:

When viewing charts, keep in mind that they always appear so obvious after the fact. 

Let me assure you hard right edge (real time) they are not.  If you trade your own money you know exactly what I am saying and you are probably nodding your head right now.

Anyway, when a position breaks down you have to sell and when it breaks out you have to buy.  You never know how long that trend down or up will last.  It  may take you a couple times or more to get it correct,  but a nice trend will wipe out a host of small losers.

It is a game of probabilities and not certainties.  I will continue to drill this point home on this blog.  This will enable you to take small losses with more ease.  Plenty of traders make millions and are wrong 50% of the time. 

They understand it’s a game of probabilities and therefore don’t sweat it.  They cut the losers short and quick and let the winners run.  This type of consistant discipline takes time to acquire and usually a couple small fortunes as well.

When you let a loser run you can find yourself in deep trouble financially and  emotionally.  Your mind will play games as it searches for confirmation and rationalization on your decision to hold that loser.

The bottom line is that we want to  follow the big money.  We can accomplish this with high probability by using charts.

Keep the winners and dump the losers.  

Discipline -Discipline – Discipline

Below are examples of such charts.  NFLX and C (Citi)

Have a good night.

– Doug

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Chart of The Day

A chart of U.S. Steel shows a break in the trend line and initial support.  Volume increased with selling.

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Chart of The Day

One of my goals with my clients, subscribers and you guys is to have you prepared for the “What If”.  In other words what would you do if the market went back down and tested the March ’09 lows?  How about if it broke 10,000 to the downside again?  What about 5,000? You just never know and for that reason we always want to use stops to protect profit and or limit loss.  We also want to be able to play the market in both directions.  Interesting how Wall Street has most of Main Street playing it in just one direction.  We’ll discuss that another day.

So the chart below raises the “What If” question.  This a yearly chart of the Dow.  Each candle represents a year.

The pattern is a potential long term  H&S (head and shoulders=bearish) pattern.  The potential for a H&S will exist until the high in the left  shoulder is broken to the upside by the right shoulder.  That number is 11,750. 

Today the trend is long.  But always be prepared for the “What If” down the road.  It’s the only way to sleep.

Enjoy your night.

-Doug

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Chart of The Day

Here is another example of why the closing price is so important.  Back on 3/30/2010 we showed a bull flag or pennant pattern on WMT.  We were looking for a close above 56.10.  The closing high in that candle was 55.91.  In other words you don’t pull the trigger until you get a close above the line.  The chart shows how WMT broke down.  If you were long WMT you would have placed your stop around 55.25 (support).   As of today, near term support is at 54.

Think closing price, not intraday.

Enjoy your night.

-Doug

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Trend Line on SPX

This chart shows you roughly the channel that the S&P has been trading in recently.  When the lower trend line is pierced in the channel, you should sit up in you seat.  When support is broken you should grab the wheel.  Today you should sit up in your seat but you don’t have to grab the wheel yet.  Near term support is at 1180.  Below that is 1160 and then major support and the 50 day is near 1150.  Let’s see if 1180 holds.  Its got a target on its back.

Three times in the last twelve months the trend line has broke and the dips were bought and the bull move resumed.  This occurred in June ’09, October ’09 and just recently in January.  When the trend changes you have to bail.  If it resumes you get back on board.  The one time you don’t bail is when a top has been put in and you are toast.

Have nice weekend.

-Doug

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INDU…

Here are some resistance levels on the Dow.  The first major level was 10K and it just went through 11K. 

The Bulls and Bears should fight it out at 11,200 and 11,300 if it gets there.  The trend remains intact but the VIX is dropping.

Enjoy your weekend!

-Doug

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S&P 500 Yearly…

This is a yearly chart of the S&P 500 (SPX).  Each candle represents a year going back to the mid 60’s.

The horizontal lines were drawn by me to show areas of resistance.   You can see the SPX made it through 1100.  The next area of resistance is 1200.  Today the high was 1199.19. 

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Gap on 10 Year…

Pressure on bonds if (if is the key word) the 10 year closes above 4% and especially 4.25%.  Got above it intraday earlier in the week and closed lower.  Same thing in June 2009.

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Welcome fellow traders and investors!

As Money Managers and Traders, the mission of our Blog and Radio Show is to go on record and further educate our readers and listeners in technical analysis and proper money management across all asset classes.

Our methods are not the traditional advice you hear repeated and repackaged over and over again, but that’s exactly the point and the reason why we know how to advance and prosper in every kind of market.

To Your Success,

Doug & Gary