Archive for October, 2009
Oversold Bounce or Higher Low?
October 29, 2009 at 9:51 pm
Following an impressive surge higher from early October, the market has finally taken a breather. The pullback of the past week has offered at least a short-term change of character that has my attention – and yours as well, I’m sure.
Downside follow through has been notably absent for some time now…until this week. Four consecutive declines began with last Friday’s reversal from the highs in the NAZ (2190), and ended with Wednesday’s punishing selloff. Thursday’s bounce was headlined by a near-200-point jump on the DJIA, but under the surface we saw the NAZ post an inside day. The S&P 500 erased Wednesday’s losses, but on declining volume. Mixed signals, to say the least.
Looking at the daily charts of the indexes, a case can be made for more than one scenario here. We are in well-defined uptrends, and the dip of the past week could again get bought and prove to be yet another higher relative low within the trend. But by the same token, the bounce we saw on Thursday could merely prove to be a relief rally after the harsh selling which put the market short-term oversold. It’s hard to place my entire weight on either scenario just yet, as more technical evidence needs to be seen to support one or the other.
So at this point, I’m making zero predictions. This isn’t a spot to buy blindly and bank on another rally straight back up to new highs. The selling intensity we just saw wasn’t like the modest pullbacks which preceded it. It was a little more vicious and a little more ominous. It could be the start of a change of character. And this isn’t a time to call for a market top and start shorting the daylights out of every name out there. The intermediate trend is still up, and that should be respected.
I’m expecting the next few days to carry some significance. Either the bulls prove themselves yet again, or the bears build on their newfound confidence and we see another leg down begin to develop. Personally, I don’t care which side wins out – I have no bias.
My approach is to stay very short-term for the next couple of sessions, day trading for quick moves in this increased volatility, and see what happens. Many stocks broke down hard and have the potential to construct bear flags and rising wedges if the rebound loses momentum and volume continues to sag. I’ll be watching those bounces intently. Other stocks still aren’t far from their highs, so I’ll observe them closely for signs of real strength returning – not simply a relief bounce of one day.
Both the bulls and bears have something to prove these next few sessions, so it could wind up being a pretty good battle. No matter what, volatility is picking up, and that’s a great thing for us as traders.
So stay objective out there, anything is possible. Expect surprises in both directions. We’re getting into the best season for trading in the next several months, and I’m excited about it!
Trade Like a Bandit!
Jeff White
Are you following me on Twitter yet?
Video Review of the Indexes 10-25-2009
October 25, 2009 at 4:27 pm
The bulls produced new recovery highs last week (again), but as the week wound down, it appeared as though some fatigue may be setting in. Not only did we see bearish engulfing bars on Wednesday and no new highs after that, but we are also seeing some rest set in with the establishment of short-term trading ranges. Prices are currently sitting just above some key levels, so if we see those get broken, it could bring some profit-taking into the picture.
As we head into a brand new week of trading, let’s examine some important levels in the indexes to keep an eye on in the days ahead. That will have the greatest influence on how individual stocks are going to move, so it’s where the trading week begins.
This clip was also posted over on the Trading Videos site (as always), and perhaps you’ve seen it there – but in case you didn’t, I wanted to put it here on the blog for you.
Quick Announcement: I just want to remind you to join our free newsletter list for trading insights by email. If you’ve been on the list in the past, it has changed, and you’ll need to opt in here to receive it going forward.
Let me highly suggest clicking the “HD” on the video player and then going full-screen for best quality.
Thanks for stopping by and I’ll see you here soon with more.
Until then… Trade Like a Bandit!
Jeff White
Are you following me on Twitter yet?
Bearish Engulfing Bars Warrant Caution
October 21, 2009 at 9:35 pm
Following gains of more than 7% in just a dozen days, today we saw the market averages tag new recovery highs and then reverse sharply to finish in the red. The bearish engulfing bars which resulted on the daily charts aren’t pretty, especially given the elevated volume which accompanied them.
It hints that this market is finally showing us a little fatigue, and that perhaps more than a few buyers morphed into sellers – at least for today.
If we did see a pullback begin to develop here, it wouldn’t at all be an unhealthy thing. Several dips have occurred since the March lows were set, with each of them being bought. Now, at some point that is going to change – it’s imperative to understand that – but we don’t yet have enough technical evidence to jump to conclusions at this point for anything but the next few days. And on that note, caution is warranted after today’s action.
Just a little while ago over on the trading videos site, I posted the following video. In it, I discuss what took place today, and offer up a few levels on the downside we could see tested if Wednesday’s selling pressure sees follow through.
Let me highly suggest clicking the “HD” on the video player and then going full-screen for best quality.
Thanks for stopping by and I’ll see you here soon with more. Until then…
Trade Like a Bandit!
Jeff White
Are you following me on Twitter yet?
Why I’m Not Trading AAPL
October 19, 2009 at 10:27 am
AAPL is set to report earnings after today’s closing bell. It’ll be the focus of attention at times both today and tomorrow as the dust settles post-news, but truth be told, I have no interest either way.
Obviously it’s one of my trading rules to avoid stocks when they’re reporting earnings, as scheduled fundamental news simply carries with it no edge for me as a technical trader.
But I’ve had no interest in trading AAPL for a few months now. Let me explain why.
The short answer is that AAPL simply doesn’t move enough. For a stock that’s highly liquid (over 15 million shares/day on average) and within sneezing distance of $200, it should move a lot. And yet it doesn’t. On an average day, it’ll see an Average True Range (ATR) of about $3. There are stocks trading at a fraction of AAPL’s price which move that much and are still highly liquid, so why pay up for less movement?
Let’s take a look at the chart.
Over the past year, we’ve seen AAPL’s price rise dramatically, while its movement has shrunken dramatically. ATR is a price-based measurement (not percent), so as price gets higher and higher, often times we’ll see ATR expand along with that. That’s not the case with this stock.
StockFinder Chart courtesy of Worden
Anytime you’re trading the high-priced stocks, do your best to gauge whether there’s enough movement there on an average day to justify an entry. Others like GOOG, CME, and BIDU all are higher-priced than AAPL, but on a relative basis (when comparing ATR) they each move considerably more than AAPL.
At some point, AAPL will be worth trading again, but on an average day right now, the moves are just too limited to warrant an entry.
Thanks for stopping by and I’ll see you here soon with more. Until then…
Trade Like a Bandit!
Jeff White
Are you following me on Twitter yet?
Video Review of the Indexes 10-18-2009
October 18, 2009 at 2:44 pm
The bulls were back at it again last week as they produced new recovery highs in each of the major averages. The net gains weren’t overly impressive, but the mere fact that the market keeps climbing certainly is.
Many stocks have become short-term extended and in need of rest. Consolidation has been a rare condition for this market since the March lows were put in, but that’s the nature of a rally when the prevailing mindset is that of not wanting to miss out.
As we head into a brand new week of trading, let’s examine some important levels in the indexes to keep an eye on in the days ahead. That will have the greatest influence on how individual stocks are going to move, so it’s where the trading week begins.
This clip was also posted over on the Trading Videos site (as always), and perhaps you’ve seen it there – but in case you didn’t, I wanted to put it here on the blog for you.
Let me highly suggest clicking the “HD” on the video player and then going full-screen for best quality.
Thanks for stopping by and I’ll see you here soon with more.
Until then… Trade Like a Bandit!
Jeff White
Are you following me on Twitter yet?
Video Review of the Indexes 10-12-2009
October 11, 2009 at 11:03 pm
In the last 2 weeks, we’ve seen the market go 2 different directions – and yet nowhere at all.
Two weeks ago, a solid breakdown appeared to be underway as short-term support zones were undercut and volume increased as the selling pressure intensified. However, since then we’ve seen a quick recovery right back up, making it a round-trip effort as the indexes returned to former resistance areas. That’s of course where the fun will begin this week, making for some pretty interesting conditions.
As we head into a brand new week of trading, let’s examine some important levels in the indexes to keep an eye on in the days ahead. That will have the greatest influence on how individual stocks are going to move, so it’s where the trading week begins.
This clip was also posted over on the Trading Videos site (as always), and perhaps you’ve seen it there – but in case you didn’t, I wanted to put it here on the blog for you.
Let me highly suggest clicking the “HD” on the video player and then going full-screen for best quality.
Thanks for stopping by and I’ll see you here soon with more.
Until then… Trade Like a Bandit!
Jeff White
Are you following me on Twitter yet?
Huge News at TheStockBandit.com
October 8, 2009 at 4:03 pm
Occasionally, it’s my pleasure to get to deliver some great news here on the blog.
At the beginning of this year, I introduced you to the Trading Videos site over at TheStockBandit.TV. Then in the spring, I got to show you the stock trading course at TheStockBanditUniversity.com, a video-on-demand training course for beginning traders.
Well, today I get to do it again with the announcement of a brand new website at the heart of our network, TheStockBandit.com. The new look is indeed cosmetically striking. It’s cleaner, more streamlined, and straightforward. A huge improvement, and I want you to see it.
Along with the new look comes the best part – new functionality.
It used to be on the old site that members logged into a Member Area which was sequestered from the rest of the site. Every feature was found in a different location, which meant it was hard to navigate and easy to get confused!
The new site works more like a blog, with anything new hitting the top of the members-only area – that way, our subscribers are continually seeing what’s new. It’s fantastic. There’s even the ability to interact and comment right there inside The Bandit Hideout. (Catchy name, yes, but appropriate!)
So head on over and check it out – we are excited to show it off! And by the way, all the usual free resources and trading education info made the transition too, so those pages of chart patterns and trading strategy outlines are still there.
One last thing… we dumped our database of former members.
That sounds bad, but it’s actually VERY good because you can start another free trial – even if you already received one on the old site. It’s only logical that with a new site, everyone gets a freebie.
So, I’ll see you in The Bandit Hideout!
Jeff White
Are you following me on Twitter yet?
