All Entries in the "Technical Analysis" Category
Steep Trend Lines Beg to Be Crossed
March 9, 2009 at 12:41 pm
This market is ugly – as in really hideous.
Fear & Panic aren’t really even the appropriate words at the moment for this price action. It’s more like sheer disgust.
Would-be buyers are trusting that they’ll see lower prices (almost by the day) to put their cash to work, so what’s the hurry? And at the same time, bears who will eventually cover aren’t having to tiptoe around – they’re strutting. Likewise, they sense no urgency for needing to exit short sales.
Such is the nature of a downtrend.
From the Mood to the Technicals
But as is often the case, there is a technical threat of a short-term reversal. And it isn’t based on the oversold indications which are quite prevalent right now. Simple is usually better in technical analysis, so in this post I’m just going to point to a couple of trend lines which are looking a bit too steep.
It’s important to note that the steeper a trend line tends to be, the more likely (and the sharper) a short-term reversal becomes. So this is no prediction, but watch for a cross of these trend lines in the coming days should it happen to occur. If it does, it just might produce a playable bounce. (Notice I said bounce.)
A Look at the Charts
Up first: the DJIA. Keep in mind this trend line is descending daily, so it changes daily. At the moment though, a push back above the 6760 area would clear it. Have a look:
StockFinder Chart courtesy of Worden
Next: the S&P 500. Here again, the trend line descends daily and therefore should be double-checked to determine its exact value. For now, a push back above the 700 level would produce an upside break and might result in a tradable bounce. Here’s the chart:
StockFinder Chart courtesy of Worden
I hope your trading week is a good one!
Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service
www.TheStockBandit.com
[tags]Stock Market, Day Trading, Stock Trading, Investing, Swing Trading[/tags]
Market View Video – January 19, 2009
January 19, 2009 at 11:35 am
It’s always a good idea to start out the trading week by checking out the big-picture view and a look at the major averages. After all, they do have the biggest influence on how individual stocks move!
So as you start to consider what and how to trade this week, be sure to stop by and check out the Market View video over at TheStockBandit.TV.
And as always, Trade Like A Bandit this week!
Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service
www.TheStockBandit.com
4 Trading Goals You Can Set Right Now
October 14, 2008 at 9:20 am
The power of goals is undeniable, just as Phelps said after going 8-for-8: "That was my goal."
Goals are huge. They motivate you to get to another level, providing both incentive along the way and some satisfaction once achieved. I’ve spoken of them a few times here on the blog, but felt that a little more elaboration might be in order.
So today I want to cover 4 specific trading goals you can set that you might not already have. My purpose isn’t to tell you how high you should aim – only you can determine that, but rather to point you toward a few more concepts which could aid your trading process. Here we go…
1. Make ‘X’ Intuitive Trades Per Month.
Not everyone is systematic enough in their approach that they can automate their trading, and that’s perfectly alright. From time to time, any experienced trader (those using automation included) should allow gut feel to play a role in the decision-making process. Those of us who are purely discretionary traders aren’t strangers to acting on intuition, even if we go about it in a very methodical way.
Have you ever sensed an opportunity right in front of you, only to talk yourself out of it, thereby shutting down that gut feel which you’ve acquired through years of trading?
Well, what if you decided to make a handful of trades each month, in very small size, allowing yourself to capture a select few of those opportunities? As long as your risk remains defined, it just might help you to think outside the box a little and add some trades to your repertoire. Sticking with your game plan is a good thing, and I’m not suggesting frequent deviation from it. However, allowing a handful of ‘intuitive’ trades can add to your bottom line and enable some of that gut feel to assist in your overall profitability.
Consider making a defined number of “feel” trades next month – you might find yourself catching a few trades you may have otherwise missed out on. It’ll put your feel to the test, and provide you with yet another way to satisfy your craving for risk.
2. Set Your Max Loss Per Trade Weekly.
This is something every trader should be in the habit of doing on a regular basis. As account equity changes over time, so should the amounts that you’re risking per trade. Although you might select a constant value like R, it will still translate into different dollar amounts as your account levels change.
Making sure to update your thresholds either on the weekend or on Monday morning is the best way to stay on top of it. Doing so will ensure that you protect the downside during a tough stretch (as the R dollar-equivalent is reduced), while also maximizing profitability during good stretches of trading (as the R dollar-equivalent increases). The point is to trade smaller when doing poorly, and trade larger when doing well.
3. Consider Your ‘Options.’
Maybe you really prefer to trade stocks, which I certainly relate to, and that doesn’t have to change. In fact, owning (or short selling) the actual shares offers the most liquidity for getting into and out of trades as you seek to capture moves. But every now and then there comes along that trade which seems to offer a lot of potential, and yet inherently brings with it a lot more risk than you’re willing to take.
Whenever that’s the case, look at the options. Defining your risk through the purchase of calls or puts can limit your overall exposure, and yet still offer a ton of upside if you nail the trade. And since the options will never move to the exact same extent as the underlying shares, you’ll likely be far more able to endure some dips and rips along the way which may have otherwise spooked you out of the shares had you been holding them.
Even better, options offer a ton of flexibility when it comes to how you can use them and profit. Being long or short the shares offers you 2 directional choices, but there are many option strategies which really open the doors of possibility.
4. Trade More ETF’s.
With the explosion of ETF’s in recent years, there are now a ton of ways to participate in index-related or sector-based moves. You might be eyeing a particular group of stocks (such as Energy) and believe that a move is coming, but not be able to select 1 or 2 specific plays to make. In that case, turning to the XLE or a similar ETF would enable you to put on a single trade and participate in the movement of the overall group or sector.
Or perhaps you find yourself not long enough as a market rally begins to develop. It’s an awful feeling to feel under-exposed and not have that shopping list handy with some swing trades on it! Whenever that’s the case, consider turning to a product like index-related ETF’s. There are a ton to choose from which mimic the movement of the underlying index (such as NAZ 100, DJIA, SP 500, RUT, etc.).
Even better, there are now quite a few ‘leveraged’ ETF’s which provide you with more bang for the buck and yet require less exposure on your part, such as QLD which moves 2x the pace of the NAZ 100. Hitting the offer for some shares of these will get you quickly positioned for a continued move, knowing that you’ll participate in lock-step (or 2x lock-step!) with the index you most want exposure to.
So whatever goals you’re striving to achieve through your trading, be sure to set the bar high for yourself and work as hard as possible to reach them. Just like Phelps, you’ll be glad you did!
Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service
www.TheStockBandit.com
[tags]Stock Market, Day Trading, Stock Trading, Investing, Swing Trading[/tags]
Trading Video – 10 Chart Examples of How Stops Work
July 3, 2008 at 7:00 am
Here’s another video of a trading lesson for your viewing pleasure over the long weekend.
It would be difficult to have missed seeing the tankage in the Metals & Mining stocks on Wednesday, as most of them reversed sharply after demonstrating a lot of recent relative strength. The turnaround moves seen in those stocks offered too good of a trading lesson to pass up, so I spent a few minutes pointing out 10 charts and 3 ways which stops could have been employed to reduce the suffering for those traders caught on the long (wrong) side of these Wednesday.
Feel free to share it if you’re a fellow blogger, the embed code is on the YouTube page.
Without further delay, here’s today’s video. Enjoy the show!
Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service
www.TheStockBandit.com
[tags]Stock Market, Day Trading, Stock Trading, Swing Trading, Trading Video, Investing[/tags]
Worden Blocks Raising Eyebrows
June 5, 2008 at 7:30 am
In case you haven’t heard, the charting program that two years ago I referred to as “the future of charting” is now… (wait for it)… FREE!
In a similar spirit to that of the ever-evolving trader, the fine folks over at Worden and The Blocks Company have shifted their approach and are now offering their revolutionary charting program free of charge for end-of-day data.
That means that those of you who have considered checking out this amazing trading tool can now get your hands on it free and right now. This does not appear to be a limited-time promo, which is really incredible when you consider what this thing can do.
I have a feeling that everyone who is currently using free charting packages such as QuoteTracker or web-based StockCharts are about to step out of an old pick-up and into a Ferrari and find out that it’s completely in another league from what you’ve been using. Build watch lists, annotate your charts, add indicators from a plethora of choices, scan and sort without any limitation on what’s possible…it’s all in Blocks and it’s fully customizable.
To those of you who want integrated news, BackScanner, or of course real-time intraday data, each are available (along with several other services) with separate pricing. But to those who have been needing a charting program and didn’t want to pay for it, you’ve now got the very best at a price that you literally cannot beat!
To download and install the program:
– Visit Worden.com
– Click the Blocks icon at the top of the page
– Click the Download Now button.
Trade well today!
Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service
www.TheStockBandit.com
Practicing Technical Analysis
March 25, 2008 at 7:00 am
If you’ve ever watched the TV show House, you’ve no doubt seen the main character Dr. Gregory House assert his opinions and act on them. He’s an extremely good doctor (at least he plays one on TV 😉 ), but he sure isn’t always right. What I find so interesting is that he’s actually wrong quite often, and yet he saves the lives of his patients/actors.
Dr. House practices medicine. Sometimes he’s right and sometimes he makes mistakes, but he’s always working toward a solution and willing to try multiple methods if necessary to get there. The key is how closely he pays attention to the results he gets. Making a decision is one thing, but setting the ego aside with a willingness to modify the game plan is of utmost importance when striving toward a goal.
Should we be any different as traders? No way. I think as traders, and in particular those of us who use technical analysis, must take the same approach of making decisions, evaluating our results, and then modifying our approach as needed. Our objective is to turn a profit, and there are many ways to accomplish that.
Simply attempting to turn a profit in the market requires that we make choices and accept some level of risk, but that’s only the first portion of the plan. Once that step is completed, it’s time to monitor and evaluate how well our decisions are paying off. When things are progressing as anticipated, we simply have to stick with the plan and patiently let it play out. However, when we aren’t seeing the results we’re seeking, a willingness to go back to the drawing board is a requirement if we want to continue making forward progress.
Technical Analysis is by some considered to be hocus-pocus, but what’s so funny is that technicians will often give fundamentals a similar lack of credit. I view technical analysis as an interpretation of where supply and demand are concentrated, but it is not always an exact science.
A doctor will ‘practice’ medicine, interpreting symptoms to determine the best course of treatment in seek of a cure. Over time, new discoveries are made, experience is gained, and an open minded physician may alter their treatment habits as a result.
The technical trader operates in a similar way. The best methods for gauging momentum can evolve over time, and certain chart patterns which worked well a few years ago may not be yielding similar results right now. A breakout trader might need to start entering more trades on pullbacks to support if the market conditions warrant that. Certain technical aspects may deserve more attention than they used to if the trading environment suddenly changes, and the astute technician will know that if he’s doing his homework. After all, the market is always changing.
Become a student of the market. Commit to closely observing the results you’re getting, and be consistent in your approach long enough to decipher what’s working and what isn’t. Keep an open mind to what elements of your method might need adjusting, and remember that technical analysis is an ongoing practice. Mix it up when you know you should, and stay attentive to what your trades are telling you.
Trade well out there!
Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service
www.TheStockBandit.com
[tags]Stock Market, Day Trading, Stock Trading, Investing, Swing Trading[/tags]
Jack of All Trades, Master of 1 or 2
February 13, 2008 at 6:15 am
Most of us have heard the phrase, “jack of all trades, master of none.” What’s funny is that I don’t think that phrase was actually created to describe a trader, even though there are quite a few who certainly fit that description. For whatever reason, beginning traders especially seem to want to try a little bit of everything, kind of like a trading sampler platter.
What is it about us that makes us want to learn every way to skin the cat? Curiosity, perhaps. Drive, determination, ambition? Yes, probably. I’d say a lack of patience when chasing success also plays a part. But what so many of us tend to forget is that good trading doesn’t have to be complicated trading.
Even the most basic of technical analysis books will point out a number of different chart patterns worth studying, but the reality is that not all of them have to be traded. You can actually do quite well just sticking with a couple of favorite setups, provided of course that you stay consistent in how you enter and exit. You don’t have to master every trading style out there in order to be profitable – just getting good with 1 or 2 that you’re comfortable with is enough.
Trying to learn every trading style and expecting to apply them correctly in order to extract profits from the market is simply unnecessary. That’s not the objective of a successful trader. The experienced trader probably has a few tactics in his arsenal, but he knows he doesn’t have to use them all in order to do well. He can be profitable just by exploiting one or two good strategies, so long as he patiently waits for the proper times to apply them.
Does that mean you never try to grow or learn? Absolutely not! Successful traders will slowly add new strategies to their trading repertoire as time goes by, so strive to do the same. Finding new and different ways to profit is part of the fun of trading, and the market will at times reward your ability to adapt. So make an effort to become a well-rounded trader, but remember your bread-and-butter setups!
Jeff White
President, The Stock Bandit, Inc.
Swing Trading & Day Trading Service
www.TheStockBandit.com
[tags]Stock Market, Day Trading, Stock Trading, Investing, Swing Trading[/tags]
