All Entries in the "Technical Analysis" Category
People of Wal-Mart: Still Spendin’
December 15, 2011 at 9:17 pm
While the People of Wal-Mart website is always an entertaining bookmark, the stock itself is no joke. Sporting nearly a 20% return since its August low, this slow mover has outpaced the S&P’s return by about 2 1/2 times.
Checking out the recent price action, the stock is a bit range-bound, but a closer examination reveals an often misunderstood pattern: the cup & handle pattern. The look of the pattern is easily identifiable to even novice chart readers, but they usually fail to take it in context. Here, it’s right where it should be found – within an uptrend.
Here’s a closer look at the chart:
A confirmation of this pattern with an upside exit would put this one in the mid-60’s in short order, so it’s worth keeping on the radar even though it’s far from a momentum name. If anything, this is simply an example worth pointing out. The handle may need a bit more work and it needs to threaten the upper trend line to indicate a move is imminent, but it belongs on the radar no less.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
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2 Levels to Watch for GLD
December 12, 2011 at 5:45 pm
GLD is the 2nd-highest capitalized ETF around, only behind SPY. It’s nearly triple the capitalization of QQQ, just to give you some perspective. And with such a fixation on the economy (both domestic & global), it’s no shock that the sometimes safe haven of gold has been in the limelight.
Some suggest GLD has topped, and in the near term, they have technical reasons which back that up (lower highs). But a closer look at the chart reveals a pair of important levels to keep on watch, so that’s what’s covered in this video.
(Direct video link is here for those interested in sharing).
Be sure to view in HD (720P) and full-screen mode for best quality in the video.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Follow TheStockBandit on Twitter or get our free newsletter to keep up!
Why I’m Careful Trading Drug Stocks
November 22, 2011 at 10:22 am
I’m really careful with trading drug stocks, there’s just so much to them. You have things to consider like FDA approvals, patient trials, lawsuits, huge news of positive or negative test results, etc. It can get to be a mess, and very few of those items are scheduled news, so they’re usually surprises.
That might sound exciting to some, but any veteran trader like me would tell you that surprises are not what a trading career is built on. Surprises spook us, and full-time traders like me want only to avoid them.
Take the buyout news in VRUS, for example, which sent the stock higher on Monday to the tune of 85%. Catching a pop like that doesn’t sound so bad, right?
Well, considering that technically the stock was set up better for a short than a long, the technical play wasn’t to be long over the weekend. The daily chart had shown both lower highs and lower lows in recent weeks. Those short would have effectively lost their entire position. Ouch!
Among other (more important) things this week, I’m thankful I had no position to begin with, but I just couldn’t help but notice the outsized gap on Monday morning.
Risk in market is required to profit, but great traders identify ways to reduce risk. Buyouts aren’t easy to see coming, but drug stocks just have too much other stuff going on anyway.
Bottom line:Â drug stocks are very tricky when it comes to overnight trades, so be consider the VRUS move another reason to be careful if you’re trading them (and consider options instead of common).
Here’s a closer look at the chart:
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Follow TheStockBandit on Twitter or get our free newsletter to keep up!
Detecting Subtle Changes of Character
November 15, 2011 at 12:06 pm
As traders, it’s imperative that we take note of any nuance or variation from character when reviewing charts. Doing so can give us occasional false or contradicting signals, but it can also alert us to imminent moves or potential pattern failures.
Take for example those imminent move alerts. A sudden perk in volume as a stock turns to challenge a key level can sometimes be an indication that a breach of that zone is about to take place. Someone’s accumulating shares ahead of the break, and technical traders will take note of the volume expansion ahead of a possible break, placing that stock on the radar of many.
Deteriorating Demeanor
Potential pattern failures can also come to light sooner by taking note of variations in how the stock is moving. With that in mind, let’s examine a stock which may be giving off some of these subtle suggestions like I’ve been discussing.
ARUN has a multi-month uptrend line (higher lows) which has provided support on numerous occasions, letting dip-buyers use it as support to play short-term bounces. It’s still intact, but something else is of concern.
Specifically, the stock had been establishing higher highs along the way up, with each bounce attaining new recovery highs – until recently. Over the past couple of weeks, we’ve seen bounces carry to lower levels, and one could even consider drawing a rounded top around the peaks of the past month. This suggests waning strength in the stock, so I’d avoid a support-based buy at this point. ARUN may rally again from this area, but I’m not betting on it.
A New Plan
My inclination would be to give this one a bit more time and see if another descending trend line can be drawn at some point from the 10/27 peak along the recent highs and wait for an upside break. This stock has a history of clearing such trend lines (including the 3 drawn below), so that’s likely a better approach for getting long than a support buy after the establishment of lower highs.
Here’s a closer look at the chart:
Again, detecting these subtle variations in the price action is not a guarantee for better entries and exits. What it does is alert us to potential changes of character so we can make better decisions based on probabilities – and trading is all about probabilities.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Follow TheStockBandit on Twitter or get our free newsletter to keep up!
Questioning the 50-day & 200-day MA’s
October 25, 2011 at 6:50 am
My recent post on Indicatoritis discussed how some traders rely on indicators incorrectly.
I believe that still holds true, but I was questioned about some common moving averages on the heels of that post.
So in this video, I want to discuss moving averages, and more specifically, two moving averages which are commonly accepted by traders as important: the 50-day and the 200-day moving averages.
We’ll look at some big-name stocks and let the charts speak for themselves on whether it’s appropriate or not to leave these MA’s on the chart all the time.
Be sure to view in HD (720P) and full-screen mode for best quality in the video.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Follow TheStockBandit on Twitter or get our free newsletter to keep up!
Avoiding Indicatoritis
October 13, 2011 at 1:59 pm
Would-be traders all tend to focus on indicators. The sense, I suppose, is that if there’s just some magic indicator to be added to the chart, then trading becomes easy.
They’re way off.
Personally, I don’t rely on indicators. I am price & volume based when making decisions on trades, and although I might occasionally glance at a moving average or something, I like to keep my charts clean and put my focus at the roots of all indicators – price and volume.
Does that make me better? Maybe.
Does it make me more decisive? Absolutely.
Back when I first went full-time as a trader (remember I already had over 2 years of part-time experience trading), there was a guy in our trading office who suffered from indicatoritis. His monitor was the most colorful thing in the office, but also the most confusing. It looked like a child had taken the entire spectrum of dry-erase markers and drawn all over his screens – a complete mess from which no sense (or cents) could be made.
This was a man grasping for some kind of a signal, but what he actually got was 50 different signals which contradicted each other. His search for clarity resulted in confusion.
That’s not a technician at work, it’s a futile (and wasted) attempt at adding an ounce of consistency to his results. He was looking in the wrong place.
A few years later, I saw a presentation by a guy (who still maintains a pretty large following in the technical analysis community) who “sees” his plays develop from charts with so many indicators that price itself is virtually obscured. Are you kidding? Suffice it to say, I think he derives zero value from those charts in terms of actual trade signals, but rather makes a really good living off confused traders seeking a magic bullet.
Indicators:Â Use Sparingly
Traders by and large rely too heavily on indicators, when it’s far better to use those indicators for confirmation. The price chart should tell you everything you need to know, but if you want some secondary assurance, then an indicator can provide that – so long as you’re using the right ones and at the right time.
Remember this when it comes to indicators: more does not equal better! Simple is ideal.
The hard part of trading is getting out of losing trades and staying in good trades. The hard part is not locating the magic bullet. Don’t waste your time expecting to find the secret to 99% profitability, because it isn’t out there.
A better use of your time and effort is to focus on improving your methods. Even better, improve your mentality, because that’s where the real game of trading is won or lost.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Follow TheStockBandit on Twitter or get our free newsletter to keep up!
Day Trading Gaps
October 10, 2011 at 4:56 pm
Day traders love to fade gaps, but it’s not always the right thing to do. In this video, I’ll point out some key traits of big gaps to watch out for when deciding on initiating gap-fill trades.
Day trading gaps can be quite lucrative, particularly when it happens early in the session. However, there’s a flip side to it which must be considered – and it costs many traders money to ignore the warnings.
Check out the video for more on this topic, and be sure you’re on the email list so you’re always notified of new updates like this one.
Be sure to view in HD (720P) and full-screen mode for best quality in the video.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Follow TheStockBandit on Twitter or get our free newsletter to keep up!
