All Entries Tagged With: "Downtrend"
TRIP Ready to Stumble
August 31, 2012 at 3:09 pm
TRIP saw a big negative change of character in late July with a big downside gap on heavy volume. The initial recovery attempt fell right on its face with the creation of new correction lows just three weeks later, highlighting the importance of avoiding the long side after a trend shift.
Currently, the stock is wedging beneath former support after bounce attempts in the past two weeks have proven unable to reclaim the $34.75 area. The rebound is looking stalled-out, and now price is beginning to weaken. A break of the lower rising trend line of this wedge would occur around $33.10 to be sure, and would likely usher in lower prices in the coming weeks.
Here’s a closer look at the chart of TRIP for you:
Trade Like a Bandit!
Jeff White
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Confirmed Trend Change for VZ
August 29, 2012 at 10:21 am
The double top pattern – like the double bottom pattern – is over-diagnosed. Anytime a stock challenges a previous high, the amateur technician jumps at the chance to declare a double top in the making. And generally they’re premature in doing so.
But the professional takes a different approach.
Rather than seeking to be the first to recognize a trend shift, it’s better to wait for confirmation of that change to come along. And in the case of the double top pattern, that requires a break of the reaction low or pullback low which was established between the peaks.
A stock fitting this description right now is VZ, which just confirmed not only a double top but has also offered an additional layer of importance by failing to reclaim former support on the bounce.
One other note is to take a look at the 2nd high on the chart on Aug 1. Price touched the previous high to the penny (not a requirement for a double top, by the way) and failed to clear it, but something else happened which was noteworthy: the finish for that day was much weaker than the day when it initially marked a high (July 18). This is another thing to watch for which might offer clues that a stock is perhaps running out of steam and deserves a closer look going forward in anticipation of a potential trend change.
Going forward for VZ, the path of least resistance is down, at least until the $43.40 area (lateral support/resistance) is reclaimed on a closing basis. That’s the level which can now be traded against. The stock looks to have next support around $41, which was a level of importance back in May.
Here’s a closer look at the chart of VZ for you:
Be careful jumping to conclusions about double tops or bottoms. Instead, be patient enough to wait for confirmation of a trend change so you can trade with greater confidence of the direction.
Trade Like a Bandit!
Jeff White
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Contrarian View
October 5, 2011 at 8:03 am
Just for fun, let’s look at both sides of this market, pretending there are actual bulls out there. (All kidding aside, there are, even if they’ve been M.I.A. of late).
This market has been plenty heavy of late. The big moves I’ve caught recently have all been on the short side, and bearish consolidations abound in the charts. Simultaneously, bullish setups are few and far between, to say the very least.
But let’s look at the bullish case right now. If I’m leaving anything out, please share it in the comments, but here are a few things to consider regarding those who are counting on a lasting turnaround:
– Nowhere else to put cash right now. This is true, and a biggie. With the bond bubble keeping money managers quite leery, and precious metals already correcting sharply from their recent highs (have you seen gold?), the so-called “safe havens” haven’t been immune to the selling either. Equities are still seen as the place to be going forward.
– Multiples are contracting, value players getting more interested. The biggest difference between a technician and the fundamentalist is how momentum is viewed. Fundies look at low prices as entry opportunities, whereas technicians look at them as downtrends which may continue. These days, the value players are seeing better numbers, which may get more of them involved.
– EVERYONE seems to be sitting on considerable cash piles right now. If this market catches a bid, that cash is tremendous potential fuel for a lasting rally. As prevalent as fear has been on the way down, it will also be relevant on the way back up — who wants to miss the big rally? Nobody who runs money, I can assure you. Underperformance is worse than losing money (sadly) in the world of portfolio managers, so you can fully expect cash to come off the sidelines quickly when signs of stability finally emerge.
The bear is still alive and well, with fresh 52-week lows being made Tuesday in every index. Nonetheless, it’s always wise to look at the other side of the trade. It’s responsible, and it either lets you keep defending your stance or it presents reasons to shift (which the best traders are always willing to do).
Keep an open mind, nothing is ever out of the question in this market.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
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What if it Gets Worse?
August 12, 2011 at 9:02 am
It might.
What’s your plan if it does?
Over at the premium site, we went to cash on July 25th. Check your charts and you’ll see that was a minor decline day (the first of 7 straight losses in the S&P 50) ahead of all this mess we’ve seen since then. Coincidence? No. Did I see this meltdown coming? Not exactly.
What happened was that several positions had warranted tighter stops, and when the market began to turn lower (it literally began the 17% down move on that day), we were naturally taken out of those trades.
We’ve been in cash ever since, avoiding the crash. Can’t even describe the freedom that brings, psychologically right now and from a capital availability standpoint going forward.
Being the last to know is an uncomfortable place to be, no doubt about it, but clearly there were a TON of people who were late to the selling party. They didn’t recognize the potential for a lower high back on July 25th like we did. They didn’t realize the importance of key index levels getting undercut ignored time after time in the weeks since then.
Those folks are in big pain, and honestly, many of them will never learn how to avoid this from happening again. Will you?
Decisions, Decisions
You see, regardless of what happens next, regardless of whether you get bailed out of poor trades or have to eat the losses, you have a choice in how you’ll respond.
Maybe you’ll turn bitter like those who got kicked during the bear market of 2000-2002 or the one from 2007-2009. Many of them will never return to stocks. Maybe you’ll be spooked away for a little while, and you’ll regain confidence after you see another big run higher. (Not that that’s ideal).
Or…maybe you’ll do the right thing and take what you can learn from this experience. I’ve had to do that before, and I’m still in the game – still able to participate and profit. I’m glad I stuck it out.
If you’re passionate about trading and you want to improve, you can’t just hope it happens on its own. You have to work for it, you have to dig in and get your hands dirty. Study your moves, your mistakes, and your successes. Study those who have done well over time or who didn’t get crushed in the decline.
Commit to greatness, as only then can you come up with an adjustable game plan going forward. You’ll need it – especially if it gets worse.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Taking It to the Bank(s)
July 12, 2011 at 7:49 am
Banks stink. Since February they have stunk. (Stank? Stunken? I’ll figure that out later.)
What’s interesting though, is the overall health of the S&P 500 without the participation of the banks. Generally the banks lead the market, yet they’ve been sliding for months and this market has stayed afloat rather well.
So are the banks no longer important, or is this a signal waiting to be recognized?
Either this market is going to turn and follow the banks, or the banks will at some point turn and add another layer of strength to this market. What’s your take? I’ll give you mine down below. Let’s look at a few of the majors…
BAC – It’s difficult to locate a more methodical downtrend anywhere in the market than this.
C – One-for-ten reverse split included, this one has gone nowhere but south. See that downtrend line? Yeah, so does everyone else. But why isn’t anyone talking about it?
WFC – This one has had glimmers of hope and potential stabilization a few times, but in every case it has failed to do anything but produce new lows. Lower highs: check. Broken rising trend lines: check.
JPM – Bounces continue to get sold here as well. Why even think about getting long until that changes?
GS – The money-making machine continues to work its way toward lower levels with lower highs and a downtrend line currently driving it steadily lower. Great company, perhaps, but hideous stock.
MS – Another picture-perfect downtrend which will perhaps at some point end, but not yet. New lows were made yesterday, and while it’s getting ‘cheaper’ it clearly isn’t done yet.
Other brokers like SCHW, AMTD, ETFC and the like are suffering similarly, as are major asset management firms (JNS), other banks, etc. The technical damage in the financial sector is widespread, and while there will be bounces, I don’t think the market will be out of the woods until we see participation from this group.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
Trade Review: BIDU Breakdown
May 18, 2011 at 11:56 am
One setup I recently had success with was found in BIDU. Although the money’s been made on this trade, there are still some lessons we can take away, so let’s take a closer look at the trade as it evolved and see what we can learn from it.
The entire Chinese internet stock group had been weakening of late, with names like SOHU, SINA, NTES, and others beginning to struggle. This followed months of leadership, as these stocks made big upside runs by building bases upon bases. The momentum shifted a few weeks ago, and in every case these stocks topped prior to the market’s pullback. (That’s why they call them leaders).
BIDU did the same thing, having peaked in late-April ahead of the major averages like the NASDAQ. Once the overall market began to pull in, these stocks accelerated to the downside, providing further evidence of an important change of character. Having become oversold, they rebounded, but in a lazy fashion. This set up quite a few bearish patterns, with the rising wedge being found in BIDU. I highlighted this pattern for premium readers on the main site, looking to short BIDU upon a break of the lower trend line at $139.50.
BIDU broke that rising trend line, a day after its counterparts NTES & SINA. That offered not only a clean entry for a short sale, but also a stock which had potential to play catch-up on the downside.
I set a pair of targets for booking profits at $132 (yellow line in chart below) and $127.50 (red line on chart below), respectively. Target 1 was reached on day 3 of the breakdown, which was just slightly ahead of the 2/14 high in case it were to be tested. Target 2 was reached on day 4, and that level corresponded with the lower end of the same mid-February congestion zone.
While this stock eventually overshot my $12 per share profit target, it became oversold. Anytime a stock moves too far, too fast, it’s time to watch for a snapback. BIDU has done that in the past 2 sessions, but remains technically damaged. Here’s a current look:
This stock and the others in the group are currently bouncing from their lows, but they remain in a bearish series of lower relative highs on their daily charts. That is to say this bounce may get sold into again, so although this short sale is long since over, we have no evidence yet to support a lasting trend change. Until we do, these are stocks to watch for new short-sided entries to emerge.
A few takeaways:
First, clean patterns are the place to focus. They make it simpler for me to recognize when to be IN a trade, and perhaps most importantly, when to be OUT of the trade. Tighter, more well-defined patterns help me be decisive, and in this game, that’s huge.
Second, stay on top of the sectors. While it’s a bit harder these days to play follow-the-leader when it comes to sector moves, it can still be done with success. Take note of which groups are shaping up for advances or declines, and work the charts for favorable candidates.
Third, when you get your move, ring the register. Greed could have kept me in this trade for a little bigger move, but it also could have kept me in too long, leaving me now to wonder what to do on the current bounce. Blend the info you get by looking left on the chart along with the pattern projection to come up with an exit strategy. Then stick to it!
Fourth, (and this goes hand-in-hand with the previous note), sharper moves are more prone to reversal. When your targets are in sight (or already hit) and the move is getting a bit stretched, expect the rubber band to snap back at least part way. Tighten your stops, book gains, and generally start expecting an imminent exit. Pigs truly do get slaughtered.
Here’s to your next trade, whether a winner or loser, and your commitment to take from it what you can – whether it be profits, a lesson, or both.
Trade Like a Bandit!
Jeff White
Producer of The Bandit Broadcast
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Be Patient Buying Dips
June 23, 2010 at 6:56 am
Novice traders are equipped with very little useful information, as even your grandmother knows to “buy low and sell high.”
With the recent correction, many stocks now are starting to appear ‘low’ on the scale, and that’s enticing – but dangerous – to those who have been waiting for a shot at getting in. The trouble is, that age-old “wisdom” doesn’t tell the whole story.
Cause for Caution
Merely buying a stock on the basis that it’s cheaper now than it used to be is no formula for success. The goal is to be buying when there’s an expectation of higher prices. When prices are declining, the trend is of course down, which means it’s best to wait for some technical proof that the correction has ended before aggressively buying.
Think of it this way. At the department store, escalators come in pairs. There’s an up escalator, and a down escalator. Buying stocks on the slide in expectation that they’re going to go right back up is like getting on the down escalator in hopes of it rising. It makes no sense. Eventually, the down escalator will end at a level floor, which in the world of technical analysis will be support. Only once that’s found can you step onto the up escalator with a realistic expectation of a ride back up. Wait for stocks to do the same thing.
Proof of Change is Needed
After a long-lasting bull market like we saw from March 2009 to April 2010, there’s going to be new money attracted to the game. So we know right now there are some new traders in the mix who are aiming to buy low, and it’s no surprise many are getting hurt with the recent ‘discounts’ we’ve seen in prices. The market has been in a correction phase for several weeks now, and it hasn’t been pretty. More importantly, it might not be done yet.
The real key here is to wait for the technicals to shift, and that will come in the form of a higher low on the daily chart. We’ve already seen higher highs get established in the NAZ, S&P 500, and DJIA, but they have yet to create higher lows. That may happen soon, or it might be a while, but that’s the next element to watch for before committing to the long side for anything but quick trades. On the premium site, that’s the stance I’m taking for now, and June’s been good so far because of it.
Trade Like a Bandit!
Jeff White
Swing Trading & Day Trading Service
www.TheStockBandit.com
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