What is a good chart? What are the least risky entry points? What kind of a goal do we have? Well, lets look at a few charts and see what happens. I'll leave these charts for us to review at a later date and see just how right we were.
8/8/00 Failure on a Head and Shoulders Top?
The answer is no. And that isn't a hindsite call. Note the volume. It ascended through the cycle that appears to be a H&S Top. The volume needs to be at the opposite angle to be a true H&S.
Volume always counts and no more or less with "H&S top" analysis.
7/21/00 Looking at the McClellan Oscilator we could be setting up for a nasty divergence. The olive line is the Naz Composite. Note the failed oscillator rallies going into the March high. Note we have the potential for a similar setup.
McClellan Oscillator is one of the most popular breadth indicators. Buy signals are generated when the McClellan Oscillator falls into the oversold area of -70 to -100 and then turns up. Sell signals are generated when the oscillator rises into the overbought area of +70 to +100 and then turns down.
If the oscillator goes beyond these areas (-+100), it is a sign of an extremely overbought or oversold condition. These extreme readings are usually a sign of a continuation of the current trend
Today sits on something of a cusp. It is neutral and rebounding without going to oversold. The real interest is this pennant formation. The pennant is neither bearish or bullish but it does indicate that something interesting is going to happen fairly soon. You can see a couple of different pennants and the interesting things when they violated. And beware of continuing lower highs such as the Feb/Mar pair
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6/20/00 Thoughts on a recent buy (Followup:
Failure as a long)
I am looking at a cup and handle that runs from early May to early June that ranges from about 33 to about 51. That measures $18. The pullback was to around 40 and that is at the .618 Fibonacci pullback on the above numbers and the ragged edge down for an acceptable handle. So this may not be a valid cup and handle where one would expect an 18-buck upside move. Add to that where we measure from and the 18 looks too weak to rely on--but it is one scenario. We have any number of resistance lines to overcome that range from 60 into the 70 and one is likely to cause us to see a consolidation or pullback.
So, my optimistic goal is that next area of congestion in the low 60's. It could consolidate there and form a second cup and handle. I didn't put the upper trendline on this chart but it does make for a somewhat bearish wedge that could intersect the resistance if this move slows or stops. But, we look in good shape to take that line out and so I'm ignoring it for now. A good day today will take it out.
So, my conservative goal here is the first congestion at 60. I don't sell; I do watch closely and stay ready to bail. For discussion lets say I bought 400 shares @ 52 5/16. At resistance and consolidation I might want to reduce by 1 or 2 hundred shares to lock in some profit. The 100 would be about my profit and I still be close to the full position in invested dollars. Selling 200 would get me to about a roughly 2/3rd position on the original investment. That decision will be mostly based on volume. If it is still moving up but on very weak volume, I'd reduce 200. If it starts a consolidation there on weak volume, I'd only reduce 100 as it would appear to be doing a second cup and handle there that would portend the possibility of a move back to the Feb high and a rough double.
Ask me for a target right here and it is 60. But that doesn't really tell the story. We have to take into account everything the chart is trying to tell us. It may be lying to us but we can't tell. If this were last Nov, I'd bet on the bullish scenario. Right here, I'll be happy to see the 60--which is also a Fibonacci 50 for a measured move from the 51. There I can take into account the current market condition and decide what to do. It would be a reduction from the original full position. But I won't know if that target is a sell, hold, or reduce until we get there.
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The lower magenta lines are money stream and shows just what has left this market. I guess those of us above our mid 99 capital are the fortunate...although, it really doesn't feel like it... The trendlines are support points. The upper represents the original ramping done in 91 into 92. It was never taken out after 1993 until we did it in 2000. The market ran under that strength. For a name I'll give it exponential support/resistance. The second line is the support built between 91 and 95 the sustainable support that has driven this bull market. It was only violated briefly in the 98 decline that lead us into the secular bull of 98 through 00. This is a massively strong level of support. Only once was it breached in nearly 10 years. The $64 question is do we return to it fully? Do we violate it for the second time? If we expect that then the market bottom is in the 1900-2000 point range! |
5/23 Composite with trendlines: The lines seem more valid on a daily. This is a weekly and the upper looks a cleaner choice than the lower. The lower is intersected more but is a valid line, honest.
5/12 Anatomy of an Index failure:
The bottom indicator is RSI. It could probably be any similar one with the same results. The market opened like a racehorse. The dramatic increase was a clue to what followed. The chart is small but the RSI started to diverge almost immediately. The key is divergences. Even when the RSI made a higher high it did it to a lower price high. From 11 to 1 there were lower RSI highs. Things kept showing more and more weakness. The tell was the 1300 to 1400 move. The divergence there was getting huge. It was time to bail if you trade short term. It was probably time to just bail--but, I admit I don't trade that way. (The chart was captured from Medved's internal charting feature.)
5/4 CEGE
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It is had to game stocks like this.The stocks is following the channel. The pullback looks normal to bullish with the stock closing above the open. A negative is the lower high that may be forming. Here we are out of the oversold condition pretty well. In fact the stochastic has a bearish divergence running from the mid-March. Looking at the Bollanger Bands we see we are touching them here while the reverse last high still had room. Bands can be stronger resistance than may chart features. I bought the mo and shouldn't have--mistake! May get out whole but that's not anything to brag about. |
4/29 My reasoning for exiting MLNM Bought 100 shares at 50 3/4 Sold @ 77 1/2
This is the full chart in TC200 as I have it set up for the tab I normally use. The Blue line on the main chart is money flow. The purple lines are Bollanger Bands. The averages are short medium and long term ones. The Purple-Middle is Worden's proprietary TSV and the dark blue is another Money Stream. The bottom contains BOP(Worden again) and a 5-5-5 Stochastic. You can get the info on the Worden stuff on their site.
I bought on the 17th when it was rallying off the 47 1/2 low--actual buy was 107; the yellow tag indicates 2:1 split. I made about 50% on the trade. The buy was what I consider a half-weighted position.
Why sell? That's always the $64 question. It is a lot easier to buy `em than sell `em. Well, the stock was touching the upper Bollanger Band--it is hard to go above them for long. Look at the trending in Jan & Feb. It stayed with them. Now the band is spreading and in a bull market you might want to ride the spreading. And the bands were constricting, which can indicate action is pending--up or down.
The day I bought the stock was one of those strong down moves that have seen quick recovery in many stocks. The stochastic made it very attractive. It was low and signaled things were close to oversold. So, I bought as it started back up. When I sold the stochastic was above the last rally. That's normally a bullish sign; but, it needs a bullish market to make you think it can go much higher. Friday was a bullish market. I may regret not trusting that. But, I think the general market upside is getting limited and so I expect, at best, modest gains from today.
It isn't drawn on the chart but you can draw it mentally. Add the trendline from the 4/16 and 4/19 highs. We are just about touching that trendline. Can it break beyond in a serious fashion? Color me dubious.
You buy a stock and want to ride a trend--I do anyway. I am not a short-term trader. I like being around for things like that Jan-Feb move. And it had two pullbacks where selling cost you big. The thing is this ain't Jan-Feb or that market.
4/15 These are monthly charts for the Dow and Nasdaq 100:
This correction is nothing like `87..yet... If it does correct like that, my buying could be way too early. The Dow has massive congestion in the 10K area. I just can't see it slipping much below that. If it does then 9500 is a possibility--that is two trend channel (low points in 96 and 98; two highs in 98) and more congestion. Actually, this is all a bit below 9500.
Is right on it's 50 month. Fell below in 98 and in 96. But, there were only two weeks it was below. I think next week is the reentry point. The N100 is below the 200 week linear regression. While we are often below it, I think it may be a rallying point. If I am wrong, we could see 2800.
The N100 is iffier than the Dow. I think the Dow holds; I hope the N100 holds. My gaming says the Dow supports the Nasdaq and they get back in lock step in this period. We all know the N100 (and COMPX) took off last fall at an unstustainable rate. I think/hope we've paid the piper for that and can start to sort things out from here.
Am I right? I really can't begin to guess...
4/13 This is an indicator from CBOE whose full name is Market Volatility Index. This index, while it has no nice fixed number, (like >0 = oversold;<0 =overbought), can be best evaluated with the use of simple 20 period Bollinger bands. When the VIX rises to meet or exceed the 20 day upper band, you can generally count on a rally within the next two ays....conversely, when the VIX drops near or through the lower band, you can expect the market to reverse and fail within the next two days....It doesn't ALWAYS work that way, but when used in conjunction with some other simple indicators can give you a pretty good indicator of market direction near term.
We need to see this one rise some more to make us want to get fully invested. Until then we have to be wary of this market. It is getting better but it isn't out of the woods. Note that it did violate the Bollanger last week. This is not the right chart to use. It is weekly; not daily. But, I wanted to show the situation with the past two Fall rallies.
4/8 Here’s one from the new, Annual Strength list: (KING Nasdaq Optionable)
KING is a drug stock with good earnings. You can see the W-bottom here. You can see the ascending volume that has reached average volume on Friday. You can see the nice blue Money Stream that has diverged from the price. The magenta line in the volume area is a Worden proprietary called Time Segmented volume and it is moving above the center. The question here is can it take out (or even reach) the 49.00 congestion. I think it can get close and I’d settle for that. I don’t see it getting beyond that resistance without consolidating. BTW, the colors for the candles are based on BOP. I’d like that to go green again; that is an iffy indicator. Stochastic looks ok. It made a lower bottom on the earlier low. It has room before it gets anywhere near overbought.
Earnings ($Millions) 1-Yr 46.50 80%
Earnings as Percent of Sales 1-Yr 13.00 85%
EPS Percent Change 1 (Latest Qtr) 96.00 87%
EPS Percent Change 2nd Qtr back 104 89%
EPS Percent Change 3rd Qtr back 40.00 79%
EPS Percent Change 4th Qtr back 39.00 80%
EPS Percent Change Latest Yr 75.50 83%
P/E Ratio 32.85 77%
4/5 EC is about half way down the list. Found one or two
decent but a pretty weak list tonight. This could be a head
and shoulder bottom. Otherwise, it is a nice cup and handle
with a nice. Tight, and relatively long handle/congestion.
Those are usually hummers when they do break
So watch this one and put in a buy stop at 16 or believe the above
average volume and take a position here. Stock could stair-step
to the next level with the small up to further consolidation
but I doubt it. Not a big metals fan but we’ll see.
4/5 USC has a steep right side on the cup that indicates it might break the congestion with gusto. .Congestion at just under 20 with old high at 26. KR is at resistance and suspect to retest before proceeding up. XLP is a definite pass approaching serious resistance and another possible retest ahead. DUK is similar but has a W bottom that may let it proceed. MXIM looks ripe for continuation and the only trending stock I come up with today that makes me think longer term trade. BMY is another looking to retest. Last, USTR could move higher off a 1998 high of 36.56—4 to 6 weeks of consolidation would really set it up for a better move from here.
4/2/00 The banking sector has been hot of late. And this stock is at the top of the day's pullback list based on BOP.
We have a shaggy cup and handle here. It isn't a classic one but it is one--none-the-less. It has a sharp move on the right into the consolidation. The cup is of 3-month duration--indicating a stronger (longer) coiling. We have about 3 weeks of consolidation (handle) and it is fairly flat--another strong sign. So, if this can move up on volume we can go long. The gamblers may want to go long early based on the sector strength.
The Blue jaggy line is Money flow and it is moving up strongly--best seen in the weekly chart below. The dotted lines are the Bollanger Bands and they are constricting--a good place for something to happen. The stock is sitting pretty well on it short term (cyan) EMA.
Now this stock will never be a barnburner of a momentum stock. But we could reasonably expect it to make a nice move here. $5 is a distinct possibility based on moving half way back to the November high. We could see more based on the depth of the cup--which is about $9.
So: Buy Stop: 32.25; Sell stop: 29.50; Expectation: 37+
Note we have two charts for this stock. The first is a daily and the one below longer term. It is nice to look at our longer term and see that there was a September low that we are taking out that should add support at the current levels. We can also look at that drop from 41 to 24.25 and compute our Fibonacci levels.
Fibonacci's are: 38% 30.65 and 50% 32.625--goodness that is about our congestion/handle. Funny how these things happen. Now the 61.8% mark is 34.50 and 78.6% mark is 37.11--goodness we just hit the goal we calculated above. Looks like the 34.50 could become an intermediate stop on our way to our goal--where we might expect a consolidation that'd give us another opportunity.
