Market Notes:
Let's go over the state of the market on different time frames.
The long term trend is bearish. We are still in a bear market. While I have not posted a long term chart, notice that the 200 day moving average (which comes into the chart in the top right corner and is red) is still sloped downward. The slope of a moving average is an easy way to identify trend.
In the intermediate term, the market has reversed and is bullish. There are three clues that identify this time frame as bullish. First, the strength of the recent price trend. During this trend volume has been positive, which signals strong accumulation. Finally, the 50 day moving average is no longer sloped down and looks like it's about to turn upward.
On the short time frame, the market is slightly overbought. The stochastic readings are 80 and 74, which signal overbought markets. However, in strong uptrends I look for a stronger reading for shorts.
How do we use this information?
Since I do not trade on the long term time frame, I pretty much ignore this information (though I do use it for my longer term portfolio). I am focused on the intermediate and short term trends. With a bullish intermediate term trend, but an overbought short term trend, I wait to initiate shorts. I look for a pullback to support and moving averages. For shorts, I wait for extreme overbought readings to initiate shorts.
Bollinger Bands and Extremes:
I don't post bollinger bands on most charts because they tend to confuse many of my readers. The reason for this is much of the published material on Bollinger Bands contend that touches of the bottom or top of the bands should be used for reversal trades. I disagree with this. Bollinger Bands are very complex and act different in different markets. In a strong trend, a touch of the Bollinger Band can signal continuation of trend. We only need to look at the band from February to March to see this.
I use the band for "extreme" reversal trades. In trending markets, I only use Bollinger Bands for reversal trades when the band is strongly pierced (rather than just touched). My own backtests have shown a 15-20 percent increase in win rate when using this method (though trade frequency decreases, and identifying trend for this trade is subjective).
Right now, we are moving along the upper band but it has not been pierced A strong move to the $90 range would not only likely pierce the bollinger band, it would also create an extreme stochastic reading and move right into strong resistance. This would be an excellent shorting area.
The bollinger band can also be used as an entry for trend pullbacks. The BB mid-point is the 20 day moving average, which many traders look to for support. A pullback to the $82-83 range would provide a good entry level.
Game Plan:
Short strength, Long on pullback.
Trade Tracker:
I have no open trades.
Focus List:
Since we are not near any long entries, I am not putting any charts up tonight, though I am posting the entire focus list. The only charts are for short entries.
Longs:
Financials, residentials, industrials, metals (not including silver and gold), retail and select tech all show strong relative stength, price and accumulation patterns. Stochastic readings are included in the list below. I'll narrow the list as we get closer to entry points.
Shorts:
Setup: Triangle Breakdown-Pullback. Enter on pullback to the top of the breakdown bar, which also corresponds with moving average resistance.
Disclaimer: All information and opinions expressed in this report are to be used for entertainment purposes only. The author of this report is not an investment adviser and does not give buy, sell or hold recommendations. Trading stocks is a risky undertaking, and due diligence is required before making a trade. Consult an investment professional before making a trade. The information in this report is not verified and may be incorrect. The author of this report may or may not hold a position in stocks mentioned in this report.
Let's go over the state of the market on different time frames.
The long term trend is bearish. We are still in a bear market. While I have not posted a long term chart, notice that the 200 day moving average (which comes into the chart in the top right corner and is red) is still sloped downward. The slope of a moving average is an easy way to identify trend.
In the intermediate term, the market has reversed and is bullish. There are three clues that identify this time frame as bullish. First, the strength of the recent price trend. During this trend volume has been positive, which signals strong accumulation. Finally, the 50 day moving average is no longer sloped down and looks like it's about to turn upward.
On the short time frame, the market is slightly overbought. The stochastic readings are 80 and 74, which signal overbought markets. However, in strong uptrends I look for a stronger reading for shorts.
How do we use this information?
Since I do not trade on the long term time frame, I pretty much ignore this information (though I do use it for my longer term portfolio). I am focused on the intermediate and short term trends. With a bullish intermediate term trend, but an overbought short term trend, I wait to initiate shorts. I look for a pullback to support and moving averages. For shorts, I wait for extreme overbought readings to initiate shorts.
Bollinger Bands and Extremes:
I don't post bollinger bands on most charts because they tend to confuse many of my readers. The reason for this is much of the published material on Bollinger Bands contend that touches of the bottom or top of the bands should be used for reversal trades. I disagree with this. Bollinger Bands are very complex and act different in different markets. In a strong trend, a touch of the Bollinger Band can signal continuation of trend. We only need to look at the band from February to March to see this.
I use the band for "extreme" reversal trades. In trending markets, I only use Bollinger Bands for reversal trades when the band is strongly pierced (rather than just touched). My own backtests have shown a 15-20 percent increase in win rate when using this method (though trade frequency decreases, and identifying trend for this trade is subjective).
Right now, we are moving along the upper band but it has not been pierced A strong move to the $90 range would not only likely pierce the bollinger band, it would also create an extreme stochastic reading and move right into strong resistance. This would be an excellent shorting area.
The bollinger band can also be used as an entry for trend pullbacks. The BB mid-point is the 20 day moving average, which many traders look to for support. A pullback to the $82-83 range would provide a good entry level.
Game Plan:
Short strength, Long on pullback.
Trade Tracker:
I have no open trades.
Focus List:
Since we are not near any long entries, I am not putting any charts up tonight, though I am posting the entire focus list. The only charts are for short entries.
Longs:
Financials, residentials, industrials, metals (not including silver and gold), retail and select tech all show strong relative stength, price and accumulation patterns. Stochastic readings are included in the list below. I'll narrow the list as we get closer to entry points.
Shorts:
Setup: Triangle Breakdown-Pullback. Enter on pullback to the top of the breakdown bar, which also corresponds with moving average resistance.
Disclaimer: All information and opinions expressed in this report are to be used for entertainment purposes only. The author of this report is not an investment adviser and does not give buy, sell or hold recommendations. Trading stocks is a risky undertaking, and due diligence is required before making a trade. Consult an investment professional before making a trade. The information in this report is not verified and may be incorrect. The author of this report may or may not hold a position in stocks mentioned in this report.
1 comment:
very useful analysis
I learnt a lot from it
Thank you !
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