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Trading Range
Trading ranges can play an important role in determining support and resistance as turning points or as continuation patterns. A trading range is a period of time when prices move within a relatively tight range. This signals that the forces of supply and demand are evenly balanced. When the price breaks out of the trading range, above or below, it signals that a winner has emerged. A break above is a victory for the bulls (demand) and a break below is a victory for the bears (supply).
After an extended advance from 27 to 64, WorldCom (WCOM) entered into a trading range between 55 and 63 for about 5 months. There was a false breakout in mid-June when the stock briefly poked its head above 62 (red oval). This did not last long and a gap down a few days later nullified the breakout (black arrow). The stock then proceeded to break support at 55 in Aug-99 and trade as low as 50. Here is another example of support turned resistance as the stock bounced off 55 two more times before heading lower. While this does not always happen, a return to the new resistance level offers a second chance for longs to get out and shorts to enter the fray.
Position Sizing – How much to buy or sell The decision about how much to buy or sell is absolutely fundamental, and yet is often glossed over or handled improperly by most traders.
Traditionally the RSI is considered overbought when above 70 and oversold when below 30. Signals can also be generated by looking for divergences, failure swings and center-line crossovers. RSI can also be used to identify the general trend.
What is a penny stock?
Less than $1 (or $5 in some cases) per share.
The successful day trader must learn how to accept a loss and when to recognize that the this rule is being violated. The day trader must be willing to accept what he or she has achieved by the end of each day without undue frustration and/or wishful thinking --win, lose, or draw.
Momentum: Momentum is usually measured with an oscillator such as MACD. If MACD is above its 9-day EMA (exponential moving average) or positive, then momentum will be considered bullish, or at least improving.
Market stock traders buy on the rumor, meaning that they treat forecasts prepared by economists and analysts as though the event had already happened precisely as predicted. In other words, they “build in” the forecast to the price, creating the very high on the price bar that the news is supposed to produce.
When the MACD crosses over from below the signal and rises above the signal, this is a sign to buy. Conversely, when the MACD crosses over from above and drops below the signal, this is a sign to sell.
Relative Strength: The price relative is a line formed by dividing the security by a benchmark. For stocks it is usually the price of the stock divided by the S&P 500. The plot of this line over a period of time will tell us if the stock is outperforming (rising) or under performing (falling) the major index.
Establish initial positions on strength in bull markets and on weakness in bear markets. The first "addition" should also be added on strength as the market shows the trend to be working. Henceforth, subsequent additions are to be added on retracements.
The S&P 500 bottomed in March 2003 and began a powerful bull run that lasted until the peak in the summer of 2007. The consumer discretionary and technology sectors led the first move off the March 2003 low. These two showed relative strength that affirmed the importance of the 2003 bottom.
The Force Index is uses both price and volume to measure buying and selling pressure. The price portion covers the trend, while the volume portion determines the intensity. At its most basic, chartists can use a long-term Force Index to confirm the underlying trend.
Respect and embrace the very normal 50-61.8% retracements that take prices back to major trends. If a trade is missed, wait patiently for the market to retrace. Far more often than not, retracements happen... just as we are about to give up hope that they shall not.
Staples/Discretionary Ratio
Chartists can also compare the performance of the consumer discretionary sector to the consumer staples sector for clues on the economy. Stocks in the consumer discretionary sector represent products that are optional. These industry groups include apparel retailers and produces, shoe retailers and produces, restaurants and autos. Stocks in the consumer staples sector represent products that are necessary, such as soap, toothpaste, groceries, beverages and medicine. The consumer discretionary sector tends to outperform when the economy is buoyant and growing. This sector underperforms when the economy is struggling or contracting.
Chartists can compare the performance of these two with a simple ratio chart of the Consumer Discretionary SPDR (XLY) divided by the Consumer Staples SPDR (XLP). The chart above shows this ratio with the S&P 500. The ratio was rather choppy in 2004, 2005 and 2006. A strong downtrend took hold in 2007 as the consumer discretionary sector underperformed the consumer staples sector. Put another way, the consumer staples sector outperformed the consumer discretionary sector. Also notice that this ratio peaked ahead of the S&P 500 in 2007 and broke support ahead of the market. The ratio bottomed ahead of the S&P 500 in late 2008 and broke resistance as the S&P 500 surged off the March 2009 low.
Terms like "market order", "limit order", "trailing stop loss", and "bracket order" may sound complicated but in reality, they are simple concepts that you can understand with just a little bit of work. It's best to think of them as tools in your stock trading arsenal. For instance, if you want to put in an order that will keep following a stock price as it rises so you don't lose any upside, but sells your stake if the market starts to crash, you can do that. If you want to buy shares and put in an order at a predetermined amount below a specific price so you limit your losses, you can do that, too.
Chart Analysis
Technical analysis can be as complex or as simple as you want it. The example below represents a simplified version. Since we are interested in buying stocks, the focus will be on spotting bullish situations.
MACD Bullish Signal Line Cross: This scan reveals stocks that are trading above their 200-day moving average and have a bullish signal line crossover in MACD. Also notice that MACD is required to be negative to insure this upturn occurs after a pullback. This scan is just meant as a starter for further refinement.
Bond Price:
Not to be confused with bond yield, it is the amount an investor pays to buy a bond. Bond prices and interest rates have an inverse relationship: when rates rise, bond prices fall; when rates decline, bond prices rise.
Understanding Fear
When a trader's screen is pulsating red (a sign that stocks are down) and bad news comes about a certain stock or the general market, it's not uncommon for the trader to get scared. When this happens, they may overreact and feel compelled to liquidate their holdings and go to cash or to refrain from taking any risks. Now, if they do that they may avoid certain losses - but they also will miss out on the gains.
While technical analysts use charts almost exclusively, the use of charts is not limited to just technical analysis. Because charts provide an easy-to-read graphical representation of a security's price movement over a specific period of time, they can also be of great benefit to fundamental analysts. A graphical historical record makes it easy to spot the effect of key events on a security's price, its performance over a period of time and whether it's trading near its highs, near its lows, or in between.
Negative Divergence: The trick with MACD is to look at the trend it is a powerful indicator when you compare the direction of the MACD Mountains with the Price Movement.
Point 2 illustrates, that although the price doubled in 2008 we saw the MACD make lower lows “negative divergence”. We see here a change in the MACD from positive to negative and the large mountain (below the Zero Line) forms. MACD is an oscillating indicator and as such is always tied to the Zero line in the middle.
Naked Shorting by definition is
Short sellers sell borrowed shares in the hope they can be bought back at a lower price. Naked short-selling involves selling shares without first borrowing them.
Management
In order to execute a business plan, a company requires top-quality management. Investors might look at management to assess their capabilities, strengths and weaknesses. Even the best-laid plans in the most dynamic industries can go to waste with bad management (AMD in semiconductors). Alternatively, even strong management can make for extraordinary success in a mature industry (Alcoa in aluminum). Some of the questions to ask might include: How talented is the management team? Do they have a track record? How long have they worked together? Can management deliver on its promises? If management is a problem, it is sometimes best to move on.
To trade successfully, think like a fundamentalist; trade like a technician. It is imperative that we understand the fundamentals driving a trade, but also that we understand the market's technicals. When we do, then, and only then, can we or should we, trade.
RSI is an extremely popular momentum indicator that has been featured in a number of articles, interviews and books over the years. In particular, Constance Brown's book, Technical Analysis for the Trading Professional, features the concept of bull market and bear market ranges for RSI. Andrew Cardwell, Brown's RSI mentor, introduced positive and negative reversals for RSI. In addition, Cardwell turned the notion of divergence, literally and figuratively, on its head.
Support: Areas of congestion or previous lows below the current price mark support levels. A break below support would be considered bearish.
Split your profits right down the middle and never risk more than 50% of them again in the market.
Company Analysis
With a shortlist of companies, an investor might analyze the resources and capabilities within each company to identify those companies that are capable of creating and maintaining a competitive advantage. The analysis could focus on selecting companies with a sensible business plan, solid management and sound financials.
Plan your strategy by taking one step further than what you’re trading actively while maintaining a close watch on a trend in a particular time period all the time. Utilizing a trading chart, try to be completely aware of weekly and monthly trends.
The Coppock Curve is simply a smoothed momentum oscillator. Even though it was originally designed for monthly charts and long-term analysis, it can be used on intraday, daily or weekly charts and the settings can be adjusted to suit one's style. The main signals are generated with crosses above and below the zero line. More aggressive chartists can consider looking for bullish and bearish divergences to anticipate such crossovers. Be careful though. Divergences do not always result in trend reversals because the trend can simply slow and continue in the same direction.
Prices Movements are not Totally Random
Most technicians agree that prices trend. However, most technicians also acknowledge that there are periods when prices do not trend. If prices were always random, it would be extremely difficult to make money using technical analysis. In his book, Schwager on Futures: Technical Analysis, Jack Schwager states:
"One way of viewing it is that markets may witness extended periods of random fluctuation, interspersed with shorter periods of nonrandom behavior. The goal of the chartist is to identify those periods (i.e. major trends)."
Try to trade the first day of a gap, for gaps usually indicate violent new action. We have come to respect "gaps" in our nearly thirty years of watching markets; when they happen (especially in stocks) they are usually very important.
TRIX is negative as long as the triple-smoothed 15-day EMA is moving lower. TRIX turns positive when the triple-smoothed 15-day EMA turns up. The extra smoothing insures that up turns and down turns are kept to a minimum. In other words, it takes more than a one-day advance to reverse a downtrend.
After Lucent declined, a trading range was established between 40.5 and 47.5 for almost two months (green oval). The resistance level of the trading range was well marked by three reaction peaks at 47.5. The support level was not as clearly marked, but appeared to be between 40 and 41. Some buying interest began to become evident around 44 in mid- to late-February. Notice the array of candlesticks with long lower shadows, or hammers, as they are known. The stock then proceeded to form two up gaps on 24-Feb and 25-Feb, and finally closed above resistance at 48. This was a clear indication of demand winning out over supply. There were still two more opportunities (days) to get in on the action. On the third day after the breakout, the stock gapped up and moved above 56.
Continually strive for patience, perseverance, determination, and rational action.
TRIX Bearish Signal Line Cross: This scan reveals stocks that meet four criteria. First, they must be below their 200-day moving average to be in an overall down trend. Second, the TRIX must be positive to signal a bounce. Third, the TRIX crossed its signal line and turned down. Fourth, volume moved above the 250-day average to show an increase in selling pressure.
Methods to Establish Support and Resistance?
Support and resistance are like mirror images and have many common characteristics.
Highs and Lows
Support can be established with the previous reaction lows. Resistance can be established by using the previous reaction highs.
The above chart for Halliburton (HAL) shows a large trading range between Dec-99 and Mar-00. Support was established with the October low around 33. In December, the stock returned to support in the mid-thirties and formed a low around 34. Finally, in February the stock again returned to the support scene and formed a low around 33 1/2.
A trailing stop order can let you protect profits. As the stock price goes up, you can tell your broker to keep trailing it and only sell if it falls, say, $2 from its highest price ever. At that point, the order gets converted to a market order.
Bollinger Bands is a versatile tool combining moving averages and standard deviations and is one of the most popular technical analysis tools available for traders.
Deflationary Relationships
Murphy notes that the world shifted from an inflationary environment to a deflationary environment around 1998. It started with the collapse of the Thai Baht in the summer of 1997 and quickly spread to neighboring countries to become known as Asian currency crisis. Asian central bankers raised interest rates to support their currencies, but high interest rates choked their economies and compounded the problems. The subsequent threat of global deflation pushed money out of stocks and into bonds. Stocks fell sharply, Treasury bonds rose sharply and US interest rates decline. This marked a decoupling between stocks and bonds that would last for many years. Big deflationary events continued as the Nasdaq bubble burst in 2000, the housing bubble burst in 2006 and the financial crisis hit in 2007.
The intermarket relationships during a deflationary environment are largely the same except for one. Stocks and bonds are inversely correlated during a deflationary environment. This means stocks rise when bonds fall and visa versa. By extension, this also means that stocks have a positive relationship with interest rates. Yes, stocks and interest rates rise together.
Obviously, deflationary forces change the whole dynamic. Deflation is negative for stocks and commodities, but positive for bonds. A rise in bond prices and fall in interest rates increases the deflationary threat and this puts downward pressure on stocks. Conversely, a decline in bond prices and rise in interest rates decreases the deflationary threat and this is positive for stocks. The list below summarizes the key intermarket relationships during a deflationary environment.
An INVERSE relationship between bonds and stocks
A POSITIVE relationship between interest rates and stocks
An INVERSE relationship between commodities and bonds
A POSITIVE relationship between commodities and interest rates
A POSITIVE relationship between stocks and commodities
An INVERSE relationship between the US Dollar and commodities
Stop orders are particularly advantageous to investors who are unable to monitor their stocks for a period of time, and brokerages may even set these stop orders for no charge.
The Coppock Breadth Indicator, originally known as Trendex's Timing Technique for Texas Traders, is a little known indicator used to identify buy signals from around the bottom of a bear market. It is very good at discriminating between bear market rallies and true bottoms in the stock market and has proven to be remarkably resistant to "whipsaws".
What is a mutual fund?
A mutual fund is a fund created by an investment company which combines money from many investors and invests it in a group of stocks, bonds, or other investment vehicles. The investment company actively manages the portfolio to meet a desired goal, such as long-term growth or steady dividends. One major benefit is diversification. Many mutual funds also charge a fee when someone buys or sells shares.
When someone buys shares of a mutual fund, they are not directly buying shares of the underlying companies. Instead, they are entitled to a proportional amount of the fund's profits, which are usually distributed two or three times per year.
You should check daily at OTC markets to see if your stock has filed a 14-C for potential reverse splits and other valuable information
What is the SEC?
The Securities and Exchange Commission (SEC) is the government agency responsible for protecting investors by monitoring and regulating brokers, dealers, and the stock and bond markets in the U.S. They also make sure publicly-traded companies disclose the required business details to the public.
Check to see when a company will announce earnings before you buy an option. If you are within a week of an earnings announcement, the option may not have enough time to move in the anticipated direction. Wait until after earnings.
Bollinger Bands consist of a middle band with two outer bands. The middle band is a simple moving average that is usually set at 20 periods. A simple moving average is used because the standard deviation formula also uses a simple moving average. The look-back period for the standard deviation is the same as for the simple moving average. The outer bands are usually set 2 standard deviations above and below the middle band.
$CRWG mj news out: August 24, 2015 / The cannabis industry could reach $35 billion in size by 2020, according to GreenWave Advisors, while it's generally considered to be the fastest growing industry in the U.S. economy. While these dynamics should make the industry ripe for investment, the murky legality of industry on a federal level and the opaque nature of many existing publicly-traded companies in the space (that went public through reverse mergers) have made it treacherous for investors.
In this release, we'll take a look at CrowdGather's unique value proposition to investors interested in the cannabis industry.
$LTNC nice 2nd quarter here, big revs! Labor SMART, Inc. Reports Second Quarter 2015 Financial Results http://finance.yahoo.com/news/labor-smart-inc-reports-second-110000224.html
Traders Cheat Sheet for $EPAZ
http://www.barchart.com/cheatsheet.php?sym=EPAZ
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