Trading Talk

We are aggressive momentum traders when a market is coming off a bottom, or one which we feel still has a lot of room for upside.

However in a market which has rallied as much as this one we prefer to wait for a pull-back to support before entering instead of buying new highs.

Momentum trading is more active for us as one alert after another goes off. Support buying on the other hand means one has a lot more time on one's hand (sometimes the more difficult of the two) and has be patient and wait for the trade to pull-back to one's target entry point.

These are the type of set-ups we've had in the newsletter the last few weeks and the type of set-ups we will be looking for in the near future. As an additional note -- support buying lends itself more to swing-trading than day-trading and going forward we're going to have selections such as these as swing trades.

Deeply oversold stock in a bull market, falling into support, is often one of the most successful swing set-ups:

Arrow points to the buy point featured in the newsletter:

AAPL

From a short-term perspective AAPL looks vulnerable with first real support at the 185 area. We'd be buyers of the 185 support for a trade.



From a longer-term perspective we wouldn't touch AAPL long until the trend-line is broken to the upside:

Fumes

We're not smart enough to be anticipatory traders -- we are nothing but your classic trend-traders. The current trend is up meaning every day we look to buy break-outs and support longs. But at the same time we look at the following chart and understand what the bears see and the potential for the pull-back. We will trade long for as long as the good times last but at the same time we'll be more careful going forward with buying support.

The 1 year chart looks vulnerable:



The short-term chart shows the market stuck in a channel between SPY 112-109 -- note how the 50 SMA has caught up to the bottom of the channel.

GS trend-line

Volume is light and the market is still stuck in the range (USD rallying not helping). We've been knocking around 15-20 cent trades today which is somewhat pathetic but at least pays some bills. Without volume there is no good intraday movement for our stocks. If the volume is going to remain this low for an extended period of time then it will force us to look more and more toward swing trading. Our entries for our newsletter alerts are based on daily charts so swing-trading the picks would come naturally.

Keep an eye on GS in the near future and the trend-line currently near 168 if we rally. If we sell-off then first support is around 157 and then comes the 200 SMA near 151. We'd probably day-trade long the 157 support but would be interested in swing-long off the 200 SMA.

Test of Range

Finally some volume coming into the market with news on the Abu Dhabi bailout of Dubai and XOM buying XTO.

Awesome.

50 SMA catching up

There's a good chance that the SPY 109-112 range will not be resolved until the 50 SMA catches up. The bullish scenario would be a final bounce on the 109 support/50 SMA and into new highs for year-end.

Bearish scenario is a break-down through 50SMA/support and a correction to end the year. Stay tuned and until then try not to do too many boredom trades.

Crude

USO coming up to levels which interest us for support long buying. $34-$35 we'll be long for a swing as the stock comes up to its 200 SMA ($35) and daily support ($34).

Line in the sand

The line in the sand was drawn for many commodity stocks today. Take a look at these levels:

ANR bounced on the trend-line today. If you're a bull, you want this to hold:



The 50 SMA stopped the bleeding on BTU. Through this level and next stop is the trend-line at 40, and if that doesn't hold then the 200 SMA.




BVN, one of our favorite gold stocks, stopped on the 50 SMA level. Again, this level must hold or you'll see much lower prices.




CHK bounced on the 200 SMA (newsletter selection for support long yesterday). Again, this level must hold.




GLD bounced on the 20 SMA -- through here and it will have a date with the 50SMA.



MDR, a newsletter support long pick from yesterday at 20.2, bounced on the 200 SMA. Again, bulls need to hold this level.




OIH, along with many oil stocks, especially drillers, is rolling -- Very nice support at the 200 SMA area near 102.



Note how the XLE has been supported by the 50 SMA since late July. Also note today's second close under the 50 SMA. Like OIH we would not be surprised to see a 200 SMA visit on XLE near 50.

What a mess!

The SPY looks quite fragile up here -- we'll daytrade longs as usual but no swing longs for us until at least SPY 108 near trend-line/50 SMA. This is a complete battle now between the bears and the bulls: the bulls can't seem to re-take SPY 112 area and have failed every attempt at break-out while the bears haven't been able to get any kind of continuation on the downside. The conclusion? Tug of war with a tight range (SPY 110-112) which hopefully will break one way or another soon. The bulls have a lot of work ahead of them if they want to take this market higher into the New Year with gold breaking down, oils and financials sick, and the USD finally rallying.

Hat tip to our friend Dinosaur Trader who bought the USD and shorted Gold into the close yesterday. Sweet!

Market Talk

We have market close to a break-out into new YTD highs but oils and financials lagging badly. This means to us that even if we do break-out there is a higher chance than usual to fail, or that this is the last leg of the March rally before a correction sets in. Of course we could be wrong but how can the market have a healthy break-out with the financials and oil stocks under their respective 50 SMA? Small-cap gambling-type stocks are where the best action is right now --- again a not too healthy sign for the general market.

Having said all that, for the most part we're day-traders and if long side is where the action is, that is where we will be. But for you swing traders out there, especially in extended sectors such as gold, stay alert.

Free newsletter for tomorrow Dec 03

Email us at info AT highchartpatterns DOT com

Excerpt from tonight's newsletter -- Key points

Some key points before starting (again, long time readers have heard all this before but worth repeating for new members) :

1) as our long-term readers know we like to trade off our own pre-determined list (newsletter selections from previous night) and not look elsewhere during the day. This helps us focus on charts we already know well and reduces the number of mistakes we make. We don't use any scans intraday.

2) once the stock has broken-out and after you have made your exit, don't stop watching the stock. Drag it to a "triggered" portfolio and keep an eye on all stocks that have broken out. Why? a) if break-outs are working, buy the dip to EMA/pivot point and b) as a tell since watching triggered alerts gives you a very good idea whether you're in a trend day (break-outs/break-downs working) or range-bound day (multiple failures)

3) EMA's can be a valuable tool if you know how to use them -- find out which EMA is important each day. Watch 1 min, 3min, 5 min, and if you wish (we do) the 10, 15, 30 and 60 min charts and their respective 20 EMAs. We make our decisions based on the 5 min chart but we watch the 1 min to place our entry.

4) there is nothing better than a trend-day for buying pull-backs to the alert price or to the EMA (or even better a combination of the two if they line up).

5) we find EMA dip-buying works better earlier in the day than later in the day

6) for buying the pull-back always look for the ascending EMA -- flat EMAs have a much higher failure rate

7)

a) Trend days up buy breakouts, buy pull-backs to EMA
b) Trend day down short break-downs on daily, short rallies to EMA intraday.
c) Range bound days buy pull-backs to daily support, short daily resistance.

Don't get these two mixed up! Do your homework and always have alerts on your list for they serve as tells on market behavior.

8) mechanical percent based stops are useless for our type of trading -- look for the base and trade around that. The base is everything.

Trading Heaven

It's been a long time since we've enjoyed trading as much as we did today. Everything worked, not only break-outs but also pull-backs intraday, and even our two resistance shorts (NUE RIG).

Here is everything that triggered from last night's newsletter. We review all triggered alerts in every newsletter -- if you want to see our commentary (and explanation of the white arrows) or how we handled the trade, please sign up for a free trial . All these stocks were featured on our newsletter last night.

Line in the sand

Next important support in the market is SPY 107.5 on a minor gap fill and the 50 SMA. Note that the oil stocks (especially the drillers in OIH) and the financials broke through their respective 50 SMAs a while back. Best acting sector right now are big-cap momentum tech stocks (GOOG BIDU AAPL).

OIH support

Trend-line and daily support near OIH 115. We'll buy this on the first test -- if this area doesn't hold energy stocks will be in trouble with no real support until the 200 SMA.

Happy Thanksgiving

Don't get chopped in the noise of the low-volume holiday tape. Enjoy your break from the screens -- Happy Thanksgiving to all our readers.

Back to support buying

There are a couple spots still buyable on the SPY even though we're cognizant of the fact that the more support is tested, the weaker it becomes. Nevertheless we're looking for intraday reversal patterns near the 20 and 50 SMA on the SPY.

Chart

Note how FWLT is basing under 34 with declining volume. We'd love a return of volume as the stock breaks out of the base through 34.

Free Newsletter

Write us at

info AT highchartpatterns DOT COM and we'll forward you tomorrow's newsletter.

POT breakout

From last night's newsletter. Text book breakout today on excellent relative strength and volume

Price is only part of it.....

Excerpt from newsletter:

And for those of you who can't help but to stare at the alert price and count the pennies up and down -- here's something that might help. Take the grid lines off the charts. This will keep your eye a little bit less focused on the price and more on other parameters that are just as important like volume, and EMA (base).

When you take the grid off then it's easier to see what's actually happening than worrying about whether your stock is a couple pennies over or under the alert. Take the grid lines off and you'll start seeing more clearly -- a stock basing nicely near the number and on top of the EMA. Stop worrying about entering at the alert price -- enter wherever the stock sets up around the alert price, be it 50 cents under or 20 cents over. Don't just use price -- use Price /EMA(and pivot lines)/ Volume combined together to better your entry and exits.

Lots of triggers today from this weekend's newsletter. If you want to see a review of the trades and tomorrow's triggers sign up for a free 2 week trial.