Monday, October 18, 2004
Issue Contents:
| 09:00 | The Day Ahead Economic releases and news. |
| 09:27 | Swing Trade Setups Featured charts for Monday October 18th |
| 14:22 | Intraday Update: S&P 500 ES futures and SPY exchange traded fund. |
| 16:15 | TrendVue Trader Talk Today's transcript. |
Good morning, on this the 292nd day of 2004. With virtually no economic news of note today (but closely-watched Consumer Price Index tomorrow) we can expect corporate earnings news, and oil no doubt, to be the primary impacts on trader emotion.
Currency relationships are also front and center, with the US Dollar Index still in danger of breaking down for a quick trip to the years lows—Gold bugs take note.
Dollar Near Lows After Sharp Slide LONDON (Reuters) – The dollar languished near its lowest level against the euro in over seven months as recent lackluster data and soaring oil prices raised doubts over the United States’ growth outlook.
Note also that an interest rate policy announcement will come out from the Bank of Canada tomorrow which may put further pressure on the buck.
Speaking of Gold:
Harmony Gold Bids for Gold Fields JOHANNESBURG (Reuters) – South Africa’s Harmony Gold has made an unsolicited 52.9 billion rand ($8.2 billion) bid to take over bigger domestic rival Gold Fields to create the world’s biggest gold producer, it said on Monday.
US Market Calendar
- 9:00 am: Treasury International Capital
- 11:00 am: 4-Week Bill Announcement
- 1:00 pm: 3, 6-Month Bill Auction
- 1:00 pm (ET): Federal Reserve Governor Mark Olson speaks to America’s Community Bankers Government Affairs Council.
Canadian Market Calendar
- 8:30 am: International Securities Transactions – August
- Heads up: Bank of Canada interest rate policy announcement tomorrow
Earnings and the Federal Reserve
For earnings highlights, please see today's WSJ Earnings Calendar.
For a list of upcoming speeches, congressional testimony, Federal Open Market Committee material, and statistical releases, please visit the What's Next page of The Federal Reserve Board website. Recently released Federal Reserve Board material, including market moving FOMC decisions and speeches by members, will be found on their What's New page.
Featured setups from Friday’s closing data symbol scan
Jump to: Long Setups | Short Setups | Special Situations
Notes for the Day
Included in todays’ Swing Trade Setups is a reprint of entry and exit strategy guidelines for new readers.
We know that broad indexes closed below important intraday resistance on Friday; pre-open, futures are down enough to set up the potential for a test of recent lows. Keep alert.
I will post more setups in the first hour. Tune into TrendVue Trader Talk.
Entry and Exit Strategies
Entries: Each chart posted includes the TrendVue High/Low indicator in the chart legend, showing the high and low of the prior day. We refer to these values frequently for setting stops, alerts and initial protective stops.
Our trade entry methodology stresses that price should prove to us where it wants to go, consequently all of our setups involve placing entry stop/stop limit orders where a trade will be initiated for us automatically, if price is able to move in the expected direction.
When price does not comply, we evaluate the setup to determine if it is either a) an expanding pattern or b) an invalidated setup. For example, a 3 bar bull flag setup that does not trigger can be followed up the next day with a buy stop above the new 4th bar, provided that price doesn’t invalidate the bull flag pattern.
Exits: Once in a trade, we must place an initial protective stop as soon as possible. Consider this stop your crash stop – an emergency measure which you hope will never get used, but is there for your protection in case you lose all connectivity to your broker or some other unforseen event takes place. The initial protective stop, unless noted otherwise, is always at the opposite end of the bar used to trigger a trade.
For example, if our trade setup for a long trade is based upon a break of yesterday’s high, we will use yesterday’s low as our initial protective stop.
The next task for us, once in a trade, is to find the earliest reasonable opportunity to move stops up. Trade and risk management is a highly personal topic; we can only relate to what works for us. In general, once a trade is substantially profitable, or has started to trend on a 10 or 20 minute chart intraday, I move to a break-even stop immediately.
Once the trade has surivied its first day, we are already on watch to look for our profit exit. Here your personal objectives come into play. A longer-term investor using swing trading techniques to improve entry and exit will tend to give a trade some room. Our recommendation is to use the break even stop until the stock starts to trend (higher highs, higher lows or the reverse in a down trend).
Short term swing traders will tend to use price extension estimates and pre-place exit orders at these estimates. This discussion goes beyond the scope of our daily swing trade service, however we are happy to entertain questions in TrendVue Trader Talk on any subject.
Long Setups
General common strategy: Unless noted otherwise, buy stop just above the “high” value, with an initial protective stop at the low value of the bar, not below the bar.
Retracement or Pause in Up Swing / Up Trend
NTES
Short Setups
General common strategy: Unless noted otherwise, place a sell alert at or just below the low of the setup bar, and look for the first failed intraday bounce after the low has been broken. What we are looking for is price to push down, bounce a little, and fail again – this is where we want to get short.
Test of Bottom – Continuation
AMGN puts in bar one of a potential bear flag. On the first bar I put a sell alert on anyway, to capture the “single up day wonder” moves that sometimes deliver very good shorting opportunities due to surprise.
TOL – caution. Self explanatory.
ISG
GLW looking weak, weak, weak.
C – as is Citi.
Special Situations
ECA – similar charts in many oil names, and to be sure, they all look like they could move lower here. It always makes sense to think counter the herd (most are heading for the exits in oil) but only some times does it make sense to act counter the herd. Bringing ECA (and all oil names up) just in case this is one of those times. Earnings reports for oil companies begins in earnest this week.
XLE – energy ETF – recent lows are likely to provide another opportunity for a long. Just a reminder to put back on watch list. Very aggressive traders can try a short to make a few dollars before the retest. The rest of us, simply stand aside.
AMD – special in that its trading in a range and therefore generally not a target for us – but the long term suggests we should give it a look.
At this point in the day price is still stuck in the lower part of the range which has built up over the past two weeks.
ES – S&P 500 index futures – intraday chart shows two potential paths. If one wants to assign a bias it has to be down, based on the daily charts, but since price is on the knife edge of resistance and support, it doesn’t make sense to make big bets here. Its enough to have an idea of how price may break today or tomorrow.
Reminder, the Consumer Price Index will be released early tomorrow morning—this closely watched economic indicator has the potential to cause price gaps in either direction.
SPY S&P 500 ETF – the daily chart of SPY shows it wouldn’t take much to get price moving below the recent range. CPI may be that catalyst. We’ve little choice but to either gamble – or, my preference, stand aside and enter once direction is confirmed.
Today's transcript.
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