Wednesday, September 1, 2004
Issue Contents:
| 09:23 | Stock Scanner Results Tuesday August 31 data. |
| 09:32 | Swing Trade Setups Featured charts from Monday's scan. |
| 10:15 | The Day Ahead Economic releases and news. |
| 10:50 | Quick Take: Oil Surprise decline in inventory. |
| 16:15 | TrendVue Trader Talk Today's transcript. |
| 18:14 | Stock Scanner Results For Wednesday September 1st. |
Tuesday August 31 data.
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Featured setups from Tuesday August 31 closing data symbol scan
Jump to: Long Setups | Short Setups | Special Situations
Notes for the Day
Futures look to open flat. Showing up in the scan lists are quite a few long ideas – however it may be another day or so before many or any of these are triggered. We shall see…
Notable were “hammers” across much of the SOX semiconductor sector.
Presented in today’s swing trade report is a repeat of a piece on entry and exit strategies, for the benefit of new clients. I am collecting the essential bits of wisdom and method into a how-to guide for subscribers, and expect to publish a first draft sometime next week.
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.
Test of Bottom – Reversal
INTC – as mentioned in notes, many semiconductor stocks drew hammers on Tuesday. Long above; take care that your exit stop be moved to break even asap, as nothing is more dramatic than a “broken” hammer. More on this in TrendVue Trader Talk today.
SMH – the semiconductor HOLDRs ETF – same story albeit not a test of bottom as INTC displays.
Retracement or Pause in Up Swing / Up Trend
YHOO
DNA
EDS, positioned just below a test of top, giving us our first exit target.
KRB, down bar in an up-swing, may provide an entry opportunity this morning.
Test of Top – Continuation
Short Setups
Please tune into TrendVue Trader Talk for short ideas as they are developed during the day.
Special Situations
LNCR – long, on a pattern failure, break of trendling. For aggressive, confident traders only.
Good morning. The market seems primed to move higher here, following one scenario we painted yesterday for subscribers, perhaps in anticipation of benign oil inventory report (10:30 am). Its easy to imagine traders and investors wanting to slam home a final nail in the oil coffin, given how much press the rise, and now fall, has been given to all things oil related.
TrendVue will release a number of new tools and features over the coming week - watch for announcements in The Day Ahead and on the website.
US Market Calendar
- 7:00 am: MBA Purchase Applications1
- 10:00 am:2Construction Spending
- 10:00 am: ISM Mfg Index3
- 10:30 am: Weekly Petroleum Institute Inventories Report
- 4:00 pm: Motor Vehicle Sales
Canadian Market Calendar
- Real return bond auction
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.
1 NEW YORK (Reuters) – New applications for U.S. home loans eased last week for the second week in a row even though 30-year mortgage interest rates decreased slightly, an industry group said Wednesday. More >
2 Sept. 1 (Bloomberg)—U.S. construction spending rose 0.4 percent in July to a record annual rate of $997.2 billion, led by work on housing, a government report showed. More >
3 Sept. 1 (Bloomberg)—U.S. manufacturing expanded at a slower-than-expected pace in August, an industry report showed. More >
Surprise decline in inventory:
U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) dropped by 4.2 million barrels from the previous week. At 287.1 million barrels, U.S. crude oil inventories are a little above the lower end of the average range for this time of year, and are the lowest since the week ending March 12, 2004. Motor gasoline inventories last week rose by 0.9 million barrels and are slightly above the upper end of the average range. Distillate fuel inventories increased by 1.3 million barrels, with most of the increase in high-sulfur distillate fuel (heating oil), and as a result, they are in the middle of the average range. Total commercial petroleum inventories decreased by 0.9 million barrels, and remain in the bottom half of the average range. Source: EIA Weekly Petroleum Status Report
A drop in supplies by 4.2 million barrels drives a spike in Crude Oil and a test of a potential range bottom is on.
If the 42.50 price fails to hold, we can anticipate that price will trade between approximately 37 and 42.50 – the next lower range is marked out on the chart. The big surprise would be new support forming here near 42.50, and we’ve got front row seats for the show, starting now.
Today's transcript.
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For Wednesday September 1st.
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