Monday, October 3, 2005
Issue Contents:
| 09:10 | The Day Ahead Economic releases and news |
| 09:30 | Swing Trade Setups Featured charts for Monday October 3 |
| 12:04 | Quick Take: Currencies |
| 16:15 | TrendVue Trader Talk Today's transcript. |
Good morning, today is Monday October 4th, the 276th day of 2005.
The US dollar is getting some lift as currencies in Japan and Europe retreat, the first on news that the Tankan, a business confidence survey, rose less than expected1. The Euro fell hard this morning against the USD, continuing a trend, no doubt partly influenced on technicals (as currencies often are) off a bear flag hovering not far above the 2005 lows.
The EIA and MMS published no oil and gas shut-in reports over the weekend, leaving traders running a little blind, therefore reports this afternoon are likely to take on increased significance. First up: Institution for Supply Management – this indicator of economic activity in the manufacturing sector has been trending lower all year, with last month’s reading coming in at 55.3. A PMI in excess of 42.7 percent, over a period of time, generally indicates an expansion of the overall economy.
US Market Calendar
- 10:00 am: ISM Index – September
- 10:00 am: Construction Spending – August
- 2:00 pm: Daily MMS Gulf of Mexico Shut-in Report
- 3:00 pm: Daily DOE Office of Energy Reliability Situation Report (PDF)
- 4:00 pm: Auto Sales – September
- 3 & 6-month T-bill auction
Canadian Market Calendar
- No scheduled releases
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 September 30, 2005 closing data symbol scan http://www.trendvue.com/latestscan
Jump to: Long Setups | Short Setups | Special Situations
Notes for the Day
- Good morning; today I’ll be off most of the day, in bed unfortunately, recovering from some bug I’ve caught. It must be fall..
- Long trades taken over the last few days should have at least partial profit stops moved up – you don’t want to give up all your profit, should this bounce stall out or fail here. ISM report at 10am, or energy at 2, are key times to watch today.
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 unforeseen 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 survived 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
Retracement or Pause in Up Swing / Up Trend
NE – driller
APC – energy producer
APA – worthwhile looking for up/down grades being issued in the wake of Rita, not just in APA but all Gulf-located producers and service cos.
ADCT follow up today only.
Test of Top – Continuation
XLE – energy ETF – we’d like it to close above the red line to hold overnight…
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.
Retracement or Pause in Down Swing / Down Trend
MGAM – quite a few bear flags starting to set up above recent lows
AGI – gaming
COH
CLX – chemicals
BBY – consumer products
Special Situations
ORCL – seems unlikely that it will head dramatically lower without trying to fill that gap, but for one day, we can try. Once in a while the unlikely happens.
A number of technical levels have been broken recently in various US Dollar currency pairs. The US dollar gained some additional strength today as the Euro weakened against the greenback, and USDJPY moved to its highest level of the year, while USDCAD moved to its lowest level. Such areas always invite testing of the current trend, where failure of the test implies reversal. The next few days ought to be bumpy!
EURUSD – later this week the ECB will make its next decision on intererst rate policy.
USDCAD – the Canadian dollar – the “petro loonie” – has been extremely strong since the spring, on the back of rising oil and gas prices. CAD has not been at these levels in years. Since its a big test of bottom for the USDCAD we do expect some sort of bounce here, which may ultimately fail and propel CAD even higher.
US Dollar Index
Gold has unsurprisingly pulled back some; whether or not this is the end of the line for Gold, for the time being, depends entirely on which path the US Dollar takes – does 89 hold as new support, or again become resistance…
Schedule note: Mike is suffering from some bug and will be off for the balance of today, returning for the open tomorrow morning.
Today's transcript.
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