Tuesday, November 29, 2005
Issue Contents:
| 09:29 | The Day Ahead Economic releases and news |
| 09:56 | Swing Trade Setups Featured charts for Tuesday November 29 |
Good morning, today is Tuesday November 29th, the 333rd day of 2005. Stock index futures are well above yesterday’s close, with most of the gain occuring overnight in thin trade. Price pushed up a little further as the 8:30am Durable Goods Orders report1 for October turned in a larger than expected rise, fully reversing any weakness anticipated off the back of the September’s weak report. New home sales and consumer confidence will help set the tone for the balance of the day.
Market Statistics for Monday November 28, 2005
| Symbols in Up Swings | 334 |
|---|---|
| Symbols in Down Swings | 335 |
| Up/Down Swing Ratio | 0.99 : 1 |
| Up Bars | 20% |
| Down Bars | 48% |
| Inside Bars | 6% |
| Outside Bars | 22% |
| Close > 20EMA | 21% |
| Close > 50SMA | 74% |
| Close > 200SMA | 68% |
| 20EMA > 50SMA > 200SMA (trend up) | 48% |
| 20EMA < 50SMA < 200SMA (trend down) | 12% |
US Market Calendar
- 7:45 am: ICSC-UBS Store Sales
- 8:30 am: Durable Goods Orders – Oct.1
- 8:55 am: Redbook – Nov. 26th week
- 10:00 am: New Home Sales – Oct.
- 10:00 am: Conference Board Consumer Confidence Index – Nov.
Canadian Market Calendar
- 8:30 am: Current Account Balance – Q3
- 8:30 am: Average Weekly Earnings – Sep.
- 8:30 am: Industrial Product Price Index – Oct.
- 8:30 am: Raw Materials Price Index – Oct.
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 U.S. Stock Futures Rise on Increase in Durable Goods Orders
Its surprising but yesterday’s down-draft on the indexes did not leave much in the way of clear opportunities within individual stocks; this is more a reflection that stocks are on the whole generally well advanced into rallies at this point – its difficult to find targets which are not already at high ADX levels (and thus closer to their end than their start).
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.
Long
AYE – energy – there appear to be opportunities across the spectrum of energy stocks here – stalk those that have narrower declines yesterday; exercise caution as price hits the trigger value – we don’t want to be filled on the last gasp up for the day. Aggressive traders will want to stalk an intraday retracement before the trigger on the daily chart, provided price has set up a trend, or, off the first decline off the open, assuming price has support enough to push back above the opening high. Tight stops.
Remember – trend days tend to get going from the morning and head in the same direction for most of the day – so if there’s an opportunity to latch on to such a day we want to do it near the open.
ABX – golds – the USD index took a big hit yesterday, propelling gold through 500. Today gold has backed off below 500 as the USD index bounces off yesterday’s lows. 500 had been a much talked-about target for so long it won’t be too surprising to see profit taking hold the gold sector back here for a while. With Gold trading in ranges that its not seen for almost two decades, we should assume this is all uncharted territory – we need to take each day on its own.
Those with long standing gold sector positions must seriously consider taking some profits off the table – best to scale out slowly on weakness, as this trend may not yet be over.
SUNW – worth stalking a long here provided price remains above the mid-point of last Thursday’s tall up bar.
Short
ERICY is one of the weaker looking stocks in the tech sector. Stalk a short following the first bounce after (if) price breaks 33.09, hold only on a weak close. Ideally price will clear a 2 day low and close near the lower end of the day’s range.