Monday, November 7, 2005
Issue Contents:
| 09:46 | Market Direction Looking backward and forward |
| 10:02 | Swing Trade Setups Featured charts for Monday November 7 |
| 11:24 | Gap fill By the numbers |
Last week markets continued to rally off the long-term trendline we noted the week prior – a solid performance, about what we’d expect to see occur if the market is to hold up for now.
Major market indexes – weekly
Today, the market will be testing last week’s highs out of the gate. If the test passes relatively easily this morning, we may have another powerful move up this week in store – that’s the operating assumption we should be under until informed otherwise by the market.
YM 135M – test of last week’s highs underway; stalk the first retracement this morning LONG; if the test fails later in the day we’ll need to look carefully at markets and determine if a shift in bias is warranted.
YM – 5M – we’ll want to stalk a long above the first retracement here, but as it ages, be more and more circumspect and consider waiting for the first attempt to trigger, then look for a pull back on a smaller time frame such as 1 or 2M charts and then buy above that. Experience tells us that unless price powers up almost out of the open, the gap will fill or mostly fill… and then we’ll want to stalk longs there.
Today continuation is again the theme – there’s quite a few symbols in the “outliers” list – stocks with single down day in a still intact upswing (and the reverse). You’ll find additional examples in today’s scan: http://www.trendvue.com/latestscan
Long
Look for a retest of Friday’s high to position or stalk a long side trade above:
LRCX – semi equip
NT – caution – but a narrow range bar Friday provides a potential lever here to another up move. Tight stops.
GE – attempting to hold into a trendline breakout here.
ELX – tech, storage area
So far this morning is playing out more or less as usual – lacking sufficient buying interest early on, the market pauses and fills the gap. As discussed earlier, we trade this by:
- Stalking a long near the first attempt to fill the gap, quickly getting to break even or bailing completely if price doesn’t jam up; generally if price takes a long time to fill the gap, the first attempt to move up off the gap fill will fail, so there’s no need nor motivation to wait around for the failure or to risk much.
- We then wait for a more complete filling of the gap, and, since price has been retracing now for some time, we’ll want to only buy above the fill on a wait and see mode. That simply means we don’t lurk directly above price but wait for the first wiggle up, and then hunt for a down bar above which to place a buy stop order.
- When filled on the wait and see approach, we really want to see price push up and then get to a break even stop quite quickly.
- If price fails to head higher directly then its likely price is going to chop around for most of the morning and we should scale back trading. We might want to consider taking a trade off the first pull back (noted at 4) but if that pull back takes too long (more than 1 or 2 bars) or is too deep (comes back to the day’s low), we should be less aggressive and seek to avoid the chop by changing our aim to buy or sell tests of tops (high of day) or bottoms (low of day).