Thursday, March 17, 2005
Issue Contents:
| 08:30 | The Day Ahead Economic releases and news. |
| 08:31 | Swing Scanner Results Wednesday March 16th closing data |
| 08:31 | Market Statistics For Wednesday March 16, 2005 |
| 09:18 | Swing Trade Setups Featured charts for Thursday March 17th |
| 09:27 | Today's Schedule TrendVue Trader Talk |
| 09:33 | Quick Take: Currencies and Gold |
| 10:46 | Quick Take: Market Direction Crude and Stocks Square Off - Prepare for Surprises |
| 16:15 | TrendVue Trader Talk Today's transcript. |
Good morning – its Thursday March 17th, the 76th day of 2005.
Today’s morning story is the price of oil, again. CL is currently trading well above $57, just a day after OPEC met and agreed to boost production.
OPEC President Sheikh Ahmad al-Fahd al-Sabah said ministers might start telephone consultations as early as next week over a second output rise if prices do not ease. “If prices continue as they are now, then starting from next week we will start our discussions,” he told reporters in Isfahan, Iran where OPEC held its Wednesday meeting.1
CL blasts through the test of top; typically price will pull back and retest former highs – if CL does not pull back almost immediately, I suspect we’ll be reading more worried quotes from OPEC spokespeople. Its an ideal backdrop to push through oil exploration legislation, isn’t it?
US Market Calendar
- 8:30 am: Initial Claims – Mar. 12th week
- 10:00 am: Leading Indicators – Feb.
- 12:00 pm: Philadelphia Fed Index – Mar.
Canadian Market Calendar
- 8:30 am: International Securities Transactions – Jan.
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 Oil Scales New High Over $57
Wednesday March 16th closing data
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Statistics for Wednesday March 16, 2005
Note: Statistics are compiled based on our custom symbol universe of the most heavily traded stocks.
| Symbols in Up Swings | 195 |
|---|---|
| Symbols in Down Swings | 567 |
| Up/Down Swing Ratio | 0.34 : 1 |
| Up Bars | 7% |
| Down Bars | 77% |
| Inside Bars | 6% |
| Outside Bars | 6% |
| Close > 20EMA | 22% |
| Close > 50SMA | 46% |
| Close > 200SMA | 60% |
| 20EMA > 50SMA > 200SMA (trend up) | 41% |
| 20EMA < 50SMA < 200SMA (trend down) | 25% |
Featured setups from Wednesday March 16, 2005 closing data symbol scan
Jump to: Long Setups | Short Setups
Notes for the Day
- There are few shorts in today’s list because our method requires a bounce show up in order to position a sell short order below – and as yesterday’s market statistics show, there were few stocks moving up yesterday. When I am looking for short exposure at a time like this I use an intraday entry in ETF’s.
- Long to stalk: Lots of oil and oil services stocks – for the most part a down bar yesterday gives at least a somewhat safer entry – but be careful of the open in case the rise in Crude leads to a number of gaps up at the open. I’ll be buying this sector again provided an intraday retracement shows up or price action at yesterday’s high gives the right opportunity. Note that many of these names are not in a simple 2 – 6 bar pull back any more, however since support / a base appears to have formed, and a down bar gives the opportunity to stalk, I will give them one try here today.
- Gold: I trimmed my gold longs significantly yesterday, taking profit. Until the USD (more on this later) breaks lower against recent consolidations, Gold is likely to drift at best, be under pressure at worst.
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
Retracement or Pause in Up Swing / Up Trend
WMB – Williams recently upgraded by a broker – big consolidation zone forming thereofre if filled we must demand immediate gratification and a strong close, or we do not hold.
PDE – oil services
DO – oil services
XOM – Exxon Mobil, integrated petro
PCA:C – Petro Canada, integrated petro, Canada
PCZ – Petro Canada on NYSE
Oil / oil services – all have similar charts, take your pick and remember, price is in a consolidation zone.
Test of Top – Continuation
CMCSA – media has held up fairly well – one to stalk for a good market day, and here since its testing a top and holding local support. Cancel if price moves below the three day low (marked).
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
KBH – warning, reports soon – I never hold new shorts through earnings releases, but there is still time for this to move down if its going to continue below resistance here.
Good morning Traders – this morning (my morning, perhaps your afternoon or evening) I have to make another trip to the dentist, moving up a scheduled visit from next week to today.
I’ll be available in TrendVue Trader Talk from the open until 1pm ET, hopefully returning in time for the close.
Quick Take: Currencies and Gold
After a significant sell-off yesterday its not surprising that the US $ is bouncing and recovering some of its losses; what we are eagerly waiting for is a breakout – up or down – of the range the greenback has been in.
USDJPY
EURUSD
US Dollar Index
Crude and Stocks are locked in a fight, a battle for market direction. For so long now every significant move in Crude has been reflected in the stock market by an inverse move. One of these days, that relationship will weaken, but until it does, I have to trade with one eye on real time crude data.
The Bigger Picture
Nasdaq futures – retesting late Feb lows as of yesterday.
Dow futures – retesting same.
What’s most interesting is that the market did not gap down this morning, knowing that Crude was trading up significantly before the open. This suggets a willingness of market participants to speculate that Crude may be reaching a local, at least short term, high on buying exhaustion. Confirmation of this would be a sell off pushing back deep into yesterday’s range.
Such a sell off will inevitably spark a significant market rally, given the apparent breakout from the test of top noted on the Crude chart in this morning’s issue of The Day Ahead.
Clearly this price failure in crude has not materialized as yet and may not – the point of developing such a scenario is to prepare ourselves for what may transpire so that we can be emotionally ready to react appropriately.
Therefore, IF crude fails to hold its opening low and IF crude starts to gather downward momentum intraday, we’ll will want to quickly act, taking out new long orders in the broader market. I use ETFs to quickly gain exposure at such times.
We must also bear in mind that any rise from here faces significant resistance – so once filled on new long orders our first goal will be to get protective stops up near or at break even. Once at break even we can relax and let others continue the battle.
Today's transcript.
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