Monday, April 18, 2005
Issue Contents:
| 21:29 | Swing Scanner Results Friday April 15th closing data |
| 21:29 | Market Statistics For Friday April 15, 2005 |
| 22:45 | Swing Trade Setups Featured charts for Monday April 18th |
Friday April 15th closing data
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Statistics for Friday April 15, 2005
Note: Statistics are compiled based on our custom symbol universe of the most heavily traded stocks.
| Symbols in Up Swings | 71 |
|---|---|
| Symbols in Down Swings | 682 |
| Up/Down Swing Ratio | 0.10 : 1 |
| Advancers | 12% |
| Decliners | 87% |
| Unchanged | 1% |
| Up Bars | 7% |
| Down Bars | 84% |
| Inside Bars | 3% |
| Outside Bars | 4% |
| Close > 20EMA | 12% |
| Close > 50SMA | 15% |
| Close > 200SMA | 43% |
| 20EMA > 50SMA > 200SMA (trend up) | 18% |
| 20EMA < 50SMA < 200SMA (trend down) | 32% |
The Swing Scanner Swing Ratio hit a new low, and if I recall correctly, has hit the lowest level since I started publishing the output of the scanner approximately twelve months ago. For every stock still in an up-swing on Friday, there were ten more in a down-swing. Its likely that a climax bottom – whether short term or not we can’t know for certain in advance – happened on Friday or will on Monday.
Tokyo’s exchange fell more than 2 percent right at the open on Monday – this type of price action is also generally a prelude to some sort of capitulation phase.
Its a good time to have spare cash ready to deploy.
Featured setups from Friday April 15, 2005 closing data symbol scan
Jump to: Long Setups | Short Setups | Special Situations
Notes for the Day
- Caution with existing and especially new short positions – sentiment certainly has reached a short term bearish extreme, therefore we need to be ready for a snap back rally at any time. Just the same I won’t let the potential of a short term bottom around the corner prevent me from taking on new short positions – if you enter each trade with low expectations then you won’t be disappointed either!
- Its earnings season again – do not go into the close holding ANYTHING unless you’ve checked when it reports. Many report in the last week of April… some sooner.
Be Ready For Anything
Markets are poised for a marginal gap down open, yet we should be ready to consider a long position even still, as this level of doom and gloom noted in the news and in market internals often leads to good multi-day rallies.
IF a rally shows up following the open and holds up through the day, it would print upon the chart a piercing line candle, one of the less frequent but more reliable reversal signals. Where possible, I like to buy near the very bottom of a piercing line candle. Of course, I have no way of knowing what the end of the day will look like, whether a rally will hold or not – so I’m speculating in the truest sense of the word.
Just because a rally starts off doesn’t mean it will continue but I wanted to give you some context on why it may make sense to try a long here this morning before I surprse anyone.
I will attempt a long knowing full well I may have to bail it minutes or seconds later, and I will also be stalking a broad market short in the morning as well. FYI on Friday I closed 100% of my broad market shorts including those I established at the top of the last major swing, a week ago Friday.
My first attempt to get long will be done in stock index futures – highly leveraged and extremely useful for fast trading situations. I will also attempt to get long in broad market ETFs such as DIA, SPY, IWM and/or QQQQ, on the FIRST buyable retracement IF one later shows up – typically this will all play out in the first 30 – 45 minutes.
IF price does rally from the open and closes at least near the mid-point of Friday’s down day, I will hold my new long positions – in either case I announce my intentions in TrendVue Trader Talk near the close each day. A close near Friday’s mid point will then present on Tuesday a piercing line candle buy scenario and we’ll be looking for more long setups.
Don’t try to buy a bottom unless you are very nimble and able to admit defeat quickly if wrong.
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
CDE – gold – published more as a reminder to keep a close eye on Gold favorites in case this US Dollar pull back gets steeper – if the recent range lows fold on the USD then Gold indeed will be a place to be again. I won’t buy ahead, hoping to game the market with a lucky guess but I will take any decent long opportunity that shows up. If a significant intraday move in the USD shows up this week there will be a special Forex and Gold note put on the site to alert you.
Retracement or Pause in Up Swing / Up Trend
UNH – health care management – my big concern with these stocks is that all the pros know these are safe havens to a degree – they are already in these names but for how much longer. Even UNH will not survive a bad market forever, but for now its one of the few stocks out there that has a chance at moving to a new 52 week high again.
Test of Top – Continuation
DF – foods – good ol’ defensive plays will be a little hardier in this environment on bad days, after all – folks still must eat
TEVA – pharma and generic drugs – certainly worth an attempt here. In a slightly better market I would not hesitate to take a long. Demand that price close above Thursday’s high if keeping 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.
Test of Top – Reversal
JNJ – short OR long – you really could make a long case for this – the drugs frequently get more support in bad markets and JNJ has less issues overhanging it than the pharma only crowd. Still, I have never met a spike at a test of top that I did not want to short – so if an entry is possible here and it closes down strongly in my favour I will hold overnight.
Retracement or Pause in Down Swing / Down Trend
CitiGroup – rising wedge, single up bar in a downswing – C was spared somewhat on Friday – and while many are pounding the table on behalf of banks and healthcare, nothing says they are totally immune from further weakness.
Special Situations
ECA – and all the oils and oil services – Crude broke 50$ early Monday morning (this article was written partly on Sunday and Monday) – ECA is an example of where many of the previously strong majors are now – trading at or just below the recent range.
As long time readers know, whenever price is trading below the upper most range we have to conclude that a trend has changed from UP to DOWN, until proven otherwise. This principle works in all markets, in all time frames – from trends found on 5 minute charts to those found on the daily and weekly charts.
In the first bar or two following the range break out (down) there is always the potential for a surprise rally or a bear flag which brings price back into the range. Occasionally we’ll want to trade these rallies long; other times we’ll want to simply stalk any bounce and prepare to short the stock or market.
We know that the oil sector got overheated with speculation and ‘hot’ money from hedge funds, so its reasonable to conclude that a first bounce here is likely to fail. On the other hand, at some level the oils will be considered cheap enough as they are generally raking in tons of cash and most will again report stellar quarters, which suggests at least a short-term floor is likely to form somewhere soon. The 50 day moving average is one natural location to look for price to halt its decline even if temporarily. Most of the majors should now be at or near their 50 period moving average.
To make it easy on myself, I plan on stalking and trading both sides, and will be just a little more conservative on the long side in deferrence to the selling momentum evident here.
The purpose for this verbage is to set the stage for what may be an intraday-entry in the days to come – there are no simple long trade setups in the sector at present but I expect that may change this week.