Tuesday, May 10, 2005
Issue Contents:
| 09:07 | Swing Trade Setups Featured charts for Tuesday May 10th |
| 09:19 | The Day Ahead Economic releases and news |
| 10:52 | Market Direction Should I stay or should I go... |
| 16:15 | TrendVue Trader Talk Today's transcript. |
| 17:12 | Swing Scanner Results Tuesday May 10 closing data |
| 17:13 | Market Statistics For Tuesday May 10, 2005 |
Featured setups from Monday May 9, 2005 closing data symbol scan
Jump to: Long Setups | Short Setups | Special Situations
Notes for the Day
- Conundrum – a market that wants to go up but oil may not let it; lets be more careful than ever here, with the principal concern being new longs triggered today.
- Very few short candidates appeared in my review of hundreds of charts; to get short exposure if needed today I will make life easy on myself and get positions in one or more of the broad market averages – more than likely I will employ the Dow 30 via futures or DIA ETF, as its traded far weaker than technology of late.
- Rather than getting net short on any crude-inspired weakness, I may consider simply taking profits in DIA and select other longs today; it would be ideal not to be forced into making any decisions before tomorrows inventory report.
- Concentration of media or media-related stocks today was not intentional.
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
TWX – media, entertainment – first pause following the retest of March 2005 lows.
Retracement or Pause in Up Swing / Up Trend
DIA – first pause since end of April, right at resistance. If price breaks above resistance there’s likely another 3 – 7% available to us before the next major point of resistance slows price down. Crude has to cooperate of course…
CY – semiconductors (may also stalk TXN, MOT) – note on CY price is at the mid-point again of the tall up bar from April – we’d like to see this area hold as new support and price advance rather directly from here.
MOT – first pause since last long setup (May 2)
CMCSK – cable / media – have been stalking this one for a while, still no trade; will give CMCSK one opportunity here; if triggered long I want to see price clear the two day high.
XMSR – digital radio / media
YHOO – internet / media; one last attempt at stalking a long in this current retracement.
IACI – media / entertainment – pull back below resistance. Be wary of minor wiggles which stop us in and reverse, still, its worth stalking this pull back for perhaps one or two more days.
ZMH – healthcare sector – a somewhat tricky setup – stalking the first break out of a triangle with a long above to capture what we call “triangle trigger failure” – or in short, it costs nothing to monitor yesterday’s high plus a tick or two for a “surprise” bounce and a trap of sellers.
MFC (also MFC:TSX) – insurance
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
TKLC
Special Situations
CMGI – supply chain software (among other things), CMGI is one of the “fallen angels” from the old internet boom and bust, and hey, it even makes some money too. Used to trade at much higher prices. Premise – trendline breakout Friday pulled back underneath the trendline; yesterday was a narrow range 7 day just above. Speculative long trade only!
Disclaimer I’m already long the stock since Friday intraday, but perhaps not for much longer – I will only hold it if price breaks the two day high.
Good morning, its Tuesday May 10th, the 130th day of 2005 and another quiet day for the market in terms of economic reports.
On the energy side, perhaps not so quiet, with Crude trading up almost one half percent at 52.28, putting a drag on stock index futures before the market open. The US dollar has so far failed at a recent test of swing high and is nearing the prior swing low, but is off only marginally in the process; Gold is up one quarter percent to 427.90.
On with the day…
US Market Calendar
- 7:45 am: ICSC-UBS Store Sales
- 8:55 am: Redbook – May 7th week
Canadian Market Calendar
- 3-year note auction
- 8:30 am: New Housing Price Index – Mar.
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.
I can hear the lyrics from The Clash ringing in my head this morning, in particular the third verse:
Should I stay or should I go now?
Should I stay or should I go now?
If I go there will be trouble
An’ if I stay it will be double
So come on and let me know…
The Clash: Should I Stay or Should I Go
Sounds a lot like the market, doesn’t it?
This morning we more or less knew that price would be in a position to retest recent support near 10300 on the Dow futures, but when price first breaks out of a triangle we should always be looking for “surprise” reversals. If the Dow regains the 10320 level we’ll be on the hunt (if not already) for a long entry; on the downside 10280–10285 offered considerable resistance in past weeks and is now the bigger picture support level unless proven otherwise and is therefore a likely next target for today if price starts to trend lower.
Dow 30 Futures before the open
Nasdaq 100, S&P 500, Dow 30 Futures – the 50% retracement level (highlighted) of the last major swing down is until proven otherwise key support for markets.
Provided price generally holds these levels then my plan is to trim stocks that are underperforming the market by a wide margin, and hold those that appear to remain in healthy upswings or up trends.
Today's transcript.
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Tuesday May 10 closing data
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Statistics for Tuesday May 10, 2005
Note: Statistics are compiled based on our custom symbol universe of the most heavily traded stocks.
| Symbols in Up Swings | 325 |
|---|---|
| Symbols in Down Swings | 422 |
| Up/Down Swing Ratio | 0.77 : 1 |
| Advancers | 19% |
| Decliners | 79% |
| Unchanged | 2% |
| Up Bars | 19% |
| Down Bars | 52% |
| Inside Bars | 13% |
| Outside Bars | 8% |
| Close > 20EMA | 19% |
| Close > 50SMA | 38% |
| Close > 200SMA | 50% |
| 20EMA > 50SMA > 200SMA (trend up) | 28% |
| 20EMA < 50SMA < 200SMA (trend down) | 28% |