Tuesday, June 7, 2005
Issue Contents:
| 08:58 | Swing Trade Setups Featured charts for Tuesday June 7 |
| 09:26 | The Day Ahead Economic releases and news |
| 16:15 | TrendVue Trader Talk Today's transcript. |
Featured setups from Monday June 6, 2005 closing data symbol scan
Jump to: Long Setups | Short Setups | Special Situations
Notes for the Day
- MXIM, UNTD, JPM short ideas from yesterday should be carried forward one, perhaps two more days. If a minor move up today results, all three are short candidates for tomorrow.
- Energy stocks seem poised to retreat – with the inventory report due out tomorrow, my goal is to hold on to my core positions at least until then but I may take some or all profits out of my trading positions (which have all gone up enough to become new ‘core’ positions…) on weakness today. Before the open, Natural Gas currently is trading in the upper 1/2 of yesterday’s Range, crude is inside the lower 1/2 of same.
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
Retracement or Pause in Up Swing / Up Trend
ETFS
My biggest concern about getting long the broad market here is to see a minor wiggle up today that doesn’t hold. Yet we can’t know ahead of time if any bounce will or will not hold, and if this rally is to continue for the medium term, this is the first opportunity we’ve had in the past week to position a long above a retracement in the market:
IWM – Russell 2000
DIA – Dow 30.
QQQQ – Nasdaq 100 – trade both ways. If markets weaken this one I would short above the others due to the huge run up its taken – selling an intraday pattern of use to us, or monitor the 2-day low.
OTHER
GIS – foods
TSN – foods
Test of Top – Continuation
SCH – lifted along with TD / AMTD, could be traded long or short here. Chart is reasonably “positive” looking with more up bars than down.
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
SCH – lifted along with TD / AMTD, could be traded long or short here. Chart is reasonably “positive” looking with more up bars than down.
Retracement or Pause in Down Swing / Down Trend
TJX – clothier – if not triggered today follow up tomorrow
MERQ – tech, software – follow up tomorrow if not triggered
Special Situations
ALUMINUM
The metal has backed off some over the past couple of days sinces trying to make a bottom – I’m going to stalk the AL giants today one last time and see if I can’t get more than a day trade out of it. The charts look terrible, but if Greenspan is signalling the end of tightening, valuations are typically at where they tend to hold up if tightening has stopped.
AL:C (also AL:NYSE)
AA
Good morning, its Tuesday June 7th, the 158th day of 2005.
Before the open, stock index futures are up approximately one quarter of one percent on two themes – slightly cheaper Crude (crude is down one half percent, natural gas is near unchanged or slightly positive), and apparently in reaction to either Federal Reserve chairman Alan Greenspan’s speech, or the Q+A session following, in which he apparently hinted that rate increases may be nearing a pause or an end.
Picking and choosing which of the Fed chief’s comments to highlight gives one a different picture of global markets:
” One prominent hypothesis is that the markets are signaling economic weakness. This is certainly a credible notion.” – Alan Greenspan
And indeed, in the media some have focussed on this:
Greenspan also said it’s a ``credible notion’’ that bond markets are signaling ``economic weakness.’’ ``When bond yields are so low, that’s going to undermine the yield advantage that investors can get from U.S. assets and therefore that paints a negative picture for the dollar,’’ said Carsten Fritsch, a currency strategist at Commerzbank AG in Frankfurt.—Bloomberg
But of course, Mr. Greenspan never throws out just one bone, and he offers several reasons why yields may be lower than traditionally expected at this point in the economic cycle, the most interesting of which to me is choice – with traditionally weaker economies such as Mexico now floating long term debt offerings, in some cases for the first time ever, it does seem as if the world has turned a corner. Sure there will be bumps along the way, but globalization has made it possible for developing economies to move forward. Choice generally depresses prices as competition for capital works to the advantage of the buyer more than the seller.
Most of today’s reaction in stock and bond markets might be attributed to the Q+A seession where, asked if he considered whether there would be a change anytime soon in yields, Greenspan said: ``I would think not.’’1
US Market Calendar
- 7:45 am: ICSC-UBS Weekly Chain Store Sales, week ended June 4
- 8:55 am: Redbook – Jun. 4th week2
- 3:00 pm: Consumer Credit – Apr.
Canadian Market Calendar
- No releases scheduled
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 Dollar Drops Versus Yen; Greenspan Signals Yield to Stay Low
2 US chain store sales rise in the latest week
Today's transcript.
Click on the title above to expand this document.