TrendVue :: Archive

Monday, July 25, 2005
Issue Contents:

09:24	Swing Trade Setups Featured charts for Monday July 25
16:15	TrendVue Trader Talk Today's transcript.

Swing Trade Setups

Featured setups from Friday July 22, 2005 closing data symbol scan

Jump to: Long Setups | Short Setups | Special Situations

Notes for the Day

BE SURE anything you’ve entered today and intend to keep has reported or is not reporting tomorrow or at the end of the day…
Broad market indexes are still within range of recovering the recent failed tests of tops, thus a “breakout” to a new leg up is still within reason but getting less and less likely as the number of failed attempts start to add up. Still, we should be prepared for this…
Oil may back off on bearish talk about slowing demand in China even as one group believes that the Yuan revaluation will increase demand (and China rising domestic prices appears to be supporting this). Profit taking in energy sector after the big run up Friday would not be a huge surprise.

ETFS

SPY – the short scenario is easy to see; the long is continuation above 123.54 (Friday close) on any useful intraday setup.

QQQQ – tech, despite INTC and MSFT performance – remains the better looking index however any move up will still require these giants – a tell will be if buyers step into those two names today.

DIA – failed test f top but still above key support and has not pulled back so far into the range that another attempt to push higher is out of the question. A longer term selling opportunity sits at the three day low.

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.

Retracement or Pause in Up Swing / Up Trend

SWIR – caution normally lower volume and may likely fill the gap first

AA – aluminum

AL:C – aluminum

Test of Top – Continuation

WYE – pharma, one of the stronger charts in the sector

MRK – pharma, one of the weaker charts in the sector

DELL

HD – home depot’s first pause since breakout

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

C – getting a little stretched here

NTAP – perhaps has hit selling exhaustion but its likely to make another attempt to move down in the coming days – follow up for 1 – 3 more days if untriggered today.

FDO – harami actually sets up a 3 inside up scenario but hanging in space in this consolidation I’m more tempted to stalk the short side and let any longs go.