Tuesday, February 08, 2011

Technical Picture - Bulls Push Prices to Top of Channel

Read some interesting commentary from Arthur Hill. It goes like this - the SPY is up 3% since the beginning of February. The above chart highlights two types of price surges: 1. surges following corrections are identified by blue arrows where the 6 day ROC (rate of change) goes from negative to 3+; 2. surges from the bottom of the trading channel are identified by red arrows, where the ROC moves from neutral to 3+.

The second type of price surge led to a correction in early November. We see this same type of price/ROC pattern occurring right now. Are the bears up to it?

On a measured move basis, we can target S&P 1328-29 as depicted below.

Gapping up on earnings: WWWW +16.5%, ANDE +10.7%, BGC +5.7%, CBL +5.9%, PBI +5.3%, ATML +4.4%, TTWO +3.6%, DIS +3.4%.
Gapping down on earnings: MOTR -17%

Momentum Stocks In Play:

CIEN $27.00
SWK - Daily - bull flag forming

These are not recommendations to buy, sell, hold or sell short. Everyone needs to think for themselves when it comes to trading their own accounts. First, it is the only way to really learn, and secondly,you are the only one responsible for your trading decisions. Think of these charts as food for further analysis. Before making a trade, it is important to have a plan. Plan the trade and trade the plan. The plan includes setting a trigger level, a target area and a stop-loss level. It is also important to plan for three possible price movements: advance, decline or sideways. Have a plan for all three scenarios before making the trade. Consider possible holding times. And finally, look at overall market conditions and sector/industry performance.

Good Trading!

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