Should the markets follow the script I’m about to lay out below, we test the Blue support levels. Then, we can look for a bounce. This could be considered a tradable bounce, followed by a final move to those June breakout levels in the DOW near 8900 — 950 for the S&P 500.

For now, we’ll take it one step at a time..

This first chart tells you why Friday’s run stopped where it did:

Why? Because those are multiple resistance levels as shown above in the Red Line and the pink downtrend channel as well. Sure, it skirted the line, but we aren’t reading into it too much due to low volume pre-holiday trade. Now you know why we call charting an art and not a science. Also, you can also see in the chart above that the full stohcastics are in nosebleed territory once again.

In addition to those support and resistance levels, Elliot Wave fans can see a few short-term scenarios above, namely the BLUE Waves 1,2,3, and 4.

If true, then here comes wave 5 down to the 9100 Dow level and 975 level on the S&P 500. You can also see the RED Waves 1 and 2 — if this is true, wave 3 to the blue line levels stated above could be in play as well.

This week, we’ll find out soon enough it they want to take the Dow and S&P 500 back up to retest the highs in a “Just Because We Can” move…

All the ingredients are on the table should the markets want to pullback from here. What we’ve seen thus far is a market having a hard time following through. That is, most individual stocks out there have been pulling back in a corrective fashion vs. a fast and furious move to the downside.

Should the markets follow the script laid out above, we test the Blue support levels and then look for a bounce that would be the start of the right shoulder by the way when viewing the daily charts. This could be considered a tradable bounce then a final move to those June breakout levels in the DOW at 8900ish and 950ish in the S&P 500. So we’ll take it one step at a time..

Sincerely,
By David Grandey
AllAboutTrends.net

September 8, 2009

Get Ready for a Tradable Bounce was originally featured in the Penny Sleuth.

All uptrends break to the downside and all downtrends eventually break to the upside. They are Change In Trend patterns that you really need to be on the lookout for. After all, if you are long, a trendline break to the downside is your cue to get out of dodge. Conversely, if you are short and an issue breaks its downtrend to the upside, it’s time to run for cover and lock in your gains.

Today we’ll be talking about trendline breaks to the downside. They say a picture is worth a thousand words… so rather than explain it away, just take a look at the charts below. They are great examples of what we are talking about…

So what happens after they break the uptrend to the downside? We call that a1st Thrust. That first thrust is an excellent trading opportunity — it’s often one of the most explosive moves a stock will make. Think about it. If a stock has been going up for a long time, it’s going to fall hard and fast when institutions decide they want out. The same goes after a stock’s been falling for some time. We’ve seen stocks absolutely go into orbit as investors pile on to get in at bargain prices.

After a 1st thrust down, we want to watch for a snapback rally as shown.

The battle cry with these patterns are : 1ST THRUST DOWN (blue box on all), SNAP BACK RALLY (Pink Lines) , BOMBS AWAY.

Now it’s your turn, look at the issue below.  What do you see?

Sincerely,
David Grandey
All About Trends

March 2, 2009

How to Trade Trendline Breaks was originally featured in the Penny Sleuth.

In technical analysis, stock chart patterns are used as tools to determine where a stock’s price is going. Even if you’re a fundamental investor – someone who invests based on a company’s business and financials instead of stock charts alone – taking a look at technicals can be incredibly useful… and profitable.

After all, even when you find a stellar fundamental play, the technicals can help you get in at the best price.
So, what patterns should you be watching for?

Double Top and Double Bottom

The double top (and its bullish cousin, the double bottom) is one of the easiest technical patterns to pick out. It happens when a stock’s price bounces off the same resistance line twice in a short period of time (or in the case of a double bottom, it bounces off support), and gives strong evidence that the stock is having serious trouble breaking through that barrier.

The double top is usually not a good sign, because it represents a limit on a stock’s upside potential – at least in the short term. A double bottom, on the other hand, is a good thing because it means that there’s a strong support level that the stock’s price will have trouble falling below.

Trading Channel

Another simple pattern to pick out is a trading channel. While a trading channel is any range in which a stock’s price is fluctuating, a horizontal trading channel (like the one above) is a lot more interesting. It could mean that the stock is consolidating – trying to regain its footing after a big drop-off, for instance – and gearing up for a breakout either up or down.

When you see horizontal consolidation, especially on lower-than-normal volume, keep your eyes peeled.

Head and Shoulders Pattern

The head and shoulders pattern is a bearish trend that usually means that a stock is headed downward. When you see two “shoulders” with a taller “head” in between, watch out, a head and shoulders pattern may be forming. Take note, though, that within the head and shoulders pattern itself you’ll find a strong support level (called the neckline).

Like most patterns, the head and shoulders has an opposite – in this case, the inverse head and shoulders. This bullish pattern looks the same as the regular head and shoulders, except it’s flipped upside down. When an inverse head and shoulders is on your chart, it could mean a rally is coming up.

Descending Triangle

The descending triangle isn’t a pattern you’ll want to find on a stock chart in your portfolio. It’s a bearish signal that usually results in price movement downward.

A descending triangle occurs when a stock’s downward trend intersects with a strong level of support. Again, its opposite, the ascending triangle is a bullish signal.

Hammer and Hanging Man

A hammer is a single candlestick that might mean a bottom is in sight. It’s formed when a stock trades in a wide range downward during the day, but closes near the open. It’s opposite, the hanging man, happens at the end of an uptrend, and signals that the trend is likely to resolve downward in the near future.

Start to Chart

While this is by no means an exhaustive list of the types of charting patterns you’ll see when you enter the wild world of technical analysis and technical trading, it is a starting point that can help you set off in the right direction. We’ll keep filling you in on technical analysis tips to make sure that you can make the most of your investment dollar.

Cheers,
Jonas Elmerraji

February 19, 2009

Five Charting Patterns You Need to Know was originally featured in the Penny Sleuth.