Meanwhile, the NASDAQ has been holding much stronger. While it too has pulled back, it hasn’t done so near as much as the other indexes. But then again, the NASDAQ doesn’t have the toxic waste the other two indexes have either. Also, the NASDAQ has formed another bullish pullback off highs pattern (POH) as shown below:

But What About Gold?

About the time you hear everyone on TV pounding the table on gold and you start to hear the words: Safe Haven Buying for days on end you know you’re near the end of the run. Why? Its emotional money saying “UH OH– the sky really is falling, I gotta get some of this” (AFTER The fact of course).

This tells us we are near a stall point. There is an old adage that has served us technicians well over the years and that is:

“More often than not when everyone is talking about it, that’s about the time it rolls over…”

Don’t follow the herd! We all know what happened to those who followed the conventional Wall Street herd right? They added 7 years to their time horizon window just to get back to where they were in 2007.

While Gold MAY be working its way higher over time, technically it’s overbought and at resistance. While we’re not saying sell it, we are saying expect a pullback. Take a look at the chart below:

Notice how it is bumping up against resistance. Also, notice that the full stohcastics are overbought? Not time to jump on the bandwagon for now.

Just remember the market has a funny way of letting those who have to have it actually have it — in more ways than one, we might add.

Sincerely,
David Grandey
AllAboutTrends.net

February 23, 2009

Is It Time for a Breakout? 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.

We know who is going to get our economy out of this funk and get us on to the next bull market cycle. It’s not the government, it’s not some stimulus package — IT’S YOU!

The way you are going to do that is by taking control of YOUR destiny and by having a plan and trading that plan. It’s ALL ABOUT YOU and empowering you to be the best that you can be regardless of what the market throws at you.

It’s our job to get you to the point where you no longer have to ask “is the market going higher or lower? You won’t care because you’ll just trade what you see, not what you think, hear or fear and you’ll do it according to a plan.

Instead of listening to what all the hoopla herders on TV are saying about it, we’ll revert to our tried and true — that being we let the market tell us what to do by the action it exhibits…

In the really big picture sense as you can see the overall trend is down. Now you know why they call bear markets the “Slope Of Hope.”

By the same token however, within the triangle we are at trendline support so we could make another run for the triangle resistance at 8700. However, before we do that we need to get through the shorter-term resistance level of the chart below.

Moving on to the NASDAQ 100 index, we’ve got more of a stair step downtrend in place.

Nothing new here — just more of the same old same old…

What can we say? It’s all about the green line. A break below it and it’s time to go short on this index. Just remember the following with regards to TRENDS. All downtrends break to the upside and all uptrends break to the downside eventually.

So you see, even if the herd runs the market on the stimulus news, it’s still going to be all about the charts and the charts are telling us we still need to get through resistance levels. And let’s face it — there are a lot of them all the way up.

The big question then becomes what happens after the dust settles? What happens after the stimulus news wears off? That’s where the turning points are assuming a gap up on Tuesday. Remember, the market is the boss.

Notice in the 60-minute chart the full stohcastics are back to being overbought. If this index is going higher, it must break thru the 1280-1300 level — that is resistance. The real key clue as to how far (if at all) this index can go may be to look at (and watch) what some of the kingpins of this index are doing — AAPL and GOOG.

Speaking of kingpins of this index, don’t waste your time looking at MSFT, CSCO, INTC, ORCL as they haven’t gone anywhere in eight years and they are also favorites of the “Managing To A Benchmark” crowd.

When these names break down, the market breaks down. The only difference between these two names and the NDX 100 is that they have both followed through with higher highs year to date vs. the NDX 100 having a hard time breaking through the highs of January.

Dont forget about QID (the NASDAQ short ETF). When it triggers, it usually ends up being a big trade. While we don’t know when or if this will ever trigger, we still need to keep it on the burner. A break above the pink line will likely occur should the market break down.

We’ll let the market guide us by the action it exhibits at key technical analysis levels. So you see whether the market is going up or down, it really doesn’t matter. All that matters is what the charts are telling us.

Regards,
David Grandey

February 17, 2009

Does It Really Matter Where This Market Is Going? was originally featured in the Penny Sleuth.