Posted on Friday, 5th September 2008 by Steve Warshaw

The DOW made a nice turn around today, bouncing off of support near 11,000; however, I am skeptical how many times this floor will hold. Hence, I feel like it’s time to start looking at short picks. Here is my first:

Symbol: SNHY (Sun Hydraulics)

Trade Details:

Market Forecast

- Overall market is in a down trend
- I expect 11,000 to be tested again, and broken in the near term

Security:

1. The uptrend line starting in February was broken, tested, and confirmed

2. The Fibonacci 50% retracement level didn’t hold up at all

3. This week has seen the 50 and 200 day EMA broken

4. There is a significant divergence between the MACD and price.

5. 1-2-3 bearish trend reversal indicated on the Aroon, PPO, and Williams %r

Intermediate target is 27.02 which is a 9% move,

Long term target is 23.96 (3% above the 78.6% retracement level.

Stop is 3% above 200 day EMA - 32.84

Click To Enlarge

Tags: pick, short, stock, symbol, tip
Posted in Stock Picks & Tips, Technical Analysis | Comments (0)

Posted on Thursday, 4th September 2008 by Steve Warshaw

With the bevy of technical analysis tools available today, I’ve seen many new techincal traders struggle to utilize them properly. While there are 1000’s of books written about this subject, there is one bit of information that I wish all new traders new about these tools.

What is an Indicator

Simply stated (in terms of technical analysis), an indicator is a mathematical formula that is applied to the price or volume of a security with the intention of predicting future price. Common examples of technical indicators are the MACD, PPO, and RSI.

Using Indicators

Indicators are best used in trending markets. In other words, the accuracy of indicators is decreased if the security you are looking at trading is moving sideways, or is highly volatile.

What is an Oscillator

Oscillators is a mathematical formula applied to an indicator, and is constrained between minimum and maximum values. Oscillators are designed to help you identify overbought or oversold conditions. When the oscillator approches the upper (maximum) value, the security is said to be overbought, and conversely, when the oscillator approaches the lower (minimum) value, the secuirty is said to be oversold.

Using Oscillators

Oscillators are best used in non-tranding markets; IE, the security is highly volatile and / or is trading with a sideways price action.

Further Reading

My inspiration to write this article came from a post written by Dr. Berry Burns about creating objective trading plans. In the article, he makes a very bold (yet quite true) statement that single indicators and oscillators simply do not work. They have to be combined intelligently to measure the different aspects of price action which he terms “energies.”

If you wish to read the article, here is a link:

http://club.ino.com/trading/2008/09/how-to-create-an-objective-trading-plan/

Tags: indicator, oscillator, Technical Analysis
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Posted on Thursday, 4th September 2008 by Steve Warshaw

This stock pick is going against the overall trend in the Market, but is showing good enough promise that I’m willing to take the risk.

Technicals

• The AROON is showing a strong uptrend is in place
• The PPO confirms the AROON and shows absolutely no divergence between the indicator and price action
• The Williams %R shows no divergence Either.
• The Williams %R on the daily chart is showing an oversold conidtion

Pattern

The chart pattern combined with the techincals is why I like this trade. A nice double bottom has formed, with a breakout occurring on strong volume. Today, support at the top of the W held up with the 13 day MA acting as further support.

Price Target and Stop

My target of 26.50 for this trade is just above it’s all time high of 26.09

Stop is $20.03, about 3% from a very strong support level.

Fundamentals

Avista is invested in renewable energy sources and provides energy to eastern Washington; an area hot during the summer, and snowy during the winter. They also grew net profits by 75% last quarter.

Tags: advice., pick, stock, tip
Posted in Diversification, Stock Picks & Tips, Technical Analysis | Comments (0)

Posted on Wednesday, 3rd September 2008 by Steve Warshaw

Trade Detective Market Sentiment -

Hi Everyone,

I’m back from my honeymoon and am going to start producing some new picks here pretty soon. I wanted to do a quick review of the overall market for August.

By and large, August didn’t provide much direction for the market; after all was said and done the market really ended up sideways. However, upon closer review there are some signals appearing; let’s take a look.

Taking a look at the long term moving average. Notice how it has gone horizontal, an event which hasn’t occurred on the DOW since the dot com bust. Also, the PPO is showing a bearish cross over and the pattern is starting to roll over as well.

Click To Enlarge

Forecast for this week

In the near term, I believe that we are entering a period known as a “5″ to Elliot Wave theorists. Even though there was a massive reversal today, I suspect this week could be an up week before see an A,B,C correction to the downside. It is possible that today’s high could signal the start of the ‘A’ correction wave, however I wouldn’t be surprise if the market tests 11,800 again before the correction starts.

Areas Of support

Support 1 - 38.2% retracement at 11,481
Support 2 - 50% retracement at 11,356
Support 3 - Swing low just below 11,000

Resistance

A very strong ceiling has been established at 11,800

Tags: analysis, dow, forecast, market
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Posted on Tuesday, 26th August 2008 by Steve Warshaw

Hello everyone, just wanted to drop a quick message to everyone letting you know that I will be gone for the next 14 days for my wedding and honeymoon.

Make some good trades,

Steve

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Posted on Wednesday, 20th August 2008 by Steve Warshaw

Marketing a blog and growing a user base is supposed be this creative art, however, sometimes it pays to just be completely blatant. In case you hadn’t noticed, that’s what I’m doing here.

At the end of each of each article on the site, you will see this cute little Yahoo Buzz Up Button:  

All you have to do is press the button, write a short couple of sentences, and shoot and add a comment to this post for which symbol you wish to have me analyze. Simple huh?

Note Please write a comment on Yahoo Buzz so I can learn more about what you think about the blog.

Thanks,
Steve

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Posted on Wednesday, 20th August 2008 by Steve Warshaw

Article Overview

With the litany of technical analysis tools, algorithms, and software available today, it’s no wonder traders have gotten away from the basics. The problem of course is that all of these fancy tools are useless until you’ve analyze the sign most important indicator of them all. Price!

Trendlines, moving averages, and price patterns: these are the things every trade should study first.

Two Powerful Examples

In the following video, you will see examples of two stocks you could have made a fortune on by drawing 1 simple trendline. Take a look:

Tags: analysis, indicator, price, trade
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Posted on Tuesday, 19th August 2008 by Steve Warshaw

Article Overview

In part 1 of this 7 part series I defined 6 critical elements of any successful trading strategy. In case you didn’t read the first article, these key elements are:

1. A daily routine for analyzing the overall market trend
2. Details for creating, testing, implementing, and refining screens / other methods of identifying possible trades
3. Guidelines for opening new trades
4. Guidelines for monitoring your trades
5. Open, hold, and closing guidelines
6. Rules for updating / refining the overall strategy

In this article, I will show you my method of analyzing the the DOW, S&P 500, and NASDAQ markets to identify overall trends. Then following a top down approach, I will break down each sector, and then show you how I track these trends to find stocks gaining momentum in the appropriate trends.

Overall Method

Many of you have heard the phrase “a top down approach” to analyzing the markets. For those of you have not, this means looks at markets from a macro level (overall market) over a longer time period, down to the micro level (individual stock). By applying technical analysis to charts in this fashion, you will better understand which direction the market is heading, and will sharpen your focus when looking to make trades. I do this every Sunday evening in preparation for the week ahead.

Analyzing the Dow Jones Industrial Average

For decades, the Dow Jones 30 (better known as the Industrial Average) has been a barometer of the US economy. Many expert traders start their market analysis with the S&P 500 because it contains a broader range of companies; I choose the Dow because it has history on its’ side.

Step 1 - Choose a Chart Range

When it comes to analyzing markets, I always start with a 5 year monthly chart, then go to a 2 year weekly, then a 1 year daily chart. I use the 5 & 2 year charts for discovering the overall trends and price patterns in the market, and the daily 1 year chart for timing trades within the market.

5 Year, Weekly Chart

I usually only take a quick glance at the five year chart to see if there are any really long term price patterns emerging. Identifying and confirming a pattern and breakout on a 5 year chart is usually a clear indication of long term direction. In many markets, such as google, you can find a very strong trendlines lasting 5 or more years with 5 - 10 points touching the trendline. Trading in the direction of this trendline, or trading breakouts through the trendline can be extremely profitable.

For instance, take a look at the DOW from May 2007, to January 2008. Notice there are several patterns in this chart, but the one I see most prominently is the Head & Shoulders Top which indicated the uptrend was going to reverse and confirmed this pattern at the end of December 2008.

2 Year, Weekly Chart

I use the 2 weekly chart to try and verify the trend or support the pattern found in the 5 year chart. Sometimes you’ll see different patterns in the 2 year than the 1 year.

 
Click To Enlarge

1 Year, Daily Chart

Finally, I take a look at the one year, daily chart. I use this chart for timing the market. Notice that along with price action, I take a look at a couple of different indicators as well (the Aroon, Williams %R, and PPO). There are many reasons why I have chosen to use these 3 indicators, but that is for another article.

Analyzing Sector & Industry Trends

When analyzing stock sectors and industry groups, choosing a Chart Range really depends on your trading style. A good rule of thumb would be to multiple the amount of time you expect to keep your trade open, and multiple it by 4 or 5. Also, there are several groups of sectors you could chose for analysis, however I chose to use the S&P 500 End Of Day sector charts as described on stockcharts.com sector page

I follow the same top down approach for analyzing sectors as I use for analyzing the overall market.

Tracking Sector Trends Over Time

By tracking sector trends over time, you will be able to find pick stocks that are gaining momentum either in the direction of the current trend, or that are very close to breaking out in the opposite direction. The reason for this is that these stocks are receiving attention from institutional investors. This concept is explained in further detail in my articles about sector rotation.

Tags: analysis, industry, market, sector, sector rotation, stock, trend
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Posted on Monday, 18th August 2008 by Steve Warshaw

Short Term Rally Officially Over…Almost

Taking a look at the daily chart today paints a pretty bleak picture for the current short term rally. Although the rising triangle support line hasn’t been broken, all other signals are pointing to a downside breakout.

Today’s price action  formed a bearish englufing pattern on the candlesticks, and the Williams %R is flashing a new sell signal. Price has attempted to cross the 50 day ema for 7 straight days, only to come crashing back down.

Looking Forward

There is still very little confirmation in the chart in terms of volume. The current rising triangle pattern is looking a over extended, and unless a breakout happens in the next day or two, the pattern will become invalid.

My hunch is that tomorrow or Wednesday we’ll see a downside breakout on high volume which will confirm this ascending triangle is actually a top triangle, and with the next support at July lows around 10,800.

Here’s the chart

Click To Enlarge

Tags: chart, dow, dow jones, forecast, stocks
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Posted on Saturday, 16th August 2008 by Steve Warshaw

Article Overview

In this article I describe my thoughts about trade plans and trade strategies, and define the key aspects of a trade strategy. In further articles I will actually go through the process of defining the trade strategy, step by step, for each element.

Trading Plans vs. Trading Strategies.

Trading, like any other business requires a plan. If you were to start your own company, you’d need to create a business plan in order to provide focus for your business, secure funding from banks, as well as serving a host of other functions.

Trading is no different; the key element to successful trading is having a game plan, sometimes called a trading plan. A quaity trading plan includes many sections, including definitions of your risk tolerance, prerequisites for opening and closing trades, outlines for setting stops, and, an ever evolving list of trade strategies that define your daily process for choosing and managing trades.

For me, a trading strategy is different than a trading plan. Elements such as why you want to trade, whether or not you wish to trade full time, analyzing and defining your risk tolerance, defining your money management plan, and understanding your trading emotion are all aspects that are part of a trading plan, but not a trading strategy. A trading plan can contain several trading strategies.

Key Elements Of Successful Trading Strategies

1. A weekly / daily routine for analyzing the overall market trend
2. Details for creating, testing, implementing, and refining screens / other methods of identifying possible trades
3. Guidelines for opening new trades
4. Guidelines for monitoring your trades
5. Open, hold, and closing guidelines
6. Rules for updating / refining the overall strategy

These 6 keys apply to any trading strategy, although some of them may have to be modified based on whether you plan on day trading, swing trading, buy & hold, or any other overall style of trading. However, understanding how each of these elements effects the quality and profitability of your trading will absolutely increase your odds of success.

Over the next few days, I will be covering each element of of a successful trade strategy, along with the usual market updates.

Tags: Featured, stock, trade plan, trade strategy, trading, trend
Posted in Stock Screens, Trading Plans | Comments (0)