Using Candlestick Charts & Patterns to position trade US Stocks & ETFs

[Pollux]

NQ rallies smartly - no decision yet...

NQ 1693.5 -- a higher volume close on a +BE D would change the picture to a significant degree. The key new piece of data is the volume today, which was clearly absent on Monday's attempt. 1/03/2006 17:25

The signs that were there in recent sessions, as we meandered to new high ground on diminishing breadth & conviction, came home to roost on a bruising day. Google smoothed the waters late in the day with a re- assuring press release about their growth prospects, after the earlier statement at a Merril Lynch conference.

CSCO had a huge day on 137m shares as money sought refuge in the 'utility' end of the spectrum. Not sure if CEO John Chambers would approve of that tag, but he might know what I mean. Actually, perhaps it's not a bad time to be looking at the 'utility techs' which have been showing a pulse of late: MSFT, CSCO etc.

Radar-wise, with yesterday's break, we will re- calibrate once the dust settles a bit, fully expecting this shake-out to throw up some good trading candidates. The negative position held by Perseus for the last week or so has held firm despite the meander to the top of the recent range. Today will provide many more clues about the potential intensity of any further move to the lower end of the range.

01/03/2006 13:00

 

[Pollux]

Missing spark found: how much powder is there, though?

Conspicuously absent from last week’s recovery move were the leading technology groups. We saw health care stocks such as Genzyme (GENZ[/B]) & J&J (JNJ), & financials such as Citigroup (C), starting to recover in a substantially oversold market. Yet major weakness in semis & brokers warranted a cautious stance.

That was last week. This is this week, and Goldman’s results yesterday provided the missing spark for a broad based move.

Along with the brokers, semis and NDX finally made a move of significance. As can be seen from the QQQQ chart, there is a major resistance zone around 41.50, where 50MA and the top of the recent major bear pattern converge.

Focus Stocks here include eBay (EBAY), having tested securely at 37, now above 39; Qualcomm (QCOM), which looks set for another attempt at 50, although we may tighten stops in view of recent failures; Tellabs (TLAB), which has sprung off the rising 50MA but faces multiple layers of resistance; S&P 500(SPY), moving impressively above recent layers at 130; Semiconductor Holders (SMH), having tested 36 & now above the first layer of resistance after a steep 10% decline in March. SMH closed on a decent bullish engulfing yesterday.

Macro-wise, remaining long, though on a short leash, on both SPX & NDX (Perseus Trading).

 

[strewthmate]

Looking for the reversal

We've paired back some of our exposure to the long side, closing our trades on TLAB and EBAY, but remain long on QCOM as it breaks nicely through the $50 barrier.

That short leash we mentioned is getting a little tighter as we anticipate new market direction signals before the end of the week on the SPX & NDX (Perseus Trading),

Charts attached

 

[strewthmate]

New multi-year highs prompt question: is this the real break–out?

In a word we’re not so sure whether this sudden surge in bullish sentiment has much substance to it. What’s sure is that the market is extended in the short term. SMH is the lone dissenting voice out there in this new wave of bullish sentiment. A weak close today would clearly be a dampening factor for the overall market. Earlier today, QQQQ backed off and made a lower high versus recent highs under 42. Trading-wise, we’re maintaining longs in QCOM, SPY & QQQQ.

William O'Neil Interview http://www.tfnn.com/ibd.php

The interview with 'Bill' O'Neil is quite lengthy but well worth perservering with. People pay a lot of money to hear his views on the market, so we view this free audio as a bit of a gift. The essence of O'Neil's approach is grounded in common sense and good market sense. In our view, the key to it all is the golden rule about not overpaying for a stock and buying as close to the pivot point as is possible. All basic in theory but a much harder thing to execute with consistency. We advocate a blended approach using pivot points, general market awareness and those recurring candle patterns that can be so powerful.

 

[strewthmate]

Jam Job

We closed our long positions on the QQQQ & SPY on Friday for a nice profit and reversed at the close to go short on both marketets. We've no other open positions coming into the Fed meeting this Friday.

Monday say little action either way, and Tuesday looked to like the markets were trickling our way until that Fed Jam Job trade got us eyeing our stops rather nervously. It came from nowhere, but thankfully for our open positions it left as soon as it arrived. Rumor has it that a large Chicago futures trader was setting up to distribute.

It's best seen on the NQ charts below. SPY entry also attached.

 

[strewthmate]

New multi-year highs prompted the question last week: is this the real break–out? App

Last Thursday we said: In a word we’re not so sure whether this sudden surge in bullish sentiment has much substance to it. What’s sure is that the market is extended in the short term. SMH is the lone dissenting voice out there in this new wave of bullish sentiment. A weak close today would clearly be a dampening factor for the overall market. Earlier today, QQQQ backed off and made a lower high versus recent highs under 42.

One of our mantras is not to sign up to 'rally mode' if Nasdaq is acting poorly. Really, it's not rocket science, Nasdaq is not just Google, Microsoft or Amgen. It's the very heartbeat of the 21st century US economy. We love seeing the Dow shaping up nicely, but a Nasdaq-less Dow is a one or two trick pony, no more.

Trading-wise, we remain short SPY & QQQQ from 17 Mar 06 as the market gyrates around its equilibrium. Tuesday’s reversal was striking & may have shifted the bias to the downside. However, more decisive action is required for this view to really take hold. Today, LEH & MER action will be significant and well worth watching after yesterday’s bear patterns. Noteworthy looking at the two main indices are the Type 1 patterns on both QQQQ & SPY in recent sessions which presaged this sharp move yesterday.

Charts here:

 

[strewthmate]

Free Seminar: Trading Using Intraday & Daily Charts

We're running a free web seminar with Trade2Win on trading using intraday and daily charts.

Details here: http://www.trade2win.com/events/event.php?id=1140

We take positions using the 15/60 minute chart and Daily charts varying from a day to a few weeks.

If there are any topics in particular you'd like us to cover or if you have any questions, please post them here or PM and we'll try to make sure we cover them.

All the best

Dave