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On January 27, I said it was not yet time to sell stocks, but the technical situation has deteriorated quite rapidly since then. Yesterday (an FOMC day), stocks saw heavy volume selling action that produced another “distribution day” (a decline on increasing volume) in both the S&P 500 and NASDAQ Composite. In a healthy market, a few days of institutional selling over a 3 to 4-week period is normal and can typically be absorbed by demand. However, when the running count of distribution days reaches five or more, it nearly always signals a substantial correction is just around the corner. The 3-Part Test There are three main components that determine the mode of my broad market timing model, which determines whether I focus on the long or short side of the market, and how aggressively to do so. Right now, only one of those three tests is (barely) holding up. 1.) Volume Pattern Of Broad Market In the NASDAQ, yesterday was the seventh day of higher volume selling in recent weeks. As such, the volume pattern portion of my broad market timing model is now flashing a clear “sell” signal. 2.) Broad Market Trend In my January 27 blog post, I also mentioned one positive element of current market conditions was that both the NASDAQ and small-cap Russell 2000 were still holding above key support of their 50-day moving averages. But that is no longer the case. With all broad-based indexes now below their respective 50-day moving averages, the trend component of the timing model has shifted to a “sell” signal as well (though I would like to give it to the end of the week to see if the NASDAQ can bounce back). 3.) Performance Of Leadership Stocks The third and final component of our timing model, the performance of leadership stocks, is the only part of the model that is preventing the current “neutral” mode from officially shifting to “sell” mode. Still, even this portion is barely holding on. NASDAQ 4000 – Coming Soon? Taking an updated look at the daily chart of the NASDAQ (below), notice the tech-heavy index reversed lower after running into new resistance of its 50-day moving average yesterday (January 29). The index also closed near its intraday low, near the intraday low of January 27 (near-term support). If the price action follows through to the downside today (January 30), then bearish short-term momentum will likely take the index down to the 4,000 area (support of the December 2013 lows). However, a false move lower in the first hour of trading that subsequently reverses above the previous day’s high could lead to a short-term bounce: Although my newsletter is not yet in full “sell” mode, I have been laying low (in “neutral” mode) this week. But as a bonus, a positive earnings report from Facebook ($FB) has currently launched our existing long position to an unrealized gain of approximately 27% since our December 2 buy entry. The long side of the stock market is all about low volatility and steady/reliable price action. However, current conditions are quite volatile. Therefore, even if I spot new bullish setups on the long side of the market (such as $AMBA or $AL), the stock market is simply too unstable right now to add new exposure with confidence. Trade What You See, Not What You Think! Obviously, there are quite a few scenarios that could play out from here, and that is why we always shy away from predicting market action and worrying about where the major averages will go. Consistently profitable trading is all about reacting to price action, not predicting it. I can discuss different possibilities and have a plan in place, but I still have no clue what will happen tomorrow. If my timing model shifts into full “sell” signal, I will then start focusing on short selling stocks and ETFs with the most relative weakness. Nevertheless, with the market already down sharply in such a short period of time, there are simply no low-risk short entries at the moment. Chasing on the short side can be just as bad or worse than chasing longs. If you have ever been caught in a short squeeze, you know that the price action can explode higher for several days before taking a break. With the very real possibility of a significant correction just around the corner, this is a great time to review my preferred strategy for entering new trades on the short side. Upon doing so, you will surely see the importance of maintaining discipline and patience right now. -
For the past six weeks, the NASDAQ Composite Index ($COMP) has been uneventfully oscillating in a sideways trading range (a 3% range from the upper channel resistance down to lower channel support). However, we have identified three highly reliable technical indicators that point to a strong likelihood of the NASDAQ soon breaking out to a fresh, multi-year high (despite continued weakness in the S&P 500 and Dow Jones). 1.) The Most Reliable Indicator You Probably Never Use We prefer to keep our technical analysis of stocks pretty simple. Although there are literally hundreds of technical indicators at our disposal, we rely primarily on price, volume, support/resistance levels (such as trendlines and moving averages), and the relative strength line. The relative strength line is a simple leading indicator that allows us to easily see how a stock or ETF is performing against the benchmark S&P 500 Index ($SPX). This is not to be confused with the RSI indicator (relative strength index). When the relative strength line is outperforming the price action of the stock (or the Nasdaq Composite in this case), it is a reliable bullish signal that often precedes further gains in price. On the chart below, notice how the relative strength line has already broken out to new highs twice, even though the NASDAQ has been trending sideways to slightly lower. This is a clear sign that institutional funds have been rotating out of the S&P 500 and into the NASDAQ: 2.) Salute The Bull Flag While the relative strength line is one of the most reliable technical indicators to predict future price action, the bull flag is definitely one of our favorite bullish chart patterns to identify and profit from. On the longer-term weekly chart, we clearly see the Nasdaq has been forming a bull flag chart pattern. This is annotated by the black lines we have drawn on the chart below: Notice that the rally off the lows in July created the flag pole part of the bull flag pattern, while the current sideways price action forms the flag. The tight consolidation of the past six weeks has retraced less than one-third of the last wave up. This is what we like to see, as the best-formed bull flag patterns should not pull back to more than a 38.2% Fibonacci retracement of last move up. Finally, since the flag pole and the flag are frequently symmetrical in time, we need to compare how long it took for the pole to form with the length of the flag. Since the pole was created over the span of six weeks, the anticipated breakout from the bull flag pattern should occur after the flag has formed for 5-7 weeks (we are currently on week 5). 3.) Already Leading The Market Higher When I began trading and studying technical analysis many years ago, I assumed that the main stock market indexes (such as the NASDAQ) led the way for the top-performing stocks to move higher. I was definitely wrong. The reality is the opposite situation; leading individual stocks set the pace for the broad market to follow. When the strongest stocks in the market (typically small to mid-cap growth stocks) are convincingly breaking out to new highs ahead of the broad-based indexes, it is a very bullish sign and the main stock market indexes usually follow suit. Conversely, it is a bearish signal when the major indices are trending higher, but without clear leadership among individual stocks. Right now, there is a plethora of stocks that are breaking out to new highs ahead of the NASDAQ. In no particular order, here are the ticker symbols of a handful of stocks breaking out right now, or have already broken out, to new highs: $QIHU, $LNKD, $TSLA, $NFLX, $KORS, $LOCK, and $YELP. We are presently long four of the above stocks in our Wagner Daily newsletter, and with the following unrealized gains since our original buy entries (based on Sept. 6 closing prices): YELP +23.2%, LNKD +10.0%, LOCK +9.1%, and KORS +7.1%. In case you missed it, you may want to check out our original August 21 analysis of Yelp ($YELP) (before it broke out and zoomed higher over the past few days). Death And Taxes – The Only Sure Things As my grandmother loved to tell me, “the only sure things in life are death and taxes.” I agree, especially when it comes to the stock market. Obviously, the Nasdaq has not yet broken out, and there is no guarantee that it will. Nevertheless, the combination of the three reliable technical indicators above suggest a strong likelihood that the tech-heavy index will soon break out of its range and cruise to a new, multi-year high (though the S&P and Dow are another story). If the Nasdaq suddenly rallies to new highs as anticipated, are you prepared to take advantage of the move? Do you know which stocks will offer the best odds for high profits? Be prepared.
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i am going to discuss about my trading style and strategy in low volume nyse ,nasdaq stocks:crap:
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One ETF we have been watching closely for potential swing trade entry in recent weeks is PowerShares QQQ Trust ($QQQ), a popular ETF proxy for the tech-heavy Nasdaq 100 Index. Specifically, we have been monitoring a bearish head and shoulders chart pattern that has been developing on the weekly chart interval of $QQQ. If this bearish chart pattern starts following through to the downside, it may create a low-risk entry point for short selling $QQQ (or buying a short ETF such as $PSQ or $QID). In this article, we walk you through the details of this technical trade setup for $QQQ, and present you with the most ideal scenario for actionable trade entry. For starters, check out the annotated weekly chart pattern of $QQQ below: When determining the validity of a head and shoulders pattern, there are a few factors we look for to determine whether or not this bearish pattern is likely to follow through to the downside. One of the biggest technical considerations is the trend of the volume that accompanied the price. The best head and shoulders patterns will be marked by higher volume on the left shoulder and lighter volume on the right shoulder. Such a pattern indicates decreasing buying interest as the pattern progresses. As you can see by the 10-week moving average of volume (the pink line on the volume bars above), volume has indeed been declining during the formation of the right shoulder. Another element we look for is whether the neckline is perfectly horizontal, ascending, or descending. The neckline on the $QQQ chart above is ascending, which means a “higher low” was formed. This ascending neckline slightly decreases the odds of the head and shoulders following through by breaking below the neckline. Nevertheless, between the two technical elements of the volume trend and angle of the neckline, volume is considered a more significant factor in determining whether or not the price is likely to move lower after the right shoulder has formed. Since it’s always best to assess a potential swing trade setup on multiple chart time frames, let’s zoom into the rather interesting, shorter-term daily chart interval of $QQQ: Just as the “line in the sand” for price support of $SPY is last week’s low, the same is true of $QQQ, but even more so. Notice how support of last week’s low in $QQQ neatly converges with both the 50-day moving average (teal line) AND the intermediate-term uptrend line from the November 2012 low (red line). The more technical indicators that converge in one area to form price support, the more substantial and pivotal that support level becomes. As such, be sure to monitor the $67.60 area very closely in the coming days, as a convincing breakdown below that level could be the impetus that sends $QQQ on its way down to testing the neckline of its head and shoulders pattern. Despite the convincing head and shoulders pattern of $QQQ, it is important to keep the following two things in mind: First, due in no small part to recent weakness in heavily-weighted Apple Computer ($AAPL), the Nasdaq has been a laggard throughout the multi-month rally in the broad market. Rather, the blue chip Dow Jones Industrial Average has been leading, and that index still remains very near its multi-year highs. In a fractured market with significant divergence between the major indices, clear follow-through in either direction usually does not come easily. The second (and more important) point is that the head and shoulders pattern, like all technical chart patterns, obviously does NOT work 100% of the time. In fact, far from it. This means that blindly selling short $QQQ (or buying an inversely correlated “short ETF”) at the current price level of $QQQ is risky and not advisable. Instead of entering this swing trade setup based purely on anticipation of the pattern working, our technical trading system mandates that we first wait for price confirmation that indicates momentum has shifted back in favor of the bears. At a minimum, we would NOT enter a short position unless/until $QQQ breaks down below last week’s low, which we now know is a key level of price support. Jumping the gun by trying to get an “early” entry point is never advisable in swing trading. As always, we will give regular subscribers of our ETF and stock technical trading newsletter a heads-up in advance if/when $QQQ gets added to our “official” watchlist for short/inverse ETF swing trade entry.
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A good way to determine the levels of oversold or overbought of the stock market is by using the indicator that measures the percentage of stocks that are above their 50-day moving average. It is a breadth indicator that you can find under the symbol $NAA50R in StockCharts.com This indicator is currently in overbought zone, which makes me think that the odds are in favor of a pullback in the markets. Markets are always oscillating between the two extremes. The stock market can remain in overbought condition for some time but now is the time to start to take precautions and stop thinking that the market can continue to rise indefinitely. In the end the price is what matters, but you must be prepared for a bearish environment at least until this indicator falls under 20. Happy Trading!
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To achieve high profit from trading the stock market, it’s advisable to trade as a pro (not as a gambler). To do so, there is a need to get some secrets of creating profits. Let’s now see which stocks are the top in NASDAQ Stock Exchange Market. >> Uranium Resources Inc. gains 120 % profit started on 2010/08/23 at price 0.6 >> Ascent Solar Technologies Inc. gains 80.25 % profit started on 2010/09/07 at price 2.38 >> EXACT Sciences Corporation gains 71.11 % profit started on 2010/09/07 at price 4.88 >> priceline.com Incorporated gains 61.49 % profit started on 2010/08/03 at price 230.67 >> Acacia Research Corporation gains 61.46 % profit started on 2010/09/13 at price 16.84 >> Occam Networks Inc. gains 61.18 % profit started on 2010/09/13 at price 4.56 >> Art's-Way Manufacturing Co. I .. gains 58.82 % profit started on 2010/09/27 at price 6.29 >> Sierra Wireless Inc. gains 58.41 % profit started on 2010/07/26 at price 7.19 >> Cresud S.A.C.I.F. y A. gains 47.31 % profit started on 2010/08/02 at price 13.4 >> Dynamex Inc. gains 44.52 % profit started on 2010/09/21 at price 14.6 >> Focus Media Holding Limited gains 44.15 % profit started on 2010/07/20 at price 16.85 >> LSI Industries Inc. gains 43 % profit started on 2010/09/21 at price 6 >> The Medicines Company gains 42.19 % profit started on 2010/07/26 at price 9.22 >> BSQUARE Corporation gains 41.2 % profit started on 2010/07/13 at price 2.67 Whether the market is up or down, you can create the profit you’ve dreamt of and avoid the loss easily. If you are interested in how to make such profit in just a few months, just keep an eye on the top promising stocks that are surely going up. (Moderator: Removed promotional URL)
