Friday, January 19, 2007
Technical IndicatorsAverage True Range (ATR)Average True Range or ATR is a measurement of volatility. It measures the average of true price ranges over time. The True Range is the greatest distance between today's high to today's low, yesterday's close to today's high, or yesterday's close to today's low. The Average True Range is a moving average of the True Ranges.
High ATR values often occur at market bottoms following a "panic" sell-off. Low Average True Range values are often found during extended sideways movement, like as those found at market tops or after consolidation periods. True Range is used in Welles Wilder's Directional Movement indicator as well as Donald Mart's Master Trading Formula and is a common volatility ratio. The ATR can be used in a channel breakout method of trading by adding or subtracting from the previous bar's close or the current bar's open.
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Trading Education Tutorial
Island Reversals
Stand Alone Formation Speaks Volumes
Reversals tend to occur slowly, with securities forming double bottoms, higher lows, head and shoulders patterns, etc. before starting a new trend. However, sometimes we see a dramatic reversal immediately, and one of the best indications of these types of reversals is Island Tops and Bottoms.
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NASDAQ Chart of the Day
VSEA took a solid breakaway gap to the downside today on increased volume and has broken a major lower trend line in the process. Watch for continued selling from this stock below 44.00.
Daily Trading Signals
NYSE Chart of the Day
EDS took a large gap up today and eventually filled the gap to the downside, forming the right shoulder of a bearish head-and-shoulders pattern. Watch key support at 26.30, as a break through this zone could spark much more selling.
Daily Trading Signals
Daily Market Commentary
Updated Thursday, 1/18 for Friday's market. | Key DOW Levels for 1/19 |
| P | Above 12,625 |
| DN | Below 12,525
|
Still Holding...
- Dow maintains stance at resistance, despite technology sell-off. The index ended the day above near-term support at 12,540 and only managed a 9 point loss, despite the big decline in technology.
- The NASDAQ continues to look highly bearish after a big three-day sell-off, which is beginning to take its toll on the broader market. Watch for more selling ahead.
Summary
The Dow closed the day modestly lower today, but continues to hold at the overall highs in a better-than-expected manner. However, if the index cannot rise confidently above 12,600, it is very likely to sell-off from these highs.
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Thursday, January 18, 2007
Tightening Price Action Leads to a Breakout
There are various forms of consolidation and they occur anytime there is an equilibrium of buyers and sellers. One of the most predictive consolidation formations is the triangle.
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Well Behaved Stocks Reap Rewards
Some stocks move multiple points and multiple directions in one trading session. Other stocks are more methodical in their day-to-day movement. Which type of stock is more attractive to you as an investor.
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Trading Ideas & PicksMCHP: Stock surged past the resistance area, then traded at the upper end of the bullish green breakout candle, representing a consolidation and possible setup for further upside. Look to go long at 36.21...
Trading Ideas & PicksQQQQ: The index is now in an interesting position because it is trapped beneath the resistance of a medium-term trendline, but is trading above the newly-formed support of its December highs...
Trading Ideas & PicksOil: Soil prices have moved sharply lower since the highs made in mid 2006, and we think that this downward momentum will continue...
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NYSE Chart of the Day
GOOG has put in a possible double top at key resistance at 513.00, which could be potentially bearish. Look for a possible drop to occur beneath 513.00.
Daily Trading Signals
NYSE Chart of the Day
BDC has just gotten a big upside break from a clear triangle consolidation at 40.00 and could be headed much higher. Look for continued strength toward 47.00.
Daily Trading Signals
Daily Market Commentary
Updated Wednesday, 1/17 for Thursday's market. | Key DOW Levels for 1/18 |
| P | Above 12,625 |
| DN | Below 12,525
|
12,600 Holds...
- Dow tests key resistance at 12,600, but fails yet again. The index was not able to maintain the momentum above resistance and eventually fell to the Close for a mild loss on the day.
- The NASDAQ and S&P each held ground throughout much of the day, but the tech-heavy index eventually dragged the broader market down. Watch key near-term support for key direction tomorrow.
Summary
The Dow ended the day with a mild loss after reaching to new intraday highs midway through the session. The index is not having any luck breaking and holding above key resistance at 12,600 and could be on the verge of a big pull-back from highs. Watch 12,525 closely.
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