A Daily Swing Trade

When looking at a stock to buy, we look to various tools and techniques to help us assess the probability of its upward movement. However, will it go up is not the only question to ask - we also need to analyze the chart to see how far it is likely to go up and also how much of a loss we are willing to take to allow it to reach it's profit potential. The potential profit of a trade divided by the potential loss of trade is known as the Reward:Risk Ratio.

WFMI took a solid breakaway gap to the upside with big volume, which is highly bullish. Look for continued strength above 48.00.

- Dow pulls back from morning advance, drops through key support. The index held its ground above 12,650, which could indicate a potential bounce tomorrow.

- The NASDAQ and S&P each sold off steadily throughout the morning, but the NASDAQ led a nice move higher to close the day. The tech-heavy index may spark a broader market reversal tomorrow.

Summary

The Dow closed the day near the lows of the session after dropping sharply to begin the day. The index is holding beneath the 12,700 level, but could continue to honor this zone as a major fulcrum. Watch for continued overall strength above 12,600, unless this level is taken out.

GLBL is winding up within the boundaries of a clear triangle, which could offer explosive breakout movement. Watch 14.00 up and 13.00 down.

HOC is holding right at major resisance at 56.00, which has held firmly since last August. An upside break through this level could spark big strength ahead. Watch for a break or bounce away from this level.

- Dow pulls back from yesterday's highs, holds firmly above 12,700. The index closed the day with a 48 point loss, but continues to hold above the key 12,700 level, which is bullish moving forward.

- The NASDAQ and S&P each pushed higher from early lows today, but the tech-heavy index looks much stronger than the broader market. Look for continued upside strength, as it continues to lead higher.

Summary

The Dow ended the day with a loss, but continues to hold above the clear 12,700 fulcrum. Watch for more strength above this zone tomorrow, unless a violation occurs.

We have previously mentioned the three types of gaps that are of relevance to investors - the breakaway gap, the measured (or continuation) gap, and the exhaustion gap. We previously discussed the breakaway gap, but it is important to discuss the measured gap and exhaustion gap at the same time. Why? Because it is difficult to tell one from the other until after the fact?

ACXM is forming a double bottom at key support at 21.75, which has held for a while. Look for a big potential rally from this zone, unless a break occurs.

BA is holding just beneath key resistance at 92.00, which has held firmly since November. Watch 92.00 for a key break or bounce, as big movement could arise.

- Dow reverses from 12,700, rallies steadily to the Close. The index bounce at 12,700 indicates more buying is ahead.

- The NASDAQ and S&P each rallied sharply from the day's lows and now sit above key resistance. Watch for more strength ahead, especially if the current support levels hold.

Summary

The Dow closed the day with a nice advance and continues to hold above the clear 12,700 fulcrum, which is bullish heading into tomorrow's market. Look for continued strength above this zone, unless this fulcrum is violated.

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The importance of trendlines cannot be overstated when it comes to technical analysis. We are told to trade with the primary trend, exit when the trend reverses, enter on trend reversals, and so on. Trends are easy enough to identify, but when is a trend actually broken?

ARBA took a highly bearish candle to the downside today via an exhaustion gap, which could be a topping pattern. Watch 10.00 for more selling.

CMG took out a key resistance level today via a solid gap at 62.40 and looks primed to head even higher. Watch for more strength above 62.00.

- Dow continues holding at highs, stays within tight consolidation. The index closed the day with a very mild 3 point gain, but continues to look positioned for more strength ahead.

- The NASDAQ and S&P each continue to hold within their respective consolidation ranges, which we'll continue to watch for a breakout move. Currently, these ranges point to more upside movement.

Summary

The Dow ended the day with a mild advance to close the session barely higher. The index continues to hold above major resistance, which is promising of more strength. Watch 12,720 and 12,800 for a near-term breakout move Tuesday.