Monday, April 23, 2007

Trading Education Tutorial

Hell's Triangle

The classic Descending Triangle illustrates the painful rollover from bull to bear market better than any other pattern. But why does it work with such deadly accuracy? Most traders don't understand how or why patterns predict outcomes. Some even believe these important tools rely on mysticism or convenient curve fitting. The simple truth is more powerful: congestion patterns in technical analysis reflect the impact of crowd psychology on changes in price and momentum.

Shock and fear quickly follow the first reversal marking a triangle's major top. But many shareholders remain true believers and expect their profits will return when selling dissipates. They continue to hold positions as hope slowly replaces better judgement. The selloff then carries further than anticipated and their discomfort increases. Just as pain begins to escalate, the correction suddenly ends and the stock firmly bounces.

For many longs, this late buying reinforces a dangerous bias that they were right all along. Renewed confidence even prompts some to add to positions. But smarter players have a change of heart and view this new rally as a chance to get out. As they quietly exit, the strong bounce loses momentum and the stock once again turns and fails. Those still riding the issue now watch the low of the first reversal with much apprehension.


Trading Ideas & Picks

The QQQQ Report for April 23rd - April 27th - A New Six-Year High

QQQQ: Many traders will watch for the $44.80 level to provide short-term support in the event of a more significant pullback. Friday's bullish price action briefly sent the QQQQ to a new six-year high, which will cause many traders to watch closely to see if the bullish momentum can continue...

Trading Picks - Read More

Trading Ideas & Picks

Weekly Swing Ideas Report for April 23rd - April 27th

Stock Picks - Long and Short Potential Swing Candidates ... SwingTracker Scans: Trading Window, Force Swings (SLM SLM Corp, BTU Peabody Energy, ECA EnCana Corp, AL Alcan Inc, TWC Time Warner CableA), Triangle (MOT Motorola, Inc, WEN Wendys Intl, YUM Yum Brands, MNTA Momenta Pharmaceuticals, WLT Walter Industries), Revival, Reversals, Breakouts (XOM Exxon Mobil, CVX Chevron Corp, BID Sothebys, HUBG Hub Group, DFR Deerfield Triarc Capital), and more...

Trading Ideas - Read More

Trading Education Tutorial
Courtesy of Nirvana Systems

Volume Climax

Volume Helps Identify Reversals

Various price patterns can alert us to potential reversal candidates. Trendline Breaks, Support and Resistance Levels, Fibonacci Retracement Levels and other price information are valuable in determining a change in direction for a security. However, one of the most overlooked chart patterns that help us determine reversals is not reflected in the price itself. Volume climaxes are easily identifiable and valuable in assessing a change in market sentiment.


NASDAQ Chart of the Day
Courtesy of Nirvana Systems

XPRT has formed a large inverted head-and-shoulders pattern at the overall lows with a clear horizontal neck line (resistance) at 15.40. This pattern is typically highly bullish and has the potential to spark a move that could fill the prior gap at 18.40. Watch resistance closely.

Daily Trading Signals

NYSE Chart of the Day
Courtesy of Nirvana Systems

LRW took a large gap up yesterday and broke below yesterday's lows today, indicating a potential fill of the gap could be ahead. Look for more weakness below 21.00 to indicate that the exhaust gap could be completed.

Daily Trading Signals

Daily Market Commentary
Courtesy of Nirvana Systems

Updated Friday, 4/20 for Monday's market.

Key DOW Levels for 4/23


Above 13,000


Below 12,900

Sharp Advance...

- Dow rallies strong at Open, pushes to new highs at the Close. The index reached the 12,950 level and held steady throughout the day before rallying to the Close with a big 153 point gain.

- The NASDAQ and S&P each rallied in strong fashion this morning and where able to hold gains to the Close, which is a very bullish sign. Look for potential ranges to form at highs, unless near-term support is crossed.


The Dow closed the day with a solid gain after opening the day in a highly bullish manner. The index has rallied steadily higher over the last seven days and could be nearing an over-bought nature. A break back below 12,900 could bring about a much-needed retracement before more strength is seen.


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