Thursday, November 29, 2007

 
Technical Indicators

Chaikin Money Flow

Developed by Marc Chaikin, the Chaikin Money Flow compares total volume to the closing price and the daily highs and lows to determine how many issues are bought and sold of a particular security. It is based upon the assumption that a bullish stock will have a relatively high close price within its daily range and have increasing volume. However, if a stock consistently closed with a relatively low close price within its daily range with high volume, this would be indicative of a weak security. There is pressure to buy when a stock closes in the upper half of a period's range and there is selling pressure when a stock closes in the lower half of the period's trading range. Of course, the exact number of periods for the indicator should be varied according to the sensitivity sought and the time horizon of individual investor.

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Trading Education Tutorial
Courtesy of Nirvana Systems

Triangles




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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NASDAQ Chart of the Day
Courtesy of Nirvana Systems




XIDE got a nice breakaway gap to the upside on increased volume, which is quite bullish at the moment. Looking at the chart further shows this breakaway gap is actually a very powerful island reversal pattern, which indicates we could see more strength back toward the 8.75 level.

Daily Trading Signals

 
NYSE Chart of the Day
Courtesy of Nirvana Systems




PBY got a huge downside break through the bottom of a bearish consolidation pattern at 13.70 on increased volume, which is quite bearish. Look for more weakness from this stock ahead, likely toward a target of about 8.00.

Daily Trading Signals

 
Daily Market Commentary
Courtesy of Nirvana Systems

Updated Wednesday, 11/28 for Thursday's market.

Key DOW Levels for 11/29

UP

Above 13,400

DN

None


Huge Rally...

- Dow breaks through upper trend line, rallies sharply for 331 points. Given today's strength, we could see a continuation pattern form at highs before another try at 13,400 is seen.

- The NASDAQ and S&P each rallied through clear upper trend lines today, paving the way for big strength throughout the day. Look for each index to build out at highs ahead of another round of buying.

Summary

The Dow ended the day near the highs of the session after breaking through the clear upper trend line at 13,000. The index looks poised to push even higher moving forward, but we may see a consolidation pattern build out first. Look for continued strength above 13,000 ahead, unless 13,400 cannot be crossed.

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Technical Indicators

Moving Average, Displaced

PThe Displaced Moving Average takes the current moving average and shifts it forward (or backward) in time. Use to de-trend the data, for cycle estimation, for phasing or as a simple moving average trading system.

While the first number in the study specifies the period of a simple moving average (e.g., 28 days), the second parameter specifies the shift period (e.g., 5 days); enter a negative number to shift the moving average back (e.g., -14 days). When the moving average is shifted back, the remaining portion of the study is computed with the moving average based on the available data for each day (e.g., 13 days, 12 days, etc.)

The mathematics of a moving average will always force it to follow or lag the actual price data. By centering the moving average, you will have a more accurate picture of the moving average relative to the current price on the chart. A Displaced Moving Average study could be quite useful in locating and estimating cycles...

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Trading Ideas & Picks

El Paso Corp - EP - Ascending trendline

EP - Stock is trading near a long-term ascending trendline that has propped up the price since early 2003. Connecting a series of rising bottoms, as shown in the chart below, is a common method used by traders for gauging strategic points of entry. This chart is a text-book example of how a trendline acts as a level of support during a prolonged uptrend.

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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.

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NASDAQ Chart of the Day
Courtesy of Nirvana Systems




BIDZ got a bearish breakaway gap to the downside today and has now broken a clear lower trend line at 15.00. This stock could be headed back towad the 8.25 range.

Daily Trading Signals

 
NYSE Chart of the Day
Courtesy of Nirvana Systems




SM has formed a clear head-and-shoulders top pattern that could be on the verge of a key sell-off. Watch for selling pressure beneath 39.35.

Daily Trading Signals

 
Daily Market Commentary
Courtesy of Nirvana Systems

Updated Tuesday, 11/27 for Wednesday's market.

Key DOW Levels for 11/28

UP

Above 13,050

DN

None


Bounce from Lows...

- Dow reverses from yesterday's lows, rallies 215 points. The Index ended the day beneath the key upper trend line with a big 215 point gain, but is now at a crossroads in the charts.

- The NASDAQ and S&P each pushed back and forth throughout the session today and continue to hold within clear ranges. The NASDAQ will likely determine major market direction once a breakout from its consolidation occurs.

Summary

The Dow ended the day with a solid gain and continues to honor the key upper trend line. Look for the index to test the upper line tomorrow at 13,000 before the day's direction is decided. Strength through 13,100 will indicate more bullish sentiment ahead. Otherwise, more downtrending movement will be seen.

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Trading Ideas & Picks

The Weekly Report for November 26th - November 30th - Will The Bulls Respond?

Even though the bulls were able to send the S&P back into positive territory for the year, we feel that the overhead resistance of the 200-day moving average may be too overwhelming to convince traders that the upward rally will be able to continue...

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