In order to find our entries, let’s first look at what the market’s doing right now, and whether we’ve actually topped out. Here’s a glimpse at the daily index charts off the March 2009 lows:

The NASDAQ, Dow and S&P indexes have uptrends that are still intact. The green lines, the blue line and the 50-day moving average are your guides. As of this moment in time we see no top in the market.

That said, if we see a quick run sometime next week to a retest of the highs and then a pullback off of that retest, those developments will create a double top and I would then be more apt to want to call a short term top at that time.

Why does the presence of a double top cause us to be more likely to change our position on the market? Because the double top is one of the most common early warning alert system patterns telling you a “Change in Trend” may be near.

The Two Ways to Buy a Stock

So now that the indexes are pulling back, but remain in a clearly defined uptrend above their uptrend lines and 50-day moving averages, we want to focus on stocks that are in the same position and have simply pulled back off of their highs to those support levels. This is called trading in tandem with the market.

Now, there are two ways to buy stocks. The first way is to find a stock that has formed a base and buy it when it breaks into new highs above the base. This is called buying a traditional breakout. Here’s a look at a recent breakout:

As you can see from the chart, after breaking out, the stock quickly turned tail to retest what was resistance (now should be support), and actually closed under support or back in the base. If you had bought them with a stop loss, chances are after a few days of feeling good you were stopped out.

Now let’s look at the second way:

As you can see here, this issue broke out. But most breakouts consolidate their gains and retest the area that was once resistance. So rather than chase the stock, we patiently wait for it to come to us.

In this case, the pink line represents the stock’s pullback off of its highs back to what was once resistance -– and is now support. Our buy point is a break above the pink line.

A classic buy support and sell resistance trade. That’s a lot better than chasing a stock only to get stopped out as the stock retests support and then takes off without you.

So what does that mean for us today? It means that since the markets have pulled back to near short-term support, now is the time to be prepared to take advantage of these opportunities — opportunities to buy stocks in confirmed uptrends at a risk-adverse place.

Sincerely,
David Grandey

Source: Buying Stocks Safely Using Alternative Entry Points

In its simplest form, the phrase refers to buying the pullbacks whether it’s in the market indexes or individual stocks — as long as they are at some sort of support level. So let’s take a look at most recent dip and the most recent rip over the last week.

For us, it all starts with the short-term index charts. From there we move into the individual stocks, as three out of four stocks generally trade with the overall trend of the market. Lately, that overall trend has been up, and stock investors have been enjoying gains in a big way. In fact, in the last month alone, the S&P 500 has gained nearly 5% as stocks bolstered by signs of economic recovery took back some of the losses they suffered in 2008.

As you can see, support is clearly defined and the full stochcastics are in oversold territory. Those are your clues to get ready. This tells you that you are “In The Zone” and its time to see if individual stocks are showing this as well. Here’s a recent example in Perfect World (NASDAQ: PWRD):

In just a week, this stock rocketed from $36 to $44. That’s a home run in the world of swing trading, and it’s a gain that any investor could have had a chance at by just buying the dips and selling the rips. All you have to do is follow the formula…

What I want you to notice is what they all have in common:

1. All have been pulling back off highs — The Dip
2. All pulled back to at or near the 50-day moving average (the blue line)
3. All have the full stochastics in oversold territory.

So now, what do you do about it? Well, there are two ways to take these trades.

One is to take them right there at a support level — at or near the 50-day moving average with a 10% stop. The other is to wait for the crossover of the pink line as shown to the upside. The latter is the safer trade, however from the dips lows of the 50-day average or a support level is a lot of room that would be missed by waiting for that to occur. This really means that you are paying up for the stock by waiting for the pink line trigger.

Sincerely,
David Grandey

Source: Deciphering this Trader’s Simple Profit System

Should the markets follow the script I’m about to lay out below, we test the Blue support levels. Then, we can look for a bounce. This could be considered a tradable bounce, followed by a final move to those June breakout levels in the DOW near 8900 — 950 for the S&P 500.

For now, we’ll take it one step at a time..

This first chart tells you why Friday’s run stopped where it did:

Why? Because those are multiple resistance levels as shown above in the Red Line and the pink downtrend channel as well. Sure, it skirted the line, but we aren’t reading into it too much due to low volume pre-holiday trade. Now you know why we call charting an art and not a science. Also, you can also see in the chart above that the full stohcastics are in nosebleed territory once again.

In addition to those support and resistance levels, Elliot Wave fans can see a few short-term scenarios above, namely the BLUE Waves 1,2,3, and 4.

If true, then here comes wave 5 down to the 9100 Dow level and 975 level on the S&P 500. You can also see the RED Waves 1 and 2 — if this is true, wave 3 to the blue line levels stated above could be in play as well.

This week, we’ll find out soon enough it they want to take the Dow and S&P 500 back up to retest the highs in a “Just Because We Can” move…

All the ingredients are on the table should the markets want to pullback from here. What we’ve seen thus far is a market having a hard time following through. That is, most individual stocks out there have been pulling back in a corrective fashion vs. a fast and furious move to the downside.

Should the markets follow the script laid out above, we test the Blue support levels and then look for a bounce that would be the start of the right shoulder by the way when viewing the daily charts. This could be considered a tradable bounce then a final move to those June breakout levels in the DOW at 8900ish and 950ish in the S&P 500. So we’ll take it one step at a time..

Sincerely,
David Grandey

Source: Get Ready for a Tradable Bounce

At All About Trends, the action in leading stocks — stocks that have delivered solid returns during this rally — is what we use to gauge the health of the market. That’s because in order for the market to continue to advance, the leaders must lead the market higher. And lately, those stocks have struggled — just look at AMZN, SNDA, NFLX, BWLD, JOSB.

That said, it’s not surprising to us to see what’s happening in the NASDAQ. And since the NASDAQ often leads the market, we expect to see topping patterns in the Dow and S&P very soon.

As you can see above, the NASDAQ has formed a Change In Trend pattern — from up to down.

Typically, there are three short sell set-ups that provide the best opportunity for low-risk gains. They are:

• Double Tops
• 1st Thrust Down
• Pullback Off Low’s

The above chart of the NASDAQ sports all three. The first clue that a change in trend is near is the formation of a double top (the red lines). Then, we have the first thrust down, which you can see from the second top down to the start of the pink line — the stocks that have led the NASDAQ higher are also now showing a first thrust down which explains the selling in AMZN, SNDA, NFLX, BWLD, JOSB.

And finally, you have a Pullback Off Lows pattern (the pink line). When a stock or an index completes its First Thrust Down, it will eventually find support and attempt to rally. This rally attempt is called the Pullback Off Lows pattern.

All of these set-ups are tradable on the short side.

Let’s start with SNDA first.  SNDA formed a solid Double Top pattern. This is what it looked like before it triggered a short-sell trade:

When it broke its pink uptrend line, it began its First Thrust Down.

JOSB is another example of a stock that is in the First Thrust Down phase.

As you can see, JOSB formed a double top as shown by the red line. The blue box is the first thrust down which is often a steep, quick sell-off — in this case JOSB has lost 14% in just two days.

These First Thrust Down moves start when a stock tops and then breaks its upward trendline. The place to take the trade is at the trend line break.

Finally, after a stock completes its First Thrust Down, it will eventually attempt to rally back. When they do that, they will form the third short-sell pattern we look for called the Pullback Off Lows pattern. LOPE (NASDAQ:LOPE) formed this pattern back in March and here’s what it looked like as it triggered:

This pattern is the exact opposite of the Pullback Off Highs pattern we’ve discussed in the recent past. It’s also usually the start of many trades we can do on the same stock. As you can see here, when a stock reverses course and starts making lower highs and lower lows, each rally attempt is a new short-sell opportunity.

Sincerely,
David Grandey

Source: Three Ways to Short Stocks

But don’t be afraid– it will be a healthy occurrence. It brings the extended names back into line and allows for buying them on pullbacks vs. chasing them.

In the Short Term…

Yes, the market is extended. And if– over time– we are going to work our way higher to the big picture downtrend line shown in the daily chart, a healthy pullback may be just what the doctor ordered. When we get that, we’ll watch the 50-day averages on the indexes and individual names for stabilization.

In the Micro Short Term…

Friday the DOW closed up AGAIN! Another 44 points! Impressive? To the untrained news anchor, I can see how it could be. However, ask anyone who was paying attention closely to the market into the close Friday and they will tell you it had that manufactured feel to it.

Now we’re not one for conspiracy theories, but we can tell you all day that index and a boatload of names struggled. The whole move higher Friday took place in all of two minutes as shown below. But the catch is while this took place, the stocks on my monitor didn’t even budge– they just sat there…

In Summary…

There are a lot of extended names, which tells us something, but no major topping patterns. However, more than a few of the extended leaders are showing minor topping action, which really just sets the stage for a healthy pullback (which we still haven’t seen during this run).

Denny’s Grand Slam

With the prolonged rally, we see there are many stocks that are well extended from their 50-day moving averages.  We want to keep an eye on them, because good buying opportunities have historically been at the first time an issue pulls back to it’s 50-day.

Not only is it usually a safe place to initiate a new position, but the issue often bounces impressively right off of the 50-day moving average line. This gives us an opportunity to lock in some significant short-term profits. Our stop loss would be a close below the next area of chart support… although it would be an early warning sign if the stock were to close below its 50-day.

We call this the Denny’s Grand Slam set-up because after a stock’s advanced, it usually gets slammed down to the 50-day. At that point, it becomes a cheap meal.

Following is an ideal example from last week:

When using this strategy, we are looking to buy a stock at an area where it should find support. However, we have to pay close attention to what’s happening in the market at the time. A move lower by the market could send the stock right through its 50-day average. So it’s even more critical to be moving in step with the market with these types of trades.

The other thing to note is that it’s a “jack be nimble, jack be quick” trade. When they hit the 50-day, most of the stocks don’t stay there long – my readers had about 10 minutes to take the LFT trade last week. After that, it was well out of buying range…

Sincerely,
David Grandey

Source: How to Trade an Extended Market

This means turning off the TV and staying focused on understanding what kind of chart patterns make for successful investments and to have the confidence to pull the strings when they trigger.

For us, we look at three types of chart patterns:

• Uptrend patterns
• Downtrend patterns
• Changes In Trends patterns

And that’s all we look for. We don’t care what any analyst said about a stock, what Cramer had to say in last night’s Lightning Round or if we didn’t like the service we got at this company’s store. None of that matters. All that matters is what the chart is telling us and what we do as a result. The chart patterns that lead to significant gains are the same whether you are a trader or an investor.

It’s a Market of Stocks, Not a Stock Market

How do you make money consistently month over month regardless of market direction? How do you make money being long when the market had the kind of year it had in 2008, which featured some of the worst months the market has had since the 1930’s?

The answer is simple. It’s a market of stocks, not a stock market. You want to get to the point where market direction shouldn’t matter. All that matters is finding stocks that have completed set-ups ideal for significant gains and doing what the chart tells you to do.

Even in the most raging bull market, a sector or two may suddenly fall out of favor and then we’ll start seeing topping signs on the charts of the industry’s leading stocks. This means it’s time to go short — even though the overall market is going up.

What Can We Expect This Week?

Going into the week, we’ve got a lot of cross currents. We can build a case for the market continuing higher and we can build a case for the market going lower.

Month to date for the most part the Dow Industrials have been range bound.

One element that gives us pause for continued upside in the short term from here is the making of a potential Head and Shoulders Top brewing as shown above (with the blue line being the neckline.)

The pink line is important by the way– it’s the whole uptrend line off the March lows. As you can see it’s broken it and is currently backtesting. That’s a negative for the long side of the equation as shown below…

A break of the neckline to the downside sets the ball rolling or a potential retracement to the 7500 level as that is where the 38.2% fibonacci retracement and the 50-day moving average levels are.

Should we not be able to break 7750 to the downside, well then that would be construed as a sideways consolidation.

In summary: If the market wants to continue higher — we’ve got names on the long side of our watch list to work with.  If the market wants to break lower — we’ve got names on the short-sell side of our watch list to work with.  So remember:

It doesn’t matter if the market goes up or down.  We trade what we see, not think, hear or fear.

Sincerely,
David Grandey

Source: Why It Doesn’t Matter if the Market Goes Up or Down

With both of these indexes you can see they are overbought and pushing a resistance level for the time being. For All About Trends, before we can begin to make the case for the market to go higher, we must first work off this oversold condition by either completing a Pull Back Off Highs (POH) pattern or consolidate sideways.  At least that’s what we need to see on the daily charts.

The 60-minute charts are another story – that being they are short-term oversold.  This suggests we COULD make another trip back up to the highs, at least in the very short-term.

As you can see, the full stohcastics are in the deeply oversold territory. One can also see that off the lows we’ve pulled a 5 waves up (abcde) Elliott Wave affair.  So the big question at this moment in time is: Was that it? 

After all the daily charts show major resistance levels being hit OR do we still have a little bit more work to do to stage a full blown ABC up as shown in blue.  One thing is for sure as you can see from the A? down to the B? that you have the makings of a Pullback Off Highs (POH) developing. The same holds true for the OTC Composite Index below.

In summary:  Going into this week we come away with asking Was That It? Or are we going to build out a larger ABC up, then down.

While on the subject of Waves, lets take a look at a few…  

When looking at the three main indexes we come away with a potential divergence. The divergence comes from where the OTC Composite MAY have completed its five waves down of the sequence but the Dow Industrials and S&P 500 may have one more run back down.

IF this index holds true to form and traces out a five waves down to end the first leg of this bear market, then a retest of the lows are in order.  However, don’t fall into the trap of “well gee, if we are going to retest the lows and I go short right here and we do retest the lows I will make X dollars.”  The trap with that thinking is that you then attach yourself mentally to a particular outcome. And if that outcome does not transpire, you’ve set yourself up for disappointment. This is what Kenny Rogers meant when he said “don’t count your chips till the dealing is done.”  
 
[Note: In order to conserve space we won't show the S&P 500, but it has that same look.]

As you can see, one could say we’ve completed five waves down off the highs. The 5th wave MAY have turned out to be a truncated 5th wave, which may have shown up in the form of a double bottom with a shake out low. HOWEVER, even if that is the case, this index is still big-time overbought as shown by the RSI and Full Stohcatics settings (Red Circles). So even if that was it, expect a short-term pullback off these levels.  

When looking at the true market bottoms of the Great Depression and the bear market of 2000-Oct. 2002, it took 4-6 months. And you didn’t know that was the bottom for at least a month after that. While history doesn’t always repeat itself, it often rhymes.
 
In summary, we need to see some sort of pullback off highs pattern develop in the overall markets, which will reset our indicators.

Source: What Does One Wild Week Mean For The Markets?

We see this played out everyday as more brokerage firms struggle to survive and unfortunately, we see folks like Madoff facing serious charges.

Here’s how you can take control of your investments:

1.    Understand what the market is doing.

That’s first and foremost. You can invest in a good stock that’s breaking out of a set-up, but if the market direction isn’t behind you, it’s like riding a bike into a fierce wind. You must understand where the market is and where it’s likely to go in the short-term. Then, invest in the best set-ups that will be helped by the market direction. It’s much easier to ride a bike with the wind at your back.

2.    Trade only the best set-ups.

Let’s take a look at NVEC, which triggered a long-side trade last week…

When a stock is moving higher, it doesn’t go straight up. Instead it rises, then has mini-downtrends where it consolidates its gains before moving higher. These mini-downtrends are where it pulls back off of its highs in an orderly manner — often to an area of key support such as its upward trend line and/or 50-day moving average.

We connect the lines of the mini-downtrend. A break above the pink line triggers a trade on the long side. For that reason, NVEC was an ideal long side set-up last week:

On Tuesday morning, NVEC triggered a trade by breaking above the pink line.

By Tuesday’s close, we were already enjoying a gain of 5%. And Wednesday morning, we locked in gains of 8.9% — a nice gain in today’s market in just over 24 hours.

This leads to step #3.

3.    Take your profits when you have them.

While on the surface, a 9% gain may not seem like much, I have to tell you that if you just did one trade like that a week, you’d significantly outperform most brokers, money managers and mutual funds. After all, most of these money handlers are nothing but “Managing To A Benchmark” cookie-cutter indexers that know how to sell but not how to manage. Have you seen what the indexes and mutual funds are down year to date? If your traditional account mimics the indexes, you know you’re working with one.

Just think about it. Let’s say you have a portfolio of $50,000. And you invest in 200 shares of NVEC at 28.22. After selling it at $30.74, you’ve made a profit of $504. Multiply that by 52 and you have a one-year profit of $26,208 or 52%! And that’s just from doing one trade like NVEC a week.

What would a one-year gain of $26,208 do for you? Well, it would easily put you well ahead of what most brokers could do for you.

Stocks may continue to go in the direction we want after we take profits. But for the time being, you are never going to go wrong ringing the register on short-term gains. For example, what if we didn’t lock in our NVEC gains at $30.74? Our gains would have been gone as the stock went right back to where it was when it originally triggered.

Now don’t get us wrong. We aren’t out to get brokers. We know a lot of them and many are very good. But the point we are trying to make is the days of handing your money over and expecting a traditional Wall Streeter to perform are over. To be successful, you have to be in control of your investments. After all, only you have your best interests at heart. As good as your conventional Wall Streeter may be, he’s not able to watch your investments as good as you can.

Source: Quicker, Safer Trades Every Week

All uptrends break to the downside and all downtrends eventually break to the upside. They are Change In Trend patterns that you really need to be on the lookout for. After all, if you are long, a trendline break to the downside is your cue to get out of dodge. Conversely, if you are short and an issue breaks its downtrend to the upside, it’s time to run for cover and lock in your gains.

Today we’ll be talking about trendline breaks to the downside. They say a picture is worth a thousand words… so rather than explain it away, just take a look at the charts below. They are great examples of what we are talking about…

So what happens after they break the uptrend to the downside? We call that a1st Thrust. That first thrust is an excellent trading opportunity — it’s often one of the most explosive moves a stock will make. Think about it. If a stock has been going up for a long time, it’s going to fall hard and fast when institutions decide they want out. The same goes after a stock’s been falling for some time. We’ve seen stocks absolutely go into orbit as investors pile on to get in at bargain prices.

After a 1st thrust down, we want to watch for a snapback rally as shown.

The battle cry with these patterns are : 1ST THRUST DOWN (blue box on all), SNAP BACK RALLY (Pink Lines) , BOMBS AWAY.

Now it’s your turn, look at the issue below.  What do you see?

Source: How to Trade Trendline Breaks