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Monthly Archives: April 2012

  • Markets in Transition

    Hawk’s Scan Sentry Report April 23

    This weekend as I scanned the markets with my ‘Scan Sentry Toolkit’ I noticed an interesting phenomena. Using the Arps TTB Triple Trender spreadsheet tool to score all of the stocks in the S&P 500 index I noticed that the number of bullish stocks, the number of bearish stocks, and the number of ‘in between’ stocks was divided almost evenly into thirds (the bears had a very slight advantage). This could mean one of two things; either the market is ambivalent, or the market is in the midst of a transition. I’m seeing a lot of divergences in the recent highs as they have been rolling  over which is common as rallies approach trend exhaustion.  The relative strength of the tech sector, the financial sector, and the energy sector are all getting weaker (these being the sectors which traditionally lead  market rallies). Only the  retail sector and the very volatile healthcare sector are still showing strength.  I also notice that the relative strength of Treasuries is getting stronger. Consequently I, like many others, am losing my appetite for intermediate-term bullish risk. Don’t get me wrong, my appetite for risk has not disappeared, only my appetite for holding my positions for more than a few days. Right now I am just as happy to trade short as I am to trade long… just not for long.  I will prepare myself for either direction.

    For long entries I’m watching a few consolidation breakouts and pullback set-ups for short-term opportunities.  For short entries I will be following some bearish divergence patterns . Jan Arps has just published a nice article on the “Deep Dip Divergence” pattern which can be found at this link. There is also an example of this pattern below.

    Below are a couple of long and short set-ups which have my attention this week. As always, if you have any questions regarding the indicators on these charts you can find their descriptions and explanations by following  this hyperlink.

    _____Longs_____

    HOG

    (After a pullback ‘Trend’ divergence, we see a nice breakout from congestion which synchronizes the Triple Trender. Radar1 Fear/Greed and Radar3 Trend Strength indicators have both resumed bullish indications.  )

    CPN

    (A breakout of the Flag pattern which synchronizes the Triple Trender. Radar1 Fear/Greed is showing increasing buying enthusiasm. )

    _____Shorts_____

    SIMG

    (Here we see an example of a Deep Dip Triple bearish divergence pattern. Click this link for a nice article recently written by Jan Arps describing Deep Dip Divergences.)

    FCS

    (One big down bar just changed the Triple Trender and the Radar1 Fear/Greed to bearish orientations. The Radar2 price Leader is decelerating as the Radar3 Trend Strength becomes more bearish. I’ll try and take this down to support at $13.15 for a 5% target. )

    May the trend be with you,

    Hawk

    Jan Arps’ Traders’ Toolbox is not an investment advisory service nor a registered investment advisor or broker-dealer and does not purport to tell or suggest which securities customers should buy or sell for themselves. Examples presented on this site are for educational purposes only.  It should not be assumed that the methods, techniques, or indicators presented in these examples will be profitable or that they will not result in losses. There is a high degree of risk in trading.  Readers using this information are solely responsible for their actions and trade at their own risk. Readers should always check with their licensed financial advisor and their tax advisor to determine the suitability of any investment.
  • This Week's Set-ups

    Hawk’s Scan Sentry Report April 15

    Welcome back to Hawk’s Scan Sentry Report. As some of you may have noticed, this report took a week off over Easter weekend. This is what I learned over that absence... If the Easter holiday is supposed to be about new life, regeneration, or resurrection the equities market didn’t seem to get the memo. I’m sure that you noticed that the only market participants that found new life over the last several weeks were ‘da bears’. Our current market environment demonstrates a ‘risk-off’ mentality identified by a lot of money shifting from equities into the supposedly safer bond markets. We have seen quite a bit of profit taking of late which may indicate the beginning of a distribution  phase for many of the high-flying stocks which have led this year’s rally.

    So how do I trade this type of market?

    In a market like this, the types of trading set-ups I’m looking for are very specific. My time frame for being in a trade is much shorter than while the market was strongly rallying.  I don’t expect to hold anything for more than a couple of days at the most until the market shows its hand. The stocks I will be trading are generally filtered by industry to select only from those sectors which are showing stronger relative strength than the S&P index.  I am primarily interested in momentum trades that are likely to attract the attention of industrial strength players. For long entries I'm scanning for strongly trending stocks; those that are breaking out of congestion may still be good for a 5% gain in a couple of days.

    For short trades I want to catch sell stops being run or topping divergences which may indicate trend exhaustion.  The shorts on my watchlist are mostly chosen from industry groups that have recently been weaker than the S&P index.

    Let’s take a look at  a few stocks from this week’s  list and I’ll provide a  little explanation of the technical analysis indicated on the charts. If you want further explanation of any of the indicators on the charts below you can find a ‘legend’ at this link.

    _____Longs_____

    PM

    (Note the Oversold Trend Exhaustion1 signal occurring within a nice pullback into the Triple Trender. Also note that Radar 2 Price Leader and Radar3 Trend Strength are setting up for a potential Pullback 23 signal. )

    MKC

    (Here we see another pullback into the Triple Trender accompanied an oversold Trend Exhaustion 1 signal. The Arps Auto-divergence finder has simultaneously identified a “Trend” divergence signal. Also note the continued accumulation indicated by the Radar1 Fear/Greed indicator. )

    ARB

    (Here we see a nice Bull Flag pattern preparing to break out. Note the accelerating Radar2 Price Leader. )

    _____Shorts_____

    PIN

    (Here a Bear Flag has just broken down accompanied by a recent shift to bearishness identified by the Radar3 Trend Strength Indicator. This signal is accompanied by a bearish  breakdown of the up-trendline.)

    ACHN

    (The Triple Trender has just aligned into bearishness as a bearish trendline breakdown occurs. Note how strongly Radar2 Price Leader and Radar3 Trend Strength are bearish.)

    ATLS

    ( THIS SET-UP IS MORE RISKY! Note the Trend Exhaustion3 signal along with the bearish Pivot divergence. The divergence is easy to see in the Radar2 oscillator below.)

    May the trend be with you,

    Hawk

    Jan Arps’ Traders’ Toolbox is not an investment advisory service nor a registered investment advisor or broker-dealer and does not purport to tell or suggest which securities customers should buy or sell for themselves. Examples presented on this site are for educational purposes only.  It should not be assumed that the methods, techniques, or indicators presented in these examples will be profitable or that they will not result in losses. There is a high degree of risk in trading.  Readers using this information are solely responsible for their actions and trade at their own risk. Readers should always check with their licensed financial advisor and their tax advisor to determine the suitability of any investment
  • It's Not May Yet!

    Hawk’s Scan Sentry Report April 2

    When I want to look at the American equities markets in general, I look at the E-Mini futures contract as a reference (I also like to day trade it on occasion). This week I noticed a few interesting things from my technical analysis indicators. First, note the consistently decreasing buying pressure over the last few months (indicated by the Radar1 Fear/Greed indicator) as the price has been rising. This is a strong signal that the rally is losing stem. We even saw it dip into the bearish side of the zero line this week for the first time since last November. Could this be a prelude to the old axiom “Sell in May and Walk Away”? Well, it’s not May yet! Note the bullish Pullback 23  signal indicating a likely continuation to the upside, and all three Trenders of the Triple Trender are still bullish.  As noted last week, it is time to be very careful with our swing trades, but I don't think it's time to abandon ship yet.  As this rally continues to play itself out I will look for opportunities to sell out of my bullish swing positions (I have not been bearish since late last year). I have already been stopped out of a couple of positions, but I believe that there is still a bit more upside to this rally for short term trades. I am still bullish on my longer term (years) investments as well.

    Below are a few individual stocks from this week’s watch list and a little explanation of the technical analysis indicated on the charts. If you want further explanation of any of the indicators on the charts below you can find a ‘legend’ at this link.

    _____Longs_____

    FDO

    (This is a basic breakout of congestion on increasing buying pressure after a nice pullback into the Triple Trender. Radars 1,2 and 3 are all getting stronger .)

    FRBK

    (Another breakout from congestion, this one accompanied by a TE1 signal and a Pullback 23. Radar1 Fear/Greed shows quite a bit of accumulation in the consolidation period preceding the breakout. )

    CYH

    (This one just filled a gap which was a key support level and in the process created a bullish pullback divergence in Radar1 Fear/Greed and a bullish Pivot Divergence in Radar2 Price Leader. These are accompanied by a Pullback 23 signal. )


    _____Shorts_____

    HMSY

    (I like the pullback into the Triple Trender and the subsequent Pullback 23 signal. Also note the diminished buying enthusiasm indicated by Radar1 Fear/Greed at the recent highs. )

    LNCR

    (Radars 1,2 and 3 all just turned bearish as did the Triple Trender. There hasn't been much buying in the last stages of this rally!)

    MTL

    (Radar 3 Trend Strength just turned bearish to synchronize with the Triple Trender. Radar1 Fear/Greed is indicating increasing selling pressure on this stock.)

    May the trend be with you,

    Hawk

    Jan Arps’ Traders’ Toolbox is not an investment advisory service nor a registered investment advisor or broker-dealer and does not purport to tell or suggest which securities customers should buy or sell for themselves. Examples presented on this site are for educational purposes only.  It should not be assumed that the methods, techniques, or indicators presented in these examples will be profitable or that they will not result in losses. There is a high degree of risk in trading.  Readers using this information are solely responsible for their actions and trade at their own risk. Readers should always check with their licensed financial advisor and their tax advisor to determine the suitability of any investment.

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Futures and forex trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing ones’ financial security or life style. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results.

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