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Monthly Archives: May 2012

  • Key Support and Resistance Levels

    Hawk’s Scan Sentry Report May 28

    It’s “Memorial Day” here in the USA, a time to celebrate our fallen soldiers. So, to all of those brave and conscientious men and women who sacrificed themselves in the cause of the American Dream and to their families I tip my well worn hat. I pray that your sacrifices are not in vain. I share your dream that this nation can fulfill its goal of promoting the general welfare of its citizenry and securing the blessings of liberty to ourselves and our posterity; and that our government can effectively represent the voices of its human constituents (as well as all the other natural beings within our boundaries that have no voice in politics). The markets that we trade, however, are completely global.  The universe of stocks available on the American exchanges is starting to resemble the melting pot which describes our our citizenry. As far as I can tell, the greenback is as blind to race or other affiliation as our government and justice system are supposed to be. Again, thank you, veterans,  for the sacrifices.

    So what are we looking towards for this week’s trading in these markets? Friday’s close generated a nice Trend Exhaustion 1 oversold signal on the weekly chart, which also shows a bullish Pullback 23 signal forming.  But, before you get too bullish, notice the orientation of the Triple Trender… it’s completely bearish. Also note the very weak Radar3 Trend Strength and Radar1 Fear/Greed indications. I wouldn’t be surprised to see a bullish pullback this week into the Triple Trender and test of resistance around 1360, but I would be very careful trading the ES long beyond that level.

    Take a look at the daily chart of the same S&P index futures contract. All of our primary trend and sentiment indicators are very bearish and have been since April. Again, this market would have to close above the long-term Trender at 1351 and and resistance at 1359 before I would consider holding long positions more than a day or two.

    On the other hand, the previous low of 1287 on May 21st was close to a 50% retracement from the rally which started last Thanksgiving. The actual midpoint would be 1275 which is also a significant resistance level from October and November last. On the bearish side I would not be surprised to see a test of those levels.

    So you’re probably saying to yourself, “Hawk, are you bullish or bearish?”.  The answer for this week is that I am expecting to see this market trade as high as 1360 or as low as 1275. And although we could see a breach of these levels I, for one, will likely be looking for fading opportunities when the price reaches those points. As always, I will attempt to be a humble servant of the price action; and right now the market mistress is not showing all of her cards.

    Below is a sample of some of the stocks on my watchlist this week and why they are there. If the indicators on these charts are unfamiliar to you please follow this link to a legend which describes each of the tools on the charts below.

    _____Longs_____

    DSW

    (A breakout from congestion which synchronized the Triple Trender bullish. Also note that the Radar1 Fear/Greed is making significantly higher highs.)

    IOC

    (Another breakout from the trendline and congestion with Radar1 making higher highs. Note that Radar3 Trend Strength is now bullish as well as the Triple Trender. )

    SPRD

    (Here we have a combination Pullback 23 with a Trend Exhaustion 1 Oversold signal. Also note the continually weakening selling pressure in Radar1 Fear/Greed since mid-December.)

    _____Shorts_____

    EEP

    (A pullback into a bearish Triple Trender accompanied by a Pullback 23 Trend Exhaustion 1 Overbought combination.)

    SLW

    (Pullback into the Triple Trender with a TE-1 Overbought signal. Note that we still have a little ways to go to complete our Bear Flag target projection.)

    MENT

    (One bar wipes out all three of the Triple Trenders. Also note that it was accompanied by a bearish Pullback 23 and TE-1 overbought signal)

    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.
  • Sellers Everywhere

    Hawk’s Scan Sentry Report May 20

    The mood on Wall Street seems to be one of 'flight to safety' again with the treasuries doing well amidst the recent equity sell-a-thon, and the precious metals starting to diverge from the plunging equity indexes. This selling appears to be more than simple profit-taking after an extended rally; which means we are not buying this as a pullback. After the S&P June e-mini futures contract broke below 1365, which appeared to me to be the accumulation price for the June contract in early March, anybody that had a long position on that contract was losing money.  I’m happy to say that the resulting sell-off over the last two weeks has been quite orderly providing ample opportunities to enter short. The selling has not had the personality of a panic… nonetheless, we certainly have not seen any herd of bulls willing to accumulate more positions as the price has been dropping.  This week I expect the selling to continue with pauses as it runs into support at 1275 and again at around 1250. The news pundits will give you lots of after-the-fact reasons for this sell-off, but few will tell you the real reason... there are more sellers than buyers!

    I generally try to trade in the direction of the overall market trend, this gives me wind at my back. Clearly the current trend is down and I expect to be selling short again this week. Please note that even though I do not expect to be trading on the long side, I am still preparing myself with buying opportunities in case the market does not do what I think it will do. Although, in general, my technical analysis has proven to give me an edge; the markets are a fickle mistress and she will do what she wants, not what I want or expect. As a consequence, my best strategy is to be prepared for the unexpected.

    In addition to the typical trading signals provided by the Arps Scan Sentry Toolkit, this week’s selections have all been filtered by their relative performance compared to the S&P index ETF “SPY”. The long picks have all being doing better than the ‘spider’ over the past several weeks. The short picks have all been weaker than the index over the last several months.  As always, if you want more information about the indicators on the charts below please follow this link to a webpage with more information.

    Here are some of the symbols on this week's watchlist and why they are there.

    _____Longs_____

    T

    (AT&T broke out of a flag pattern and pulled back to the breakout price where we got a Pullback 23 signal. Also Radar1 Fear/Greed and Radar3 Trend Strength and the Triple Trender are all bullish in a very bearish market .)

    WG

    (With all three Triple Trenders bullish we also have a bullish Pullback 23. )

    LOGI

    (Another stock bucking the trend in a bearish market. In addition to the Arps Radars 1,2 and 3 and the Triple Trender all being bullish we also got  a recent Trendline breakout signal .)

    _____Shorts_____

    IMOS

    (Here we find a breakdown from a Bear Flag pattern which was the first pullback into the bearish Triple Trender accompanied by a breakdown across the up trendline . Also, Radar1 Fear/Greed just turned bearish after very weak buying.)

    SAPE

    (After pulling back into the bearish Triple Trender and filling the gap from early May we now get a bearish Pullback 23 signal.)

    COST

    (A pullback into the Triple Trender which created a ‘Pullback Divergence’ with the Radar2 Price Leader .)

    Again, last week’s selections did nicely. I only traded to the downside and did particularly well with ESRX. I hope you did too.

    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.
  • Consider This

    Hawk’s Scan Sentry Report May 14

    Looking at the market as a whole we’ve seen quite a correction over the past several weeks. Since we’ve corrected this much, a lot of indicators are exhibiting pullback buying signals. Is this really a buying opportunity, or are we seeing the beginnings of a secular bearishness? It seems to me that there are quite a few hungry bears coming out of winter hibernation. One of the reasons for this perspective is that the rallies of 2010 and 2011 have been to a large extent fueled by bank bailouts and cheap dollars loaned into existence by the FED.  Is there any money left to continue to fuel this cyclical rally? Are the monetary manipulators running out of tricks up their deep sleeves? When you examine individual symbols you may still find opportunities to buy into. However, examine your pullbacks carefully; many of the current pullback opportunities are occurring following bearish pivot divergences at the recent highs and the pullbacks are in many cases making lower lows than the previous pullbacks. It’s true that false pivot divergences occur within strong rallies, but the last one will always be the correct one, and one of them has to be the last one! The lack of enthusiasm in the recent rally which peaked around April Fools Day leaves me (and my indicators) identifying my best trading opportunities at this time on the short side of this market. Nonetheless, I am just as prepared to buy as I am to sell.

    This week I’m finding several trading opportunities using combinations of the Triple Trender and the Trend Exhaustion1 tools. Following is a smattering of what I'm looking at after I filter through all of the symbols that I examine to establish my Sunday night watchlist? The charts are accompanied by a little explanation about each of the indicators. As always, if you have any questions about any of the indicators on these charts you can find an indicator legend at this link.

    _____Longs_____

    CERN

    (Here we see a pullback into the short-term Triple Trender (and the breakout price) after making new highs. This is accompanied by a Trend Exhaustion1 Oversold signal. We also see increasing bullishness in the Radar1 Fear/Greed indicator.)

    AXP

    (Another  pullback into the short-term Trender . The Radar2 Price Leader is showing the set-up signs of an oversold buy signal. This is especially appealing as the Radar3 Trend Strength indicator is showing indications of a pullback in a bullish trend. )

    _____Shorts_____

    ESRX

    (One of my favorite set-ups! A bearish pullback into a recently synchronized Triple Trender. Our Wave Count indicator indicates that we are likely past the end of bullish Wave 5 which is corroborated by the series of bearish pivot divergences leading into the highs of early April.)

    OCN

    (Here we see a Trend Exhaustion1  overbought signal. Note how the Radar3 Trend Strength is showing that this is a pullback in a bearish trend while the Radar2 Price Leader is not only overbought, but preparing to give us a sell signal by crossing below the slow line.)

    By the way, last weeks picks did nicely. In a bearish market even the long recommendations did well. HAIN was up over 7% on the week. We had some short positions which did well as well. I hope you did too.

    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.
  • Bearly Anything to Buy

    Hawk’s Scan Sentry Report May 7

    As I look at the  June S&P futures contract (eMini)  I notice that since it started trading regularly in early March, the base of  it’s early accumulation occurred at a price around 1360. Friday’s close of $1362.50 was very close to this significant support level. If it trades much lower than that level, then pretty much every long position on the March contract is losing money. That should add to the 'fear factor' of the current market.  The contract’s high was around 1415 several weeks ago.  “Sell in May and walk away”… that’s what they say. Well, they didn’t waste any time selling. It looks to me like the selling started promptly on May Day and didn’t stop all of last week. It took only one week to trade from near the contract high (1415) to the contract low.

    So how do we make money in this type of market?  It looks to me like there is a lot of money going into Treasury bonds right now, so you could follow that crowd.  But there is not a lot of return there.  If you want to trade stocks this is what I would do. First be willing and able to sell short…. after all, the market goes in both directions and we need to be able to make money either way. Remember, the market generally goes down a lot more rapidly than it goes up, so don’t chase shorts.  If you do trade long, make some quick money and get out. It's best to filter your long trades to stocks that are in the strongest sectors which at this time appear to be home builders, utilities, and consumer staples. Unless you are a trend trader don’t expect to hold any trades more than a few days.   It is  important to note that the amount of risk you expose yourself to in the markets can be measured by time as well as by dollars. I am going to be monitoring each day’s sentiment and day-trading in that direction for quick (and little) profits or losses.

    As I scan my universe of nearly 7000 stock symbols with my Scan Sentry Toolkit I notice that there are exponentially more short set-ups this week than long. Below you will find a few of the stocks that are on my watch-list for the early part of this week, and some of the reasons I am monitoring them.  For an explanation of the indicators on the charts below please follow this link.

    _____Longs_____

    HAIN

    ( One of the few stocks left with a bullish Triple Trender. This one broke to new highs with a Pullback 23 signal while the rest of the market was tanking.)

    LF

    (Another bullish breakout with a Pullback 23 signal and a bullish Triple Trender. )

    _____Shorts_____


    LAMR

    (Here is a bearish Pullback 23 coinciding with a Trend Exhaustion Overbought signal and a Trendline Breakdown signal. Also Radar1 Fear/Greed indicates very few buyers at this time. )

    LINTA

    (After the first pullback into a bearish Triple Trender we get a Pullback 23 signal. Also note the very weak buying enthusiasm indicated by Radar1 Fear/Greed.)

    VLO

    ( A very nice Bear Flag breakout signal coinciding with a Trendline Breakdown signal.)

    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.

4 Item(s)

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.

Full Risk Disclosure

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