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Monthly Archives: June 2012

  • Seasonal Turning Points

    Hawk’s Scan Sentry Report June 25

    Those of you in the Northern hemisphere, welcome to summer; those in the Southern, welcome to winter.  Those of you who spend all of your time in your office or in front of your computer…. you might consider getting outside a little bit and enjoying whichever season you are in. Trading the markets can be consuming and addictive; don’t forget why you are doing it!

    To begin our technical analysis this week, let’s take a look at the daily S&P futures contract again.  You can see that the Triple Trender is confirming neither a bullish nor a bearish trend. Look at the Radar3 Trend Strength Index; at blue -3.4  it also indicates that there is no significant trend strength in either direction.  So we have to look for other indications to identify our bias for the near-term market movement. One clue is the recent bearish Pullback 23. Notice that we also have a very nice bearish Pivot Divergence in the Radar2 Price Leader over the last 7 or 8 bars. Also note the longer term bearish “Pullback” divergence indicated in the Radar1 Fear/Greed indicator.  Note also that we recently saw a bearish Trend Exhaustion 1 overbought signal which has not been violated by a higher close. As a consequence of this analysis and these signals, my starting bias for this week is bearish.

    In order to identify the symbols for my equities watch-list this week, I scanned for long set-ups by looking for stocks that bucked the big sell-off on Thursday. Most of the equities that I came up with are in the healthcare sector which outperformed the S&P last week by 1.5%. For my ‘sell-short’ list one of my scans looked for stocks that recently showed a bearish Pullback 23 and a bearish Trend Exhaustion 1 signal. I call this set up a Trend Exhaustion 123. This matches my analysis of the market in general.  I also searched for, and found, some symbols showing recent bearish pivot divergences accompanied by Fear/Greed indications showing bearish strength. This gives me a list of stocks that could potentially be in the early stages of a bearish trend.

    Let’s take a look at some of the specific equities that are on my watch-list for this week and why they are there. If you have any questions about the indicators on these charts please follow this link to a legend describing these tools.

    _____Longs_____

    MRK

    (A breakout of the horizontal resistance line. Radars 1, 2, and 3 and the Triple Trender are all getting stronger.  This bullish stock is not following the general market trend!)

    MMR

    (After a breakout at around $10.00 and a retest of that level we see increased buying force in the Radar 1 Fear/Greed  and early trend identification in the Triple Trender and Radar3 Trend Strength ).

    ECL

    (Another breakout of resistance followed by a pullback to test the breakout price. It looks like a bullish Pullback 23 is setting up.  The last bullish thrust showed more buying strength than the previous ones.)

    _____Shorts_____

    PENN

    (Here we have a double top creating a bearish pivot divergence with Radar1 Fear/Greed and Radar2 Price Leader. Radar1 Fear/Greed and Radar3 Trend Strength are both already showing bearish indications. All of this combined with a bearish Pullback 23 provides an early entry into a potential bearish trend.)

    ELP

    (Pullback into the Triple Trender with a bearish Pullback 23. Note that Radar1 Fear/Greed has just turned bearish again. ).

    XPO

    (A bearish Pivot divergence. Radar1 Fear/Greed and Radar3 Trend Strength both already bearish even though the price is still in the upper 85% of it’s 52 week channel. This is another opportunity for an early entry into a potential bearish trend)

    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.
  • Technical Analysis for Trading Dads

    Hawk’s Scan Sentry Report June 18

    As Father’s Day passes, I would once again like to acknowledge the precious gifts my father, Jan Arps, has left for me… and for you. His gift to each of us includes his keen insight into the ‘personality’ of the markets that we like to trade combined with his ability to synthesize sophisticated mathematical calculations with a creative perspective on technical analysis. This singular mindset has created some of the most insightful technical  analysis tools available to market traders. These include the Fear/Greed Indicator (Radar1), the Price Acceleration Oscillator (Radar2) and the Arps Trender as well as many other tools which are the mainstays of many traders' systems. Even more importantly,  my father he has always been supportive and patient with me and eager to inspire a lifetime of continuing education… Thank you, Jan Arps.

    Now, let us get onto the analysis of the markets. It looks like the market indexes are playing out more or less as we have been expecting the last several weeks.  First,  looking at the weekly S&P chart, we have been watching a ‘Type II’ Bullish Pullback divergence forming between the index price and the Radar2 Price Leader as well as with the Arps Fear/Greed Indicator (Radar 1). This type of divergence is identified when the oscillator makes lower lows than in the previous pullback while the price makes higher lows.  While this weekly pullback divergence has been forming we have been able to confirm the bullish pullback by looking at the daily chart where a bullish Pivot divergence formed within this weekly pullback. That bullish pivot divergence was pointed out in last week’s posting of this blog.  Currently, on the daily charts, we are seeing the Triple Trender bullishly synchronized, and the Radar1 Fear /Greed Indicator showing bullish strength for the first time in months, but our Radar3 Trend Strength does not yet confirm . Furthermore, we are seeing short term bearish signals from the Trend Exhaustion 1 and Pullback 23 indicators.  My conclusion, therefore, is that over the next several weeks we could likely see more upside in these indexes than down; but in the shorter term I am preparing for a potential regression.

    Let’s take a look at some of the set-ups I’m looking at in both directions this week. If you have questions about the tools on the charts you can find information about these indicators at this link.

    _____Longs_____

    SCCO

    (A breakout of the down trendline after a bullish pivot divergence in the Radar oscillators. Note that the Triple Trender and the Radar3 Trend Strength Indicator are both bullish now, and that Radar 1 Fear/Greed is making higher highs. )

    NU

    (This one has just broken out to new highs above the $37.50 resistance level. Radar1 Fear/Greed is making new highs as well. Watch out though, we may get a bearish  overbought Radar2 Price Leader signal soon. This stock is in the Utilities sector which has been one of the strongest sectors over the last few months as the markets have been correcting. )

    EXEL

    ( A breakout above the down trendline as the Triple Trender synchronizes bullish. Also note that the Radar3 Trend Strength Index has just turned bullish and that the Radar1 Fear/Greed indicator is making higher highs. )

    _____Shorts_____

    ETP

    (A bearish pullback 23 signal accompanied by an overbought Trend Exhaustion 1 signal This is a nice pullback to the breakdown price of the Bear Flag .)

    PCP

    ( Here we see the combination Pullback 23 and Trend Exhaustion 1 overbought signals .)

    EPD

    (This is another Trend Exhaustion 1 overbought signal combined with a bearish pullback 23 after a pullback to the Bear Flag breakdown price.)

    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.
  • Nice Bounce

    On Thursday of last week I had one reader ask me if the nearly vertical move on the ES contract on Wednesday was ‘for real’ or not.  Let’s take a look at that.  In last week’s blog I pointed out that 1250 would be a major support level for the ES contract. Sure enough the market tested that on Monday and it held. In the process of testing that level and bouncing off of it, the daily chart formed nice bullish pivot divergences in the Radar1 Fear/Greed indicator, the Radar2 Price Leader, as well as the Radar3 Trend Strength Index. This adds a bit of bullish fuel to the current technical pattern.  So now that we’ve bounced off of that support level, how far up will the market go?  Although no man can answer that question with certainty,  if the price can hold above the current down-trendline, and close above the long-term Triple Trender, then I will be more willing to trade on the long side of the market for the time being. If that is the case, I foresee the next upside resistance to occur around the 1360 level.

    Of course, one hiccup from Europe, one sneeze from Uncle Ben, or one bad 'check-up' from one of our ‘too-big –to-fail’ financial institutions and we could be looking at the 1200 levels up close again in no time at all. I’ll try and be ready with trades in either direction. Some selections from my weekly watch-list are shown below.

    As always, if you have any questions about any of the indicators on these charts you can find some explanation of them at this link. I will also be presenting a free webinar demonstrating the use of these tools on Thursday June 14 at 1:15 PM EDT. The registration link will be provided later this week to all the subscribers to this blog.  I hope to see you there!

    _____Longs_____

    DG

    (This one shows a breakout of the trendline to new highs accompanied by a Pullback 23 signal. )

    IRM

    (Another breakout of the down-trendline as Radar 1 Fear/Greed is breaking its previous highs. Radar3 Trend Strength is now bullish and the Triple Trender has just turned bullish as well. All of this followed a bullish pivot divergence identified by the Arps Automatic Divergence Finder.  )

    ALK

    ( Another stock which has broken  above the down-trendline. The Triple Trender is now bullish as well as the Radar3 Trend Strength Index. Radar 1 Fear/Greed is also making higher highs. )

    _____Shorts_____

    ATPG

    (A bearish Pullback 23 signal as the Triple Trender synchronizes bearishly.)

    OMI

    ( Here we see a Trender Pullback into the long-term Trender accompanied by a bearish Pullback 23. This is happening around the previous low which is now resistance.)

    EXC

    (Here we see a Trend Exhaustion1 overbought signal as the price failed to break above the down-trendline.)

    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.
  • Is this the Limbo? How Low Can You Go?

    Hawk’s Scan Sentry Report June 4

    Last week the American markets went down in a very steady and orderly fashion. There was no panic.  For ES day-traders like me, this created many excellent trading opportunities to enter short whenever there was a minor rally back up to the down-trendline. As I look at  a daily chart of the S&P e-mini futures contract this weekend the technical analysis is still extremely bearish. The index has just completed a pullback into a bearish Triple Trender and now has broken out of a BearFlag consolidation pattern, this is accompanied by a Trend Exhaustion 1 overbought signal and a bearish Pullback 23 signal. The most recent bar even provided a nice breakaway gap to the downside.

    So a lot of traders want to know if this is the bottom, offering buying opportunities. Personally, I don’t think so. Even though the sell-off on Friday achieved some of the highest volume this year,  it still did not have the 'panicky' characteristics of a typical capitulation type sell-off which can be a tell-tale emblem of a market bottom. In other words, even though the current technical analysis mentioned above is very bearish, the investor sentiment has not yet become bearish enough for me to start entering into longer term ‘investment’ type of positions. I expect to see that happen on the day that Greece defaults on it’s bank loans. That day could come later in the summer and I will be looking to buy longer term investments positions then . On a multi-year timeline I am still, as noted in posts earlier this year, quite bullish.  And yes, this downward correction may still have some tradable short-term rallies suitable for day-traders like me. However, at this point I still expect to see the market test support levels around 1250 and perhaps fall even lower to the Bear Flag target of 1212.

    As is always the case, this week's watch list will have potential longs as well as shorts, and some of those are listed here. Most of the longs picks are from what I perceive as the strongest sector in the American markets right now, the Utilities stocks.  Occasionally I will trade in both directions at the same time as a sort of ‘hedge’; but generally I will only trade those symbols with signals in the direction of the larger market trend. Below are charts of some symbols that I am looking at this week. If any of 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_____

    PGN

    (A Bull Flag breakout on a symbol in the Utilities sector. It just completed its first pullback into the Triple Trender which appears to be the start of a Wave 3 pattern. )

    EE

    (I like this because it is a Utility sector stock showing signs of accumulation. Note Radar3 Trend Strength just turned bullish as did the Triple Trender. Notice, also, the strengthening buying pressure indicated by Radar1 Fear/Greed after a bullish pivot divergence. )

    FE

    (A Trend Exhaustion 1 signal combined with a Pullback 23 signal. Keep a tight stop on this one around $46.20. The target is the gap-fill at $47.56)

    _____Shorts_____

    RJF

    (A Pullback 23 coincident with a Bear Flag and a bearish Triple Trender.)

    WFM

    (A Trend Exhaustion1 overbought signal coincident with a bearish Pullback 23. Note the weak buying pressure near the recent highs indicated by Radar1 Fear/Greed.)

    ADS

    (A bearish Trend Exhaustion1 and a Pullback 23 signal combined with a newly bearish Triple Trender. )

    Last week was a good week for the Scan Sentry selections. In an extremely bearish market our long picks did well too. I, however, was not doing any buying last week. I was quite satisfied with several of our short picks which earned better than 20% as they plummeted. Thanks for the e-mails!

    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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