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Monthly Archives: October 2012

  • Scanning for Profits

    Hawk’s Scan Sentry Report October 29

    Looking at the S&P emini futures contract, all of our primary indicators have now turned bearish. The Triple Trender is synchronized bearishly. The Radar1 Fear/Greed indicator is making lower lows after posting a bearish Pivot Divergence. Even the Radar 3 Trend Strength Indicator is giving a bearish reading for the first time since the middle of June. The Radar2 Price Leader is extremely oversold right now so I would expect to see a pullback up into the Triple Trender followed by further selling pressure to the downside. We are currently resting right around 1400 which is where last week's posting identified support. 1385 and 1365 will be the next lower support levels on this contract.

    I was recently asked how I scan for the stocks that end up on my weekly watchlist published here. The answer is simple. I use a set of tools called the ‘Arps Scan Sentry Toolkit’ (from whence this blog gets its title). This is a set of spreadsheet indicators that are programmed to identify some of my favorite technical setups and to plot the pertinent information on a spreadsheet application like the Trade Station Radar Screen or the eSignal Watchlist. Some of the pertinent information that these tools plot includes how many bars ago the setup fired and how much the price has changed since the setup fired.  Some of them even give me warning signals when the setup conditions are starting to come together or a profit target if the signal is a measured move indication.

    After using the Trade Station Scanner to create symbol lists of some of my favorite setups, I then combine the lists on a Radar Screen so that I can sort the data however I want and compare the status of different signals. Finally, I link the Radar Screen to a chart with the significant charting indicators applied and then I can click on any symbol in the RadarScreen and immediately see what the chart looks like.

    Some of those charts are published below. There are setup examples both long and short. Each contains a little explanation of the analysis visible on the chart. If you have any questions about the indicators on these charts please follow this link to a legend describing these tools.

    _____Longs_____

    TDG

    (A combined assortment of bullish signals including a Trender Pullback, a Pullback 23, a Trend Exhaustion 1 oversold signal and an AutoDivergence ‘Trend Divergence’  signal .)

    PKI

    (This combines a trendline breakout signal, with a Pullback 23, Trend Exhaustion 1 and ‘Trend Divergence’ signal.)

    _____Shorts_____

    OC

    (A series of bearish divergences followed by a bearish Trend Strength reading .)

    FR

    (All three Triple Trenders turned bearish after a bearish pivot divergence and a weak Radar3 Trend Strength indication.  )

    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.
  • Identifying a Leader

    Hawk’s Scan Sentry Report October 22

    When you want to know what is causing global events, the common wisdom is ‘follow the money’. But when it comes to the financial markets which we like to trade it is all money. So, in order to get some clues to potential market movements we have to find out which markets are leading and which are following. There is an entire field of technical analysis called 'Intermarket Analysis’ dedicated to this topic and TraderPlanet.com does an excellent job of offering several blogs on the subject.  In this case I will keep it simple and just look at two American market index futures contracts to make my point.

    I postulate that the NASDAQ has led the S&P in this four year rally we have been experiencing.  Why do I say that?  Well, if we look at some of the recent key points of the rally, particularly when price breaks through resistance levels and how far back it retraces, we see some tell–tale signs. Let’s compare weekly charts of the futures contracts for each index.  Note how on October 15th of 2010 the NQ was already breaking through resistance to new highs. The S&P didn’t accomplish that for another three weeks. Next, note the panicked pullback after the dollar downgrade in August/September of 2011. The NQ simply tested the previous support/resistance level and consolidated above that level whereas the S&P spent most of that consolidation below that level. The NASDAQ contract finally broke to new highs in late January of 2012; the S&P didn’t accomplish that until February 10th.  Later, when we experienced the sell off in May of this year, the NQ contract  never broke below the previous breakout price support level, whereas the S&P e-mini once again spent several weeks below that support/resistance level.

    I mention this in order to draw you attention to where we are now. Note how the NQ contract has already broken below our previous highs from April 6; the S&P has not breeched those levels yet. If the NQ contract led the ES contract up it does not necessarily mean that it will lead the way down. However, in so much as the NQ appears to be the leader, I would expect to see the S&P follow the NASDAQ down at this point.  As noted in last week’s blog, fear is more likely to inspire this hyper-extended kind of market than greed… at least until after the American elections.

    As usual, below are the charts of some of the symbols that I am looking at this week for my trading watch list. There are examples both long and short. Each contains a little explanation of the analysis visible on the chart. If you have any questions about the indicators on these charts please follow this link to a legend describing these tools.

    ________Longs________

    NYB

    (A Pullback-123 which combines a Trend Exhaustion 1 signal with a Pullback 23 signal to identify a Pullback Divergence. We also see a Trender Pullback here. This is occurring at the up trendline support level.)

    TIP

    (This is a similar scenario as above. Simultaneous bullish TE-1, Pullback 23, and Trender Pullback signals)

    ________Shorts________

    PL

    (A bearish Pullback Divergence identified by the Pullback-123 combination described above, this one at the down trendline resistance level.)

    WM

    (Same setup as the previous chart with an additional Trender Pullback signal. )

    MCRS

    (Another Pullback-123 Pullback Divergence in a downtrend. )

    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.
  • What My Job Is and Isn't

    Hawk’s Scan Sentry Report October 15

    Some think that as a technical analyst it is my job to try and predict the future of the markets I am studying. Not so!  I would rephrase my job description like this… it is my job to come up with  analysis that  provides a  short term bias that is constantly being updated, a medium term biases that takes longer to change, and a  long term bias that informs my investments more than my trading.  However, these are not predictions, they are biases.  This may sound like an apology, but it is not. Over the past year the market has moved pretty much in the directions I have expected (and published).  The way I see it, my job is not to predict the markets I trade; it is merely to design good trades for whichever direction the market might go. I cannot force my will on the group mentality which is the market.  At best, all I can do is be properly prepared to meet the market and her participants in the process buying and selling. That means having good entry and exit strategies in either direction. It also means having a perspective that is as accurate as possible. This is where experience and sophisticated technical analysis helps.  However, both of those come at a price.

    So, what do we see for the coming week? In the S&P emini we currently rest around 1420. As noted last week we could easily see the current slide in the American equities market take us back to support levels established in March and reinforced last August around 1400.  1465 will act as resistance if we make it back there this week. As you are trading remember, this is earnings season and election season… anything could happen to spook or inspire a security or even the market as a whole. Economic and political surprises should not be unexpected at this time in the cycle; and fear has a better chance of inspiring a major move in the market than greed.

    Below are the charts of some of the symbols that I am looking at this week for my trading watch list. There are examples both long and short. Each contains a little explanation of the analysis visible on the chart. If you have any questions about the indicators on these charts please follow this link to a legend describing these tools.

    _____Longs_____

    HCA

    (A TE-123, pullback divergence setup... Trend  Exhaustion 1 with a simultaneous  Pullback 23. Wave counter shows that this may be the end of Wave 4.  This is occurring at a logical support level and above the long-term Triple Trender)

    NPSP

    (A breakout of a Bull Flag and the resistance trendline accompanied by a Pullback 23. This one may backtrack to breakout level @ $10.07... target is $12.05)

    WDR

    (A pullback divergence with a Pullback 23 signal.  This one is also at a support level above the  long-term Triple Trender)

    _____Shorts_____

    EXC

    (A bearish pullback divergence below the long-term Triple Trender, accompanied by a Pullback 23 signal. This is occurring at a logical resistance level of previous lows.)

    PSA

    (A Bear Flag breakdown accompanied by an up trendline breakdown. All three ‘Radars’ are bearish 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.
  • Looking Ahead

    Hawk’s Scan Sentry Report October 8

    Few would argue that we are currently in the upper reaches of a mature bull market.  This Fed fueled market has been making higher lows and higher highs since Obama took office in 2009 and is now approaching the historical peaks of rallies which ended in February 2000 and October 2007. It’s amazing what practically free money will do for a stock market. At this point we would only need a 7%  rise in the S&P to meet those historical highs which create our next significant resistance level at around 1560.  As I have noted several times this year in this blog, I expect to see this market test those levels before the end of this year.  If we do reach the 1560 level I will then expect to see a lot of profit taking.  I don’t know how much ground we will cover toward that upside target this week since we are currently testing the most recent interim highs attained several weeks ago.   This, of course,  creates a bit of resistance. If we fail in this attempt to break through our current resistance level of 1468 we are likely to see another pullback into the 1420’s or perhaps back to around 1400 before the bulls make another charge toward new highs.  In my short term trading endeavors I hope to be ready for either scenario this week.

    It is vitally important to be prepared to ride this thing up down and/or sideways because, like a rodeo bull, this market will do its best to buck and kick in every direction in order to throw you off. Ask any rodeo cowboy, the trick is to endeavor to become one with the raging animal you are riding.  That’s why it is especially important to look at both long and short trading possibilities in order to be ready for the unforeseeable gyrations of this bull market. Below are some charts of some of the symbols that I have identified this week for my weekly trading watch list both long and short. Each contains a little explanation of the analysis visible on the chart. If you have any questions about the indicators on these charts please follow this link to a legend describing these tools.

    _____Longs_____

    BLK

    (A nice breakout above the down trendline accompanied by a bullish Pullback 23. All three Trenders of the Triple Trender are now bullish.  Note that Radar1 Fear/Greed is starting to make higher highs as well. )


    ARCC

    (A Pullback 23 and Trend Exhaustion 1 oversold signal occurring at the up trendline.  If this trades below the recent lows then get out.  )

    PIR

    (A nice Pullback 23 after a pullback into the Triple Trender)

    _____Shorts_____

    FTK

    (Rejection at the down trendline. Downside target is $10.65 )

    ACTG

    (Here we see a bearish Pullback 23 and a breakdown below the up trendline. Target is $23.24)

    SHFL

    (This one  is all about the pivot divergence with Radar1 Fear/Greed ).

    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.
  • Would You Care to Dance?

    Hawk’s Scan Sentry Report October 1

    Trading the markets is like dancing with a fickle partner. It’s very important, however, that you let the market lead. If you do not then you will pay… much worse than just getting your toes stepped on.  If you do let the market lead and you pay attention to the subtle clues she gives you as to which direction she is tending, then you can find yourself  the envy of all of the others at the ball, gracefully moving back and forth with the most powerful being there. But remember, YOU MUST LET HER LEAD. If you try to lead she will humiliate you with her wily ways. So how do you read her subtle clues? Well, you need good sensors that telegraph her intentions to you as she herself is deciding to make her move. This is precisely what the study of technical analysis is designed to provide. However,  there is no substitute for an experiential education that enables you to perceive the nuances that separate the actionable signals from the others. When you make mistakes the market mistress will berate you (and your trading account) until you learn to humble yourself enough to perceive her will, not your own hopes and expectations. That is why I often encourage new traders to reassess their analysis frequently, as the markets morph from day to day. There is no way around it, this type of experiential education can be expensive; however, sophisticated technical analysis can help curb the costs significantly.

    Right now when I look at the American equities market as portrayed by the Emini-S&P futures contract, I see a pullback in an uptrend. Note how we retraced to the support/resistance level in the mid 1420’s , and how we see a bullish Pullback 23 setting up right at the up trendline. We’ve even got a bullish “Pullback Divergence” developing in the Radar2 Price Leader which also happens to be oversold right now.  We still have a Bull Flag target to achieve as well.  Radar1 Fear/Greed is not as strong as I like it; however I am fine with my bullish outlook until the Radar1 Fear/Greed indicator drops below the previous lows of -25.76 on August 30 one month ago.

    Although I am bullish on the market in general, I will let the market mistress lead me where she will. That is why I like to look at both long and short trading possibilities in order to be ready to dance whichever direction she decides to step.  Below are some charts of some of the symbols that I have identified this week for my weekly trading watch list. Each contains a little explanation of the analysis visible on the chart. If you have any questions about the indicators on these charts please follow this link to a legend describing these tools.

    _____Longs_____

    CDNS

    (This is a Pullback 123 trade combining a Trend Exhaustion1 signal and a Pullback 23. This is occurring right at support and creating a bullish Pullback Divergence. )

    AM

    ( Another Pullback 123 pattern, this time as a breakout to new highs above the down trendline. )

    MDR

    (This is a bullish Pullback Divergence with Radar2 Price Leader identified by a combination of signals from Trend Exhaustion 1 and Pullback 23)

    _____Shorts_____

    MO

    (A bearish Pullback 23 into the Triple Trender creating a pullback divergence in the down trend.)

    CHD

    (Here we see a Pullback 23 signal at the short-term bearish Triple Trender).

    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.

5 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.

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