Category: Trading Articles
- 23 August 2016
These 3 stocks are set up for big breakouts
Last week we outlined how to identify potentially great trades using Alibaba as an example as it shined bright. This week there are over 75 trades that qualify for the same analysis. Finding potentially great trades using the neoclassical tool, Trading Signals, isn’t the problem – it’s sifting through all the potentials and picking out the best of the best.
This week I offer up a few more stocks that have broken out on multiple time frames as of last Friday. The first is in the biotechnology arena - Amphastar Pharmaceuticals Inc. (AMPH).
The charts on this one are spectacular not just due to the breakout but due to the potential to carry farther which can be seen on the monthly time frame ... all-time highs now
Another stock is in the oil sector, Baker Hughes Incorporated (BHI). There were about 8 stocks in this sector and one could choose any of them including this one.
On a conservative basis, a 10-12% gains looks doable even if that's all there is. Like Alibaba last week, BHI has a similar setup with breakouts on the daily and weekly charts and the potential for even larger gains if crude oil does work higher.
The final name is in the transportation sector which has struggled for two years but you couldn't tell that by looking at this stock on the daily and weekly time frames - Kansas City Southern (KSU).
Both the daily and weekly time frames are just plain strong
As seen in the charts, the setup is the same – breaks of swing point highs on the daily and weekly charts simultaneously and sometimes the same on the monthly time frame. That is the setup that provides the best opportunity for a continued move higher without an immediate retrace and thus, the reason for calling them potentially great trades. In fact, the statistics show that a successful breakout with this common characteristic will likely carry higher for two to three bars on the greatest time frame witnessing the breakout – the weekly time frame in two of the three cases and the monthly on AMPH.
The problem with this market isn't getting good setups - it's figuring out which ones to take out of the plethora of opportunities.
This article originally printed on Marketwatch Aug 23, 2016 9:04 a.m. ET
Category: Trading Articles
- 16 August 2016
Alibaba- Identifying potential great trades before they happen
Although it might not be immediately obvious, finding great trades and investments via the neoclassical technical analysis model is pretty much the opposite of avoiding potentially damaging losses using the same methodology. Let’s consider that for a moment.
If you have read articles I’ve written in the past, you know the one thing that all traders and investors must avoid at all costs is a breakdown on multiple swing points on multiple time frames. Borrowing from an article written many moons ago (August of 2015) here’s a portrait of what that looks like – before it happens.
If we were to look at the short term time frame as well, a similar set up was occurring there. Breaks of multiple swing points on multiple time frames is a necessary, though not sufficient, condition for significant losses and potential bear markets.
That was August of 2015 and now a year later the market is setting new highs on a regular basis and once more the potential doesn’t become the actual. So what about bullish setups that one can take advantage of?
Well, it just so turns out that great bullish trades have the exact same characteristic – multiple breaks of multiple swing points on multiple time frames only up rather than down. And like most technical analysis, the more the better.
Once such great trade began to setup recently, a trade relayed to TA Today members in our unique cradle-to-grave videos prior to the breakout and also as an addition to our members-only trading portfolio. The stock was Alibaba and the charts look like this now.
On the daily time frame, the stock broke out the day prior to earnings but the potential for that breakout across multiple time frames had us entering the position just prior to the breakout on August 8th. On the very next day it broke a swing point high and again the following four days. That possibility of a strong fast move higher is what got us involved.
But it isn’t just a breakout on the short term time frame that creates the setup for an exceptional bullish trade, it’s the breakout on multiple time frames. Here’s the weekly chart.
As you can see here, the setup to break over not one, or two, but instead three swing point highs in one fatal swoop existed and that is exactly what took place this past week.
These are the highest probability trades that one can find and they work both ways – up and down. It is the recognition of such a trade and the execution of it with a higher percentage of ones funds that allows one to outpace the markets with a lot less risk. In this case, a 15% pop with very little risk in a single week. What’s better, it is unlikely to stop there. Take a look at the monthly chart.
Finding and executing high probability trades that have the potential to be great is a huge part of successfully trading/investing in the markets. Finding and identifying multiple swing point breakouts before they break out is a key cog in that wheel of success and at TA Today we have to tools to do just that.
This article was originally published on Marketwatch on Aug 16, 2016 12:40 p.m. ET
Category: Trading Articles
- 29 July 2016
Last night, I referred to Japan's Bank of Japan as the most basket of basket case central banks. With BOJ's latest disappointment on quantitative easing front, we now have the four major central bankers pretty much doing nothing other than making a lot of promises. And what have the markets done? Like lapdogs to the central bankers, most equity markets around the world have risen. Is it really that simple? Just get a whiff of central banker intervention; front run it and make a small mint? Well, not exactly.
Category: Trading Articles
- 15 August 2016
Will gold fever last?
Gold and gold stocks have seen an incredible run so far this year providing ample rewards to all who were involved. After more than doubling in many stocks and providing a 30% gain in the bullion itself, there are neoclassical signs suggesting that another pause is beginning to form – a refreshing pause that allows wise traders and investors to build larger positions most likely for even more gains to come. Let’s take a look at the charts.
On the short term time frame we have now have two failure bars in a row with the last being a bearish engulfing candle. Those are typically not what you like to see if you are bullish
On the intermediate term time frame the overall bullishness is quite evident but being bullish doesn't necessarily mean "up" forever - at least not if it’s going to last for a long time. What you want is for the metal to stair step higher, surge, retrace, build a base and move on higher. Though I wouldn't call this a fever yet, it's been an exceptional move already so one has to be cognizant of the retrace potential. Some short term cold water on this feverish run higher would actually be beneficial - not long term detrimental.
So with the short term charts (daily) suggesting more immediate weakness, do the longer term charts agree? The answer is to some degree on the weekly charts and very much so on the monthly charts. Here’s the weekly view.
First off, these charts remain very bullish but after breaking higher from the lower range, once more there is a surge in volume which typically results in a digestion phase (up and down choppy action). As such, one should not be at all surprised if prices retrace to the lower end of the upper range or even back into the top end of the middle range.
And it is this range action that offers the best opportunity for longer term investors for it will allow one to "trade around" a core position and actually increase the size of that position while waiting for the next larger leg forward and, make no mistake, legging forward remains the likely path when you consider the monthly (long term) chart.
It is on the long term time frame that overall bullishness is best understood since this chart has officially transitioned trend from bearish to sideways. Unfortunately, the current price area is likely to prove more difficult an area to scale than those that came before for there is the low currently being tested of a high volume, wide price spread bar from the month of May 2013. That was the breakdown bar from the higher range and ushered in significantly lower prices for almost three years.
This article was originally published on Investing.com on August 14, 2016
Category: Trading Articles
- 12 July 2016
Last night, I was listening to a broadcast from Richard Koo, the chief economist of the Nomura Research Institute and author of "The Holy Grail of Macro-economics: lessons from Japan's Great Recession" courtesy of Tim Price at Sovereign Man. It's hard to find an insider, one who was in the thick of the battle, to talk candidly about how critical times have been throughout recent financial history, but here we actually have such insight.
Koo's view of the current macro-economic situation is rather unique but his prescription is purely Keynesian in approach. Even if you don't care to understand the economics and his point of view, flip to about 31 minutes in and listening to how government and Fed officials necessarily have to knowingly fabricate elaborate lies for years to keep the system from failing. If you don't think this is going on in times of crisis - like right now - then I have some swamp land to sell you.
Will it matter this time? Will we reach that tipping point this time around? Right now it would be hard to argue that since once more the stock market dogs are running laps around the track while acting as if the race had just begun. It's always a possibility but if there's one thing I have learned over and over again it's not to try and impress your view on the market but to try instead listen to what it's saying at critical points.
Looking at the charts, the critical line in the sand was the 2103 level on the S&P 500. That price area was captured on Friday as we suspected and positioned for on Thursday of last week, but now the question is "What comes after that?" To get over it was a huge deal. To hold that level on a weekly basis is something else. So good so far on the latter point as the stretch higher continues. Here's the current view as the S&P 500 now sits at all time highs again with a projection of 2178 on the current bullish ABCD structure.
But even though we have new highs here, we don't see that elsewhere - far from it still on the NDX 100 and the Russell 2000. That usually leads to a situation where either the S&P drags the others higher or they drag it lower. With earnings on tap for most all companies now, this tug-of-war will be resolved one way or the other over the next couple weeks of trading against a backdrop of a huge flood of money by central bankers and governments in most of the industrialized world.
In Japan we have Abenomics promising another huge round of QE while the BOJ will also inject more stimulus through some new inventive stimulus program (which is getting harder and harder to do since they own almost all the government bonds already).
In England we are about to get Carney and the BOE injecting more stimulus and the question that remains there is what does the new Prime Minister do on her part - more stimulus too?
In Europe, we likely won't see anything for another month but there too the story is the same.
Finally in the U.S., rate increases are on hold again and this week we hear from Fed speaker galore - three today in fact. Will they tone down the rate hike talk that they keep exercising after prior meetings where they vote to do nothing? If not, the dollar will continue to try and rise.
Although we are positioned for more "up" in the portfolio, we can't lose sight of the downside potential and we have to look to those levels that are critical. On the S&P 500 it is pretty clear now and that's the bullish retest and regenerate zone that now sits below in price and, as usually happens, it's just above what was the critical 2103 area.
This is the lowest risk price zone to put more exposure on if you are bullish and is where we should expect buyers to show up. If they don't then it will say a lot about the short term outlook. If they do, then it will indicate that the projections higher have a higher probability of being met.
Recognize that just because the RT/RG zone exists doesn't mean it has to be tested but probabilities suggest it will and that should happen within six bars. The higher we spike prior to the retest, the higher the probability that the test holds and regenerates so this continued push is laying the groundwork for further gains and that's how we should be viewing this.
So, although my longer term view remains that a larger range is playing out, the shorter term timeframes are not trading that way so as a trader and reader of the tape, you have to accept what the market chooses to do and to benefit from it while it does it while keeping your eye on the horizon. Sooner or later this great monetary experiment will come crashing down but without balance sheets in central bank offices, we have to accept that the financial alchemy can persist for a very long time.