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understanding the stock market, trading system
Begin part 2 of 3
SUBSCRIBER QUESTIONS
Q: You've said or implied on various occasions that the market won't be ready to move up again with any real conviction until the investor complacency is shaken out and some real fear comes back into our collective mindset. I don't really understand this concept []. Would you be kind enough as to explain the reasoning behind this concept? Thanks a million for your help.
A: The market moves when investors with the big money buy or sell stocks. Of course. The real understanding of the market, however, comes in understanding when they are showing they are ready to buy or ready to sell. Those decisions are driven by two extreme emotions, fear and greed and the gradations in between. If you look at charts long enough you can see that fear and greed manifested whether it be a blow off top on a stock that has run hard and then continues to shoot higher in massive, high volume run that is its last gasp. The examples are multitude, but when you start to understand that the market is driven by human emotion that has not changed since the Japanese traded rice futures thousands of years ago and that charts display that emotion, then the picture starts to get clearer.
What you are looking for in major market moves is emotion at extremes, either everyone overly confident or overly scared. With the current pullback on NASDAQ we wanted to see fear ratchet up as it sold; that is why a second leg lower that really scares investors is good because it gets those out of the market that are not really committed to the upside. That did not happen and the market bounced on low volume. Now it is moving laterally on low trade, frustrating many that hung on. It is basically supply and demand: when those 'weak' holders sell out either through a violent sell off that scares them out or a slow lateral and lower move that frustrates them out and only those committed to the stocks are holding them, the market is ready to move. It then only needs a catalyst to get buyers coming back to the market to buy. Stocks are in the hands of those who believe in them longer term, and they require a higher price to part with them. That demand causes price to rise and that is how breakouts occur.
After a long rally as in 2003 investors are not as hungry for stocks. They assume they are going to continue moving higher but buyers are getting saturated. There has to be something that makes buyers want stocks again, and that is usually a selloff that gets those that are easy to sell to go ahead and sell. When they are so scared they don't want to be in the market, that is just about the time stocks have sold back and moved into the hands of those looking for more value. That is when that supply and demand takes over.
CONTINUING PLAY LIST
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LEGEND FOR CONTINUING PLAY TABLE
DATE: date play first appeared on report.
PLAY: Denotes the type of pattern or play.
Upside play types: A Wedge=Ascending triangle/wedge; BO=Breakout; Cup=Cup base; Cup hdl=Cup w/handle; DB hdl=Double bottom w/handle; Dbl btm=Double bottom; Flat=Flat base; FlyPlat=Flying Plateau; Pennant=Pennant; Rv H&S=Reverse head & shoulders; Saucer=Saucer base; Test 18=Testing 18 day MVA; Test 50=Testing 50 day MVA; Test BO=Testing the breakout (could be 10 day MVA test, etc.)
Downside play types: CCall=Covered Call; DWedge=Descending triangle/wedge; Dbl Top=Double top; H&S=Head & shoulders; Put (generic downside);
PIVOT=Buy point
Tgt=Target stock price for the play. Applies to stock and options.
Vol=Volume for the most recent session.
TgtV=Target volume to enter the play.
Stop=Stop advisory point. This is advisory and we may or may not exit a play if it hits this level depending upon market conditions.
PLAY STATUS: Buy not hit (stock has not hit buy point); Buy not issued (stock has hit buy point but did not enter due to weak volume, poor intraday action, poor market action); Current (ongoing play already entered); Entered today (entered the play that session); Exited (closed the position); Target hit (play hit initial target; will note if took all or partial gain or let run further); Trailing stop (exited using a trailing stop loss).
Upside Plays
Stock Date Play Close +/- Pivot Tgt Vol TgtV Stop
$SOX 04/07 Test 50 515.24 +3.46 519.25 545 0 0 508
Buy Not Issued. Still consolidating. Volume was not there to enter the play. Raised pivot since stock has not established break out point.
ABTL 04/09 DB hdl 15.53 +1.24 15.14 18.42 1.2M 860K 14.05
Entered today. Tapped 14.03 at the low and rallied for an explosive move up the 10 day MVA on excellent volume surge.
ALGN 04/09 Cup hdl 22.43 +2.01 21.67 26.12 918K 703K 20.15
Entered today. Great move up the 10 day on strong volume surge.
ANSR 04/03 DB hdl 7.81 +0.05 8.29 10 143K 425K 7.66
Current. Tapped 7.60 at the low and rallied holding above the 10 day MVA on low volume. Moving up after testing the break out.
APCS 04/03 Rv H&S 6.84 +0.16 6.38 7.75 371K 1.8M 6.42
Current. Tested the 10 day MVA and rallied for a nice move on excellent volume surge.
BBOX 04/07 Cup hdl 57.83 +0.86 56.98 65 132K 354K 54.72
Buy Not Issued. continue to move up the 10 day MVA on low volume. Have not entered the play, because volume is not there. Will drop, stock, but will keep our eye on it.
BCR 12/17 Rv H&S 97.84 -0.23 80.93 92.95 321K 500K 96.32
Current. pull back showing a doji on much stronger above average volume. doji may indicate a change in the pattern.
C 03/29 Flat 52.06 +0.53 51.93 59.72 7M 17M 51.06
Current. Gapped up at the open and moved up the 10 day MVA on low volume.
CERN 03/25 Test 50 47.25 +2.17 47.06 53.88 731K 986K 44.72
Entered today. Gapped up at the open for an explosive move on stronger above average volume.
CHIC 04/05 Test BO 17.28 -0.39 18.88 22 257K 375K 17.56
Buy Not Issued. Fell below the 18 day MVA on rising, above average volume. Stock has not performed so will drop, but will keep our eye on it.
CHT 01/22 Cup hdl 17.84 -0.04 15.75 18.92 219K 1.1M 17.44
Current. Pull back showing a doji just above the 10 day MVA on low volume. Pull back after nice move.
CNMD 03/17 Flat 30.45 +0.12 29.16 35 286K 230K 29.28
Current. Tested the 10 day MVA and rallied showing a doji on stronger above average volume. Doji may indicate a change in pattern after stock has made a routine pull back.
CPTV 03/29 A Wedge 16.55 +1.25 15.25 18.35 415K 175K 14.18
Current. Great move up the 10 day MVA on strong volume surge.
CYTC 03/17 Test 18 22.71 +0.17 21.84 26.22 856K 2.2M 21.88
Current. Moving up showing a doji on low volume. Still in good shape.
DNA 01/03 Test BO 110.55 -1.45 95.44 102 1.9M 3M 108.15
Current. Pull back tapping 109.72 and rallied on low volume. Still in good shape.
ECOL 04/01 Dbl btm 10.04 +0.23 9.89 11.32 167K 150K 9.25
Current. Gapped down below the 10 day MVA and made a fierce rally on lower, but still above average volume. Needs to break through resistance at 10.11.
EEFT 03/29 Cup hdl 20.23 -0.53 20.59 25 210K 225K 19.62
Current. Pull back on higher, but only average volume. May test back to 19.78 as stock tests the break out.
ENDP 04/01 A Wedge 25.05 -0.33 25.45 30 615K 1.6M 23.67
Buy Not Hit. Tested toward 18 day MVA on the low and rebounded to
hold the 10 day. Has made the test and is ready. Just
need volume on the bounce.
FINL 03/16 Test 50 38.1 +0.59 35.55 41 178K 661K 37.12
Current. Moving up the 10 day MVA on lower volume after testing the break out.
FMDAY 03/30 A Wedge 2 -0.08 2.06 2.67 4.1M 12M 1.88
Current. Pull back on low volume. Still in uptrend pattern.
FSH 03/29 Flat 58.05 -0.2 54.52 62.75 641K 1.6M 56.58
Current. Pull back on low volume. Routine pull back after nice run.
GILTF 03/16 Flat 8.89 +0.04 8.64 10.38 119K 500K 8.58
Current. Gapped down to open on the 18 day MVA and rallied holding the 10 day MVA on low volume. Moving up after testing the break out.
GLDN 04/02 Test BO 33.26 -0.13 35.98 41.45 51K 200K 33.96
Current. Gapped down to open below the 50 day MVA and rallied tapping 34 at the intraday high , but gave some of it back on low volume. Looking for stock to continue to rally off the 50 day MVA.
GNLB 04/07 Cup hdl 2.88 -0.11 3.18 4 709K 700K 2.84
Buy Not Hit. Pull back testing the 18 day MVA and rallied on stronger above average volume. Testing the break out.
HMP 03/08 A Wedge 2.6 +0.18 2.16 2.84 254K 150K 2.18
Current. Tapped 2.43 at the low and rallied for a nice move up the 10 day MVA on stronger above average volume. Came off the day's high of 2.80
IDXX 02/02 DB hdl 60.24 +0.4 50.22 58 250K 500K 57.78
IMX 04/03 Test BO 14.68 -1.86 14.94 17.65 356K 135K 14.98
Current. Gapped up at the open, but reversed on very strong volume surge holding the 10 day MVA. May test back to 14.27 as stock tests the break out.
INTV 03/08 Flat 17.29 -0.13 13.91 16.85 961K 500K 16.22
Current. Pull back on lower, but still above average volume. Still in uptrend pattern.
IVIL 03/31 Cup 8.84 +0.28 7.22 8.68 1.2M 738K 7.97
Current. Nice move up the 10 day MVA on lower, but still above average volume.
KFX 02/24 Cup hdl 10.24 -0.05 8.46 10.15 193K 508K 9.84
Current. Pull back testing the 10 day MVA and rallied on low volume. Moving up after testing the break out.
KFY 03/18 Cup hdl 16.12 +0.18 14.46 17.35 224K 300K 15.64
Current. Moving up the 10 day MVA on rising volume after routine pull back.
LIFC 02/28 Cup hdl 9.14 +0.12 7.75 9.28 315K 180K 8.78
Current. Tapped 8.90 at the low and rallied showing a doji on lower, but still above average volume. Moving up the 10 day MVA.
LTD 03/22 Test 50 20.54 -0.03 21.16 25.15 2M 3.9M 20.22
Current. Showing a tight doji on low volume as stock begins to make a lateral move just above the 10 day MVA.
MAMA 03/16 Test BO 15.43 -0.47 10.04 13.12 3.2M 6M 13.96
Current. Pull back on very low volume. Needs to break through resistance at 16.
MDRX 03/24 FlyPlat 11.05 +0.6 10.94 12.75 798K 600K 10.09
Entered today. Tested the 10 day MVA and rallied for a great move on stronger above average volume.
MTIC 04/06 Test BO 4 -0.05 3.91 4.92 375K 251K 3.59
Current. Gapped up at the open, but gave it back on lower, but still above average volume. Still moving up the 10 day MVA.
MTIC 03/27 Dbl btm 4 -0.05 3.39 4.28 375K 251K 3.59
Current.
MXT 03/22 Cup hdl 7.85 -0.02 7.77 9.32 615K 1.7M 7.75
Current. Tapped 7.55 at the low and rallied holding just above the 10 day MVA on higher, but still below average volume. Moving up after routine pull back.
NGAS 04/06 Cup hdl 5.99 -0.33 6.72 7.98 671K 651K 6.25
Current. Pull back tapping 5.92 at the low and rallied holding just below the 10 day MVA on stronger above average volume. May test back to 5.91.
NMSS 04/09 Cup hdl 7.98 +0.38 8 9.58 1.2M 592K 7.42
Entered today. Another nice move up the 10 day MVA on excellent volume surge.
NSM 03/24 Cup 48.54 +0.34 41.98 48.25 2.7M 6M 45.62
Target Hit. Took some of the money off the table as stock continues to climb up the 10 day MVA on low volume.
NSTK 03/20 Test 18 13.5 +0.14 13.42 16.12 60K 135K 12.48
Buy Not Issued. Bounced off the 18 day MVA and rallied holding above the 10 day MVA on low volume. Volume needs to increase before we can enter the play,
NUS 03/02 Test 50 24.88 +1 21.08 25.15 1.1M 455K 22.22
Target Hit. Took some of the money off the table as stock gapped up to hit the target on strong volume surge.
NVDA 03/24 Test 50 26.24 -0.5 23.94 28.75 3.7M 6M 25.48
Current. Gapped up at the open, but reversed on low volume. Still in good shape.
NVTL 03/27 Flat 27.18 +0.73 21.95 26.22 726K 1.1M 25.38
Current. Nice move up the 10 day MVA on average volume. Trading higher after hours due to Q1 guidance
ONCY 03/03 Cup hdl 8.55 +0.1 4.55 5.48 367K 156K 7.62
Current. Moving up the 10 day MVA showing a doji on average volume.
PHMD 04/07 DB hdl 3.16 +0.46 3.02 3.82 1.1M 322K 2.79
Entered today. Tested the 10 day MVA and rallied for a great move on excellent volume surge.
PKZ 03/01 A Wedge 30.47 +0.85 27.51 31.72 652K 553K 28.33
Current. Gapped up at the open and continued to rally up the 10 day MVA on stronger, but average volume. Needs to break through resistance at 31.15.
PTNR 03/11 Dbl btm 8.55 +0.13 8.48 10.15 49K 200K 8.02
Current. Continue with uptrend pattern on low volume. Came off the day's high of 8.81.
R 03/30 Flat 39.76 0 38.33 44.85 173K 600K 38.88
Current. Continue with lateral move on low volume.
RBK 03/30 Flat 42.01 -0.03 41.79 47.72 366K 1M 40.88
Current. Beginning to make a lateral move showing a tight doji on low volume.
RHAT 04/05 Test BO 25.06 +0.81 24.88 29 4.1M 8.8M 23.14
Buy Not Issued.
RHAT 03/24 Flat 25.06 +0.81 20.66 24.85 4.1M 7.3M 22.98
Current. Moving up the 10 day MVA for a nice gain on rising, but still below average volume.
RIMM 04/09 Test BO 109.06 +3.57 108.55 122 4.3M 8.5M 101.44
Entered today. Bounced off the 10 day MVA and rallied for a nice gain on low volume.
RITA 03/20 Test BO 6.88 0 5.68 7.05 132K 90K 6.48
Current. Tapped 7.15 at the high, but gave it back showing a doji on lower, but still above average volume. Beginning to make a lateral move above the 10 day MVA.
RMKR 03/27 Test BO 2.78 +0.02 2.52 3.15 45K 167K 2.52
Current. Moving up the 10 day MVA on low volume. still in the pattern.
SBUX 03/22 Test 50 39.2 +0.06 39 47 1.8M 4.5M 38.12
Current. Tested the 10 day MVA and rallied showing a tight doji on low volume. Moving back up the 10 day MVA after testing the break out.
SGMS 03/01 Dbl btm 20.49 -0.49 18.85 22.62 573K 1.1M 19.98
Current. Routine low volume pull back after nice break out.
SLTC 04/01 A Wedge 5.43 -0.09 5.72 6.95 287K 242K 5.32
Buy Not Issued. Gapped up at the open, but gave it back holding the 10 day MVA on stronger above average volume. Needs to break through resistance at 5.60.
SPAB 02/10 A Wedge 3.9 +0.32 3.49 4.35 79K 451K 3.82
Current. Bounced off the 10 day MVA and rallied on rising, but still below average volume.
STHLY 04/03 Test BO 23.25 +0.67 21.25 25.45 307K 408K 21.88
Current. Moving up the 10 day MVA on rising above average volume.
SWK 03/23 Flat 43.89 +0.51 40.56 46.65 616K 800K 41.76
Current. Tested the 10 day MVA and rallied on stronger above average volume. Moving up after testing the break out.
SWKS 04/05 Rv H&S 12.27 +0.04 12.55 15.12 1.5M 5M 11.67
Buy Not Issued. Moving up the 10 day MVA on low volume. beginning to make a lateral move.
TASR 03/25 Cup hdl 97.5 -2.3 66.29 76.25 5.2M 6.8M 94.22
Current. Routine pull back on low volume. Still in uptrend.
TEO 02/23 Test 50 10.99 +0.25 10.61 12.72 120K 520K 10.62
Current. Tested the 18 day MVA and rallied moving up the 10 day MVA for a nice move on low volume.
TGA 04/09 Dbl btm 2.91 +0.01 3.06 3.85 241K 585K 2.84
Buy Not Hit. Beginning to make a lateral move on low volume.
TINY 04/01 Test 50 21.85 -0.68 19.32 24 299K 936K 21.72
Current. Pull back on low volume. Routine pull back after nice run.
TKO 03/17 Test 18 5.11 -0.04 4.88 5.85 142K 500K 4.98
Current. Pull back tapping 5.02 at the low and rallied showing a doji just above the 10 day MVA on low volume.
TLCV 03/11 Test 18 12.06 -0.12 12.11 14.34 539K 1.2M 11.96
Current. Pull back testing the 18 day MVA and rallied holding the 10 day MVA on higher, but still below average volume. Routine pull back after good run.
TMWD 04/06 Cup hdl 8.04 +0.27 8.22 9.85 714K 556K 7.64
Entered today. Tested the 10 day MVA and rallied for an explosive move on excellent volume surge.
TOM 02/28 Cup hdl 18.23 +0.18 16.84 20.12 198K 850K 17.54
Current. Continue with uptrend pattern on low volume.
TSCO 06/03 Rv H&S 38.86 +0.76 23.42 27.62 339K 603K 42.65
Current. Nice move up holding at the 10 day MVA on stronger above average volume. Up $2.50 in after hours trading after announcing great earnings.
TSCO 04/24 Cup hdl 38.86 +0.76 21.88 26 339K 603K 42.65
Current.
TSYS 04/07 Cup hdl 7.9 +0.05 8.46 10.18 144K 570K 7.87
Buy Not Hit. Moving up on rising, but below average volume after testing the break out.
TTP 03/18 Test 18 4.86 -0.14 5.46 6.72 134K 300K 4.95
Current. Pull back below the 18 day MVA on slightly higher, but still below average volume. Holding above support
UBET 04/01 Cup hdl 6.24 +0.21 4.43 5.54 1M 325K 5.62
Current. Nice move up the 10 day MVA on lower, but still above average volume.
VAR 03/03 Flat 88.45 -0.39 88.11 100 368K 750K 86.22
Current. Routine pull back after nice run.
VAR 10/28 Cup hdl 88.45 -0.39 64.5 74.25 368K 1.1M 86.22
Current.
VION 03/25 Test BO 3.82 0 4.08 5 293K 1.4M 3.79
VOXX 02/21 A Wedge 20.49 +0.59 16.29 19.62 163K 160K 19.12
Current. Moving up the 10 day MVA for a nice move on low volume. Needs to break through resistance here.
VRNT 03/15 Cup hdl 33.49 +3.6 27.88 33.45 420K 200K 29.22
Target Hit. Took some of the money off the table as stock makes an explosive move on excellent volume
WEBX 02/25 Test 18 32.38 +0.43 27.27 31.35 612K 1M 30.88
Current. Continue to move up the 10 day MVA on low volume.
WIND 03/13 Test BO 12.42 +0.23 11.98 14.32 582K 850K 11.68
Current. Moving up the 10 day MVA on rising, but still below average volume after routine pull back
WOOF 02/23 Cup hdl 36.6 +0.28 31.24 37 316K 296K 35.52
Current. Tested the 10 day MVA and rallied as stock moves back up the 10 day MVA after testing the break out.
XRIT 04/05 Cup hdl 15.69 +0.29 15.71 18.98 231K 120K 14.61
Current. Nice gap up showing a doji on stronger above average volume. Moving up the 10 day MVA.
ZILA 04/06 Cup 4.45 -0.37 5.25 6.35 800K 231K 4.88
Buy Not Hit. Tanked below the 50 day MVA on strong volume. The stock has not performed so will drop.
ZOOM 04/06 Cup 5.54 -0.05 5.72 6.88 31K 150K 5.28
Buy Not Hit. Pull back tapping 5.31 at the low and rallied showing a tight doji on low volume. Low volume pull back after break out.
Downside Plays
Stock Date Play Close +/- Pivot Tgt Vol TgtV Stop
AZO 03/10 Put 83.41 -0.84 84 81.28 1M 1.1M 83.66
Current. Nice move down the 10 day MVA on rising, but average volume.
DO 04/01 Put 24.53 +0.7 23.12 21.06 816K 1.5M 24.02
Buy Not Issued. Rallied on rising, but below average volume tapping 24.84 at the high, Held below at the simple 50 day MVA. Stock has not made the move we were looking for so will drop.
OII 04/05 Put 30.44 +0.19 29.75 27.72 124K 275K 30.95
Buy Not Hit. Showing a doji on the 10 day MVA on low volume. Tapped the 18 day MVA at the intraday high, but could not hold the gain. Held below resistance.
End part 2 of 3
|
understanding the stock market
trading system
|
