23
Sep

Triangle Trade Setting Up in Apple AAPL

With all the attention focused on the iPhone 6 this weekend, traders may be missing an iTriangle Pattern forming on the stock chart of Apple (AAPL) shares.

Let’s take a look at the Classic Chart pattern, note the boundaries, and trading tactics we may use as this pattern develops.

Shares continue a strong bullish uptrend as evidenced by higher price highs and higher price lows.

We also observe the most bullish orientation possible in the moving average structure of price in the trend.

Initially, we’ll focus our attention on the confluence of the $ 100 per share “round number” area with the rising 20 day EMA (today’s low so far).

We can also see that Apple shares have a recent tendency of breaking slightly under the 20 EMA and testing (touching) the rising 50 day EMA.

If this pattern continues, the lower 50 day EMA intersects $ 98.00 per share (key support).

However, let’s focus our attention for now on the Triangle Price Pattern which sets up a breakout opportunity.

The intraday chart shows the compression (triangle) pattern clearly.

A lower rising trendline intersects the current low near $ 100.50 per share while the falling upper trendline connects the $ 102.00 level.

Price has bounced or played ping-pong between these boundaries throughout September (despite the announce – then launch – of new products).

A breakout – bullish trend continuation – trade will trigger above the $ 102 level (bullish to target above $ 105).

On the other hand, a range expansion bearish breakdown trade triggers initially under $ 100.50 but preferably – to be safe – under the key confluence $ 100 per share level.

The $ 100 per share level reflects an overlap of the 38.2% Fibonacci Level (as drawn), trendline, and “Round Number” $ 100 level.

For now, focus your attention on these price levels for short-term trade entry and management strategies.

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Corey Rosenbloom, CMT
Afraid to Trade.com

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Corey’s book The Complete Trading Course (Wiley Finance) is now available along with the newly released Profiting from the Life Cycle of a Stock Trend presentation (also from Wiley).


Afraid to Trade.com Blog

21
Sep

New Highs Again and Trending Stock Scan for Reversal Day Sept 19

Perhaps not surprisingly, the stock market pushed yet again to another intraday high today as the non-stop bullish uptrend continued, yet this time we saw a quick retracement down to the rising trendline.

Let’s start with our updated, uptrending S&P 500 intraday chart:

A stable rising trendline pattern contains the progressive higher highs and higher lows and it should be our market reference point until proven otherwise with a breakdown under the rising level.

Today’s session low represents the lower boundary near the 2,007 level and it will be our focal point (bull above; bear beneath) going forward.

Perhaps as a result of the morning weakness, Sector Breadth is slightly Bearish/Cautious:

While we have moderate sector performance (most sectors show 50% of stocks positive), we do see that Utilities tops the performance of the day and that’s a bearish sign.

Relative strength – though not by much – still concentrates in the Staples and Health Care (the other defensive names).

Potential bullish trend day continuation (buy retracements) stocks include the following:

Vertex Pharma (VRTX), Mallinckrodt (MNK), Dr. Pepper Snapple Group (DPS), and Verizon (VZ).

Today’s downtrending stock scan includes the following bearish candidates today:

Garmin (GRMN), Corning (GLW), Flir (FLIR), and Fossil Group (FOSL).

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Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter: http://twitter.com/afraidtotrade

Corey’s book The Complete Trading Course (Wiley Finance) is now available along with the newly released Profiting from the Life Cycle of a Stock Trend presentation (also from Wiley).


Afraid to Trade.com Blog

20
Sep

About that Death Cross in the Russell IWM…

I’ve been hearing a lot of discussion about the “Death Cross” in the Russell 2000, particularly in the IWM ETF.

Let’s identify what a “Death Cross” is and then test out prior performance of “Death Crosses” specifically in the IWM Russell 2000 ETF.

Here’s a current chart – and we’ll step inside it all shortly:

First, let’s define a “Death Cross.”

A “Death Cross” – that’s such an ominous sounding name – occurs by definition when the 50 day Simple Moving Average (SMA) crosses under the 200 day Simple Moving Average.

It simply means that a shorter-term moving average has crossed under a longer term moving average.

A Moving Average adds the closing price of every day – for example 50 days – and then divides that number by 50 days (or however many days have been added).

The goal is to find the “average” price over that period and we plot this on the chart as a line which we call a “Moving Average.”

That being said, when a shorter-term average crosses under a longer-term average, it could signal a trend change in price.

As such, we can program a strategy to short-sell the market when the 50 day average crosses under the 200 day average, or also buy the market when the shorter-term average crosses above the longer-term average.

In the chart above, I’ve done exactly that using TradeStation and initiated a strategy BUY when the 50 day SMA crosses above the 200 day SMA and then a short-sale (flip and reverse) when the 50 day SMA crosses under the 200 day SMA.

The Green and Red lines above simply connect the price-based entries on the chart (green is for when the trade made money; red is for when it lost money).

We can see that currently, we remain on a “Buy Signal” from mid-2012 and we hear the chatter about the potential “Sell Signal” that may trigger soon if price does trade lower and the 50 day SMA does go on to cross under the rising 200 day SMA.

For reference, I plotted the 50 day SMA as BLUE and the 200 day SMA as RED.

Let’s zoom-in on the price and strategy action:

We see the period from the market bottom (March 2009) until the beginning of 2012 to clarify the cross-overs (signals) during this period.

There were TWO Death Cross signals during this time:

July 29, 2010 and August 15, 2011

You can see these on the chart above with the red box.

Both times, the market went on to trade higher to continue the uptrend – price did not reverse – and thus both trades were closed at a loss (black line).

I would like us to take a closer look at the 2010 period to learn a valuable lesson about Moving Average Crossover Strategies (and Analysis):

Here are those same two Death Cross signals – red lines – and the outcome.

This time we can see the price action clearly and let’s focus our attention on something you don’t see until you actually trade these strategies.

Notice the distance price is trading away from the averages when they cross-over.

For example, during the Bullish (also called “Golden”) Cross on October 26th, price was roughly $ 5.00 above the cross-over point near $ 65.50.

I think this distance or conundrum is clearer when studying the “Death Cross” Signal that triggered on August 15, 2011.

Price literally collapsed from the $ 84.00 per share level all the way down to $ 64.00 BEFORE the moving averages generated its official “Sell Me Now” signal with the Death Cross.

The short-sale trade officially triggered near $ 70.00 per share.

Yes, price did trade lower all the way to $ 60.00 per share but there isn’t a way to use moving averages to “call a bottom” (or a top, for that matter) using this strategy.

In fact, even though the market did trade lower, the “reverse and exit” signal triggered when the averages crossed bullishly – the Golden Cross – on February 9, 2012.

If you look closely at the chart, we see that the official exit price at the $ 83.00 per share was clearly ABOVE the cross-over signal then intersecting the $ 76.00 level.

Here’s the main idea about Moving Average Cross-over Strategies:

They experience significant delay.

Remember that price has to move BEFORE the average can turn up or turn down, and in order to generate a signal from a shorter-term average crossing a longer-term average, price often has to move a considerable distance.

In other words, don’t get too excited when you see official moving average cross-over signals.

My advice is to use them more for analytical (analysis) purposes rather than as stand-alone trading signals or programs.

It can be interesting – and it is – to talk about Death and Golden Crosses, but do your research before using these as independent trading strategies.

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Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter: http://twitter.com/afraidtotrade

Corey’s book The Complete Trading Course (Wiley Finance) is now available along with the newly released Profiting from the Life Cycle of a Stock Trend presentation (also from Wiley).


Afraid to Trade.com Blog

18
Sep

Fed Day Market Update and Stock Scan Sept 17

After yesterday’s strength, we have today’s retracement of the bullish reversal.

Though price pushed to new highs, it was on negative divergences and we’ve seen downside action so far this morning.

The afternoon gives us a “Fed Day Announcement” which could radically change the structure, but first, let’s update our S&P 500 chart then highlight the top trending stocks of the day.

Positive Divergences suggested a bullish reversal which occurred this week.  Now negative divergences at a new high similarly argue for caution.

We’ll use 2,000 as a simple reference level and will play cautiously/bearishly beneath it and otherwise bullish – throwing caution to the wind – above.

Again, the “Fed Day” announcement and press conference begin at 2:00pm EST so read the statement and monitor the often volatile price action that develops  into the close.

Not surprisingly, Sector Breadth is Mixed:

Our top two sectors are Financials and Industrials (with strength in the other offensive names) which is actually bullish and our weakest sectors are Energy and Staples (which is also net bullish).

Not to be outdone, Utilities join with the bullish sectors.  This isn’t a pure bullish picture but it’s slightly more bullish than bearish at the moment ahead of the Fed announcement.

Potential bullish trend day continuation (buy retracements) stocks include the following:

Dupont Denemours (DD), Nucor (NUE), C.H. Robinson (CHRW), and Whole Foods (WFM).

Today’s downtrending stock scan includes the following bearish candidates today:

Owens-Illinois (OI), General Mills (GIS), FMC, Conagra Foods (CAG).

Afraid to Trade Premium Content and Membership

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Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter: http://twitter.com/afraidtotrade

Corey’s book The Complete Trading Course (Wiley Finance) is now available along with the newly released Profiting from the Life Cycle of a Stock Trend presentation (also from Wiley).


Afraid to Trade.com Blog

17
Sep

FT: Ukraine volatility benefits Moscow Exchange

Russia’s action in Ukraine has not harmed trading on the Moscow Exchange. Instead, market volatility has even boosted volumes. Evgeny Fetisov, chief financial officer, tells FT Trading Room editor Philip Stafford why investors are willing to trade.

FT Trading Room

16
Sep

Bullish Reversal Stock Scan and Market Update for September 16

And now for something a little different!

Today’s session sported a strong Bullish Reversal in the S&P 500 from a “Rounded Reversal” and bullish divergence pattern.

Let’s update our chart and note the key trending stocks of the day.

I highlighted the positive market internal divergences to members last night (and in this morning’s briefing with TradeStation) and indeed, the market responded with a larger-than-expected bullish reversal.

Price achieved the minimum targets and actually traded rapidly above the 1,997 prior high and then the 2,000 “round number” index level.

The market is caught in a “short-squeeze” or positive feedback loop of bullish action and may continue in this direction as long as the index remains above the focal point 2,000 (where bears will trigger stop-losses at higher levels).

Sector Breadth is Bullish across the board:

There’s not much to say about today’s Sector Breadth which reveals bullish dominance in all sectors.

The only negative note is that the Defensive Sectors are the top performers of the day – not by much however.

Potential bullish trend day continuation (buy retracements) stocks include the following:

AutoZone (AZO), CVS (CVS), Gamestop (GME), and Archer-Daniels-Midland (ADM)

You might not be surprised to learn that we have no stocks on our bearish downtrending scan list today.  Go bulls!

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Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter: http://twitter.com/afraidtotrade

Corey’s book The Complete Trading Course (Wiley Finance) is now available along with the newly released Profiting from the Life Cycle of a Stock Trend presentation (also from Wiley).


Afraid to Trade.com Blog

15
Sep

Reversal and Market Update with Stock Scan for September 12

The intraday downtrend continued and price traded down from the 1,997 inflection level mentioned in yesterday’s mid-day planning post.

Let’s update our S&P 500 level chart, highlight breadth, and see the strong intraday trending stocks right now.

Price continued the downtrend in motion through September and pushed to another (small) new price low during today’s sell-session.

We’ll focus on the session low and look for additional downtrend action should sellers continue their activities.

However, note that price has a tendency to bounce sharply higher – a retracement – when it interacts with the lower trendline which is near today’s low.

Be on guard for another sudden bullish rally should it occur.

Our Breadth Chart is a little surprising given the strength of the sellers:

What’s our strongest sector on this sell day?  Financials.  Which is the weakest?  Utilities.

“That’s not right!” you may say and you would be correct.

While price action is clearly bearish, internal Sector Rotation or money flow actually paints a bullish classical picture.

That’s because strength is showing in the “Offensive” sectors while weakness appears in the Defensive sectors.

If anything, it’s something to temper any super-bearish bias of today’s price action.

We actually do have very strong trending stocks at the moment:

Best Buy (BBY), Staples (SPLS), ICE Exchange Group (ICE), and Yahoo (YHOO) again.

Strong  bearish downtrend continuity stocks include these candidates:

Ventas (VTR), ProLogis (PLD), Public Storage (PSA), and Boston Properties (BXP).

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter: http://twitter.com/afraidtotrade

Corey’s book The Complete Trading Course (Wiley Finance) is now available along with the newly released Profiting from the Life Cycle of a Stock Trend presentation (also from Wiley).


Afraid to Trade.com Blog

13
Sep

Quick Charting New September Trends in Cross Market Money Flow

Even if you are only a stock market trader, it’s important to view money flow moving across major markets.

Let’s take a quick update of our “Cross-Market Money Flow” trends as we move into the middle of September.

We’re seeing the futures contracts of the S&P 500, Gold, Crude Oil, and US Dollar Index.

From the top-level, we see money flowing INTO Stocks and the US Dollar Index and OUT OF leading commodities Crude Oil and Gold.

That’s simple, but we saw a slight retracement up for commodities at the end of August, only to see these new intraday downtrends continue.

Thanks in part to geopolitical instability and money flow into the United States in general, we saw the US Stock Market along with the US Dollar Index both rally non-stop from August to present.

While the US Stock Market (S&P 500) is pausing and retracing lower, so far the US Dollar Index is merely taking a sideways pause in its strong intraday uptrend.

We’ll step inside these markets, look at higher frames, and plot potential opportunities in this week’s Intermarket Strategy Report for members, but do take a moment to study these trends as they continue to develop.

Afraid to Trade Premium Content and Membership

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Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter: http://twitter.com/afraidtotrade

Corey’s book The Complete Trading Course (Wiley Finance) is now available along with the newly released Profiting from the Life Cycle of a Stock Trend presentation (also from Wiley).


Afraid to Trade.com Blog

12
Sep

Updating our TICK Volatility Charts for September

I know, it’s not the most compelling title, but it is very important for all of us to monitor the Volatility or Cycles of Market Internals, especially those of us who use them in our trading or analysis.

Let’s update our TICK Volatility Chart and note the current important intraday levels for trading with the TICK.

To get some background on the chart and the concept of “TICK Volatility,” be sure to read some earlier posts:

Updating TICK Volatility and the Compressing Range

“Why You MUST Consider Volatility When Trading with the TICK”

“Research in Behavioral Changes in the TICK Over the Last 10 Years

To keep this post concise, we’ll note that the 20 day average TICK high at the moment is 862 and the average 20 day TICK low is -972.

This is very important if you use arbitrary numbers like 1,000 or -1,000 if you use TICK in your trading decisions.

Sometimes 1,000 is an important number and other times, it rarely occurs (thus you’ll receive no signals).

The red line indicator at the bottom simply measures the change in the average high and average low TICK value (notice how it is cyclical like volatility – we see steady alternation between periods of high volatility and low volatility just like price).

We can actually zoom-in our perspective on the most recent action to make the picture clearer:

Again, the 20 day average TICK high value is 862 (that’s less than the arbitrary 1,000) and -974 (close to -1,000).

Notice also the cluster of lower TICK values and the second lowest TICK reading of the year (-1,420) which occurred on September 4th.

Take a moment to view additional information on the “TICK Volatility” Concept, view any of the prior updates:

Afraid to Trade Premium Content and Membership

Follow along with members of the Daily Commentary and Idealized Trades summaries for real-time updates and additional trade planning.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter: http://twitter.com/afraidtotrade

Corey’s book The Complete Trading Course (Wiley Finance) is now available along with the newly released Profiting from the Life Cycle of a Stock Trend presentation (also from Wiley).


Afraid to Trade.com Blog

10
Sep

FT: Investing in cloud computing

Banks’ trading profits are receding, yet senior executives often speak about the need to invest in technology. Rick Lane, Trading Technologies chief, tells FT’s Philip Stafford why more trading will be done by cloud computing despite security fears.

FT Trading Room

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