November 3, 2011
By Geoff Bysshe
Today was a second consolidation day in two. If you look at the 60-min. charts on the market watch 4 (SPY, DIA, QQQ, and IWM), you‘ll see a clear pattern of sideways action since the gap down Monday morning.
All four markets also closed in the upper part of their range and all but the Q’s closed over the prior day’s high. This creates a situation where they may all open above their pivots which are positively stacked and above Monday’s high. Both of these levels will be areas to look for OR Reversals.
The consolidation day also means the markets have held the support area of the 20-day MA’s. The IWM’s managed to get back above their 10-day MA which is still positively sloped. The QQQ is the weakest relative to its 10 and 20-day MA but it is also sitting right on top of the 200 and much stronger on a longer term basis.
After two days of consolidation a trend day is very possible. News out of Europe remains the wild card. With a modest amount of optimism the pivot set up at support could lead to a nice up day. Any bad news, however, and the consolidation could create a big trend day down. Absent any news I would play reversals or quick 5-min breakouts in the direction of the stock’s major trend so your are positioned to take advantage of either chop or a trend day.
Stocks To Watch
A few days ago I posted about the importance of the market’s location relative to the 200-day moving average. The market has since pulled back and consolidated, but not in a decidedly bearish way. This leaves the markets full of great patterns for both long and short, day trades and swing trades.
A powerful and simple way find stocks that are in a good location to move up or move down is to start by looking for stocks that are relatively strong or weak. In the advanced filters section of HotScans you can filter stocks based on their location relative to many different “Historical Ranges”.
Currently, stocks near 52-week highs are relatively strong, and stocks near 30-day lows are relatively weak. You can easily screen stocks for this criteria and then quickly look for good trading patterns in their charts. Below you’ll see an image of I did this for the stocks near 52-week highs ranked by their relative volume. The list has some interesting stocks for swing trading or day trading that I was not focused on. For example, CHKP, FE, SGEN, and VCLK to name a few.
(Clicking on the the image will enlarge it)
October 14, 2011
By Geoff Bysshe
I could just say, today’s answer is in the 9/20 “Advanced Pivot Patterns” training video.
In the 9/20 video (available to subs only) I reveal the same patterns that exists in all but the Q’s after Thursday’s trading. The current stage of the pattern is one of a warning that upside momentum may be waning and more importantly, if we get an opening range breakdown below the pivot in the IWM, SPY or DIA it should be respected, if not shorted.
For those of you who did not see the video the condition I’m referring to is one in which the market spend the majority of the day trading below the pivot after a series of days in which the pivot has stepped up and not been tested.
The other condition I’ve been writing about as the markets climb is that of the markets not trading below the prior daily low. All 4 did that yesterday but managed to recover. A close below a prior low would be a significant negative event.
If all this sounds bearish it is, IF… the markets trade lower. Specifically, the basic key reference points of support are now more important indicators of downward momentum becoming a reality. Subscribers should know how the patterns should line up for the more significant breakdowns. Everyone should be focused on the OR’s, the floor trader pivot, S1, and the prior day’s lows.
If the market does not go down as measured by these points, then the important question for more upside is, have we seen enough compression to have a trend day up. Here’s how I see it:
SPY – No. It’s been a sloppy wide two days resulting in not only 2 dojis, but would also form one big doji if the two days were combined.
DIA – No. Same condition as SPY.
QQQ – Yes. The last two days have been wit in the same range and tight relative to the 10 day ATR.
IWM – Yes. The same condition as the Q’s
In the prior Focus List I said I’d only consider trading reversals on the long side in the indexes if there was a divergence. We got that in the Q’s and it was a worthy, but not stellar long trade. For Friday, I’d still consider trading reversals on the long side, but I’d be even more cautious if below the reference points mentioned above.
As for trading breakouts, I’d consider long or short under the right Opening Range conditions and so long as the market watch are not diverging. Once exception to this is the condition would be if the market gaps higher, followed by a SPY or IWM breakdown below the floor trader pivot. That’s probably worth following with or without the Q’s in the breakout down.
GOOG’s earnings having been well received and pushing markets higher in the pre-market so there is a good chance we will start the day on a positive note.
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This content is taken from the Focus List. The Focus List is a service that provides daily market commentary and stock selection.
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September 12, 2011
By Geoff Bysshe
Today the markets gapped lower then struggled to get back above the prior day’s floor trader pivot level. The markets closed on a strong note near their high of the day, but just a fraction above their one day pivots. You should be able to see commentary and charts covering today's market action in another post here today.
The lower open, strong close creates a pattern of the market potentially bouncing off key support. This is a good time to to use HotScans look for stocks trading on volume that have outperformed the market. Strong volatile stocks in a weak market can have potential for day trading or swing trading set ups.
Fist I scanned for stocks that closed on good volume over the prior day’s high and that yielded a lot of interesting patterns, but since the market has just experienced a pretty big swing from its highs two day’s ago to its opening low today, I decided to make the scan a little more strict.
The image below shows the results and the settings for scanning for stocks that closed over their 5-day high. This means they have cleared their intra-day highs of last Thursday which was the market’s recent swing high. I also required greater than average volume so I know they were trading on volume as they moved up today.
This is nice tight list of stocks with potential for day trading breakouts, or trading reversals on a day trading or swing trading basis. I don't expect the scan will result in stocks to buy right away. I'll find those that fit best for the day trading and swing trading systems we follow.
Note that I've focused on the long side in this post. I'm doing similar a scan for stocks on the short side using the 30 day lows as a frame of reference.