Wahaa said...
7 COMMON BREAKOUT PATTERNS.
Check your favorites stocks whether they have the following patterns:
http://ibankcoin.com/chart_addict/?p=818
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http://breakpointtrades.com/watch_rules.htm
Some basic rules:
1. Volume is crucial. When looking at a chart for a good entry, the key to successful trading is an increase in volume. Chart breaks without volume have a much lower probability of success.
2. Only trade breakouts with an excellent volume % relative to their 60-day volume average. Some programs like Medved Quote Tracker will provide this information for you. The 60-day moving average can also be found on Yahoo Finance under detailed quotes. Trading breakouts with big volume % will greatly enhance your probability of a successful trade. This is especially true when day trading or swing trading. (Please note: Increased volume is not as important when shorting a stock.)
Here is a simple formula you can use to determine the volume % at any point during a trading day:
[Total volume / hours into the trading day] multiplied by 6.5 (trading hours in a day)
Here's an Example:
Stock ABC has a breakpoint of $10.25 with a 60-day average volume of 500,000 shares. At 11:30AM, stock ABC breaks the $10.25 price resistance (breakpoint) with a volume of 100,000 shares.
Does this breakout possess a high probability of success? The answer is NO. Even though ABC has broken out above the 10.25 resistance level, using the formula above, the adjusted volume of 325,000 shares does not meet or exceed the 60-day average volume.
100,000 / 2 = 50,000
50,000 x (6.5) = 325,000
3. It is a good idea to avoid entering new positions in the first 15 minutes after the market open.
4. Avoid holding a position into earnings as this can result in a major loss. A Positive earnings surprise can result in a significant gain, but the potential reward usually does not merit the risk.
5. Do not overweight your trading resources in one position.
6. Do not enter a position early. Wait for a pattern to setup, make sure it has above average volume, then only enter only after the price has traded through the breakout price.
7. It's a good habit to sell 1/2 your trading position on an initial move above resistance and reset stops at entry to ensure a profitable trade. Use mental stops to avoid large losses.rket open.
8. Avoid averaging down if a position goes against you. Maintain proper mental stops. If the stock moves back up, you can always reenter.
9. Keep your emotions even. Do not become exuberant when trades go well and do not become depressed when trades do not work. Maintaining an even temperament in the short term will enable you to trade for the long term.
Wednesday, May 20, 2009
NYMO
McClellan Oscillator
Developed by Sherman and Marian McClellan, the McClellan Oscillator is a breadth indicator derived from each day's net advances, the number of advancing issues less the number of declining issues. Subtracting the 39-day exponential moving average from the 19-day exponential moving average of net advances forms the oscillator.
Similar to MACD, the McClellan Oscillator is a momentum indicator that is applied to the advance/decline statistics. When the 19-day EMA (shorter moving average) moves above the 39-day (longer moving average) EMA, it signals that advances are gaining the upper hand. Conversely, when the 19-day EMA declines below the 39-day EMA, it signals that declining issues are dominant. As a momentum indicator, the McClellan Oscillator attempts to anticipate positive and negative changes in the AD statistics for market timing.
Buy and sell signals are generated as well as overbought and oversold readings. Usually, readings above +100 are considered overbought and below -100 oversold. Overbought and oversold readings may vary among indices and historical precedent. Buy signals are generated when the oscillator advances from oversold levels to positive territory. Sell signals are generated on declines from overbought to negative territory. Traders may also look for positive or negative divergences to time their trades. A series of rising troughs would denote strength, while a series of declining peaks weakness.
Calculation
When calculating the McClellan Oscillator, the ratio adjusted index is often used for easier comparisons over long periods of time. The basic input for the ratio-adjusted version is no longer the daily advances minus declines. Rather, you
- Subtract declines from advances
- Divide the result by the total of advances plus declines, and
- Multiply that result by 1000. (Multiplying by 1000 is simply cosmetic and lets us work with whole numbers instead of decimals.)
The rest of the calculations for the Oscillator are the same.
Example
The above chart shows the breakdown of the McClellan Oscillator. The top window shows the 19-day EMA and the 39-day EMA of the NYSE advance-decline issues, and the lower window shows the ratio adjusted McClellan Oscillator line. Notice that the 19-day and 39-day EMA crossovers correspond with zero-line crossovers on the McClellan Oscillator.
StockCharts.com provides one-year charts of the McClellan Oscillator for the NYSE and NASDAQ markets.
MAD and MDD
BenMao said...
Any classmates here have info for how to the following patterns:
1) MAD;
2) MDD;
3) post MAD;
4) post MDD;
$SPX-Daily: To make it clear: MAD = $NYUPV:$NYDNV > 10; MDD = $NYDNV:$NYUPV > 10. All MADs and MDDs since SPX=666.79 have been identified on this $SPX Daily chart. Typically on the day after MAD or MDD a small body bar will form, meaning that the close price will be close to the opening price.
On this daily chart a decreasing volume pattern has been identified. Three similar occurrences are also marked, with the first (Feb, 2008) being a double top, the second and the third (May, 2008 and Aug, 2008) being rolling-over mid-term tops. Keeping in mind that near the top of 930.17 we have observed distribution occurring. If the 900 mark is going to be taken out together with selling-volume picking up, we have more reason to believe that the mid-term top is passed. However, another attempt can be made to retest 930 if the 900 level is hold.
Any classmates here have info for how to the following patterns:
1) MAD;
2) MDD;
3) post MAD;
4) post MDD;
$SPX-Daily: To make it clear: MAD = $NYUPV:$NYDNV > 10; MDD = $NYDNV:$NYUPV > 10. All MADs and MDDs since SPX=666.79 have been identified on this $SPX Daily chart. Typically on the day after MAD or MDD a small body bar will form, meaning that the close price will be close to the opening price.
On this daily chart a decreasing volume pattern has been identified. Three similar occurrences are also marked, with the first (Feb, 2008) being a double top, the second and the third (May, 2008 and Aug, 2008) being rolling-over mid-term tops. Keeping in mind that near the top of 930.17 we have observed distribution occurring. If the 900 mark is going to be taken out together with selling-volume picking up, we have more reason to believe that the mid-term top is passed. However, another attempt can be made to retest 930 if the 900 level is hold.
Small Cap & Large Cap Relationship
Overview:
During major market rallies, small caps usually lead the large caps.
As an example, if you see that the Market is rallying, but the Small Caps are lagging behind or falling, then the Market rally will likely end as well unless the Small Caps recover. Likewise, if the Market is falling, but the Small Caps begin to rally, this may be an idication that the Market Market correction may soon be over.
When the Ratio is trending up, small caps are leading and indicates the jmarket can support a rally.
Semiconductors and Nasdaq Relationship
Overview:
The Nasdaq and the Semiconductor Index are closely linked with one another, similar to the DOW and Transports. In other words, a major market trend cannot happen without one confirming the other. If you see a divergence take place between the Nasdaq and the Semiconductors, then something has to give, in other words, these two sectors can only diverge for so long.
As an example, if the Nasdaq is rallying, but the Semiconductors are falling behind or breaking down, then the Semiconductors need to rally soon, otherwise the Nasdaq will soon breakdown as well and the rally will end. Likewise, if the Nasdaq is falling, but the Semiconductors begin to rally, this may be an indication that the Nasdaq will soon recover and rally as well.
When using this indicator, look for divergences between the Nasdaq and the Semiconductors as an early indication that a major trend change is about to take place
When the Ratio is trending up, then the market can support a rally.
DOW Theory
DOW Theory - DOW Jones and Transports Relationship:
DOW Theory states that the DOW Jones Industrials is closely linked with the Transportation Sector. In other words, a major market trend cannot happen without one confirming the other. If you see a divergence take place between the DOW Jones and the Transports, then something has to give, in other words, these two sectors can only diverge for so long.
As an example, if the DOW is rallying, but the Transports are falling behind or breaking down, then the Transports need to rally soon, otherwise the DOW will soon breakdown and the rally will end. Likewise, if the DOW Jones is falling, but the Transports begin to rally, this may be an indication that the DOW Jones will soon recover and rally as well.
When using this indicator, look for divergences between the DOW Jones and the Transports as an early indication that a major trend change is about to take place
Transports / DOW Ratio
The direction is what is important: When the direction is up, the Transports are outperforming the DOW, which is healthy
Here's a real word example of how to use the DOW Transports as an indicator with respect to the DOW:
In the chart below, the Transports began to breakdown in late January 2003 and underperform the DOW. This was a big red flag that the DOW would soon follow.
Following the sharp breakdown in the Transports, the bounce ocurred followed by another downtrend which began in mid February. This second breakdown finally caused a subseqent breakdown in the DOW.
Following the weakness in the Transports, the DOW finally broke down in early March.
http://breakpointtrades.com/indicator_DOW.htm
DOW Theory states that the DOW Jones Industrials is closely linked with the Transportation Sector. In other words, a major market trend cannot happen without one confirming the other. If you see a divergence take place between the DOW Jones and the Transports, then something has to give, in other words, these two sectors can only diverge for so long.
As an example, if the DOW is rallying, but the Transports are falling behind or breaking down, then the Transports need to rally soon, otherwise the DOW will soon breakdown and the rally will end. Likewise, if the DOW Jones is falling, but the Transports begin to rally, this may be an indication that the DOW Jones will soon recover and rally as well.
When using this indicator, look for divergences between the DOW Jones and the Transports as an early indication that a major trend change is about to take place
Transports / DOW Ratio
The direction is what is important: When the direction is up, the Transports are outperforming the DOW, which is healthy
Here's a real word example of how to use the DOW Transports as an indicator with respect to the DOW:
In the chart below, the Transports began to breakdown in late January 2003 and underperform the DOW. This was a big red flag that the DOW would soon follow.
Following the sharp breakdown in the Transports, the bounce ocurred followed by another downtrend which began in mid February. This second breakdown finally caused a subseqent breakdown in the DOW.
Following the weakness in the Transports, the DOW finally broke down in early March.
http://breakpointtrades.com/indicator_DOW.htm
Percent of stocks above 50MA and 200MA
Overview:
The percentage of stocks above and below the 50 MA and 200 MA can indicate the overall health of the Market.
However, a very useful way to use these charts is to determin the direction becaue these charts are directly correlated to their respective index.
For example, if you see positive divergence developing in the MACD in the chart of the % of stocks above the 200 MA, then you know there is a strong possibility that the index will soon experience a rally.
Normal technical analysis can be used on these following charts to predict market movement.
http://breakpointtrades.com/indicator_percent.htm
The percentage of stocks above and below the 50 MA and 200 MA can indicate the overall health of the Market.
However, a very useful way to use these charts is to determin the direction becaue these charts are directly correlated to their respective index.
For example, if you see positive divergence developing in the MACD in the chart of the % of stocks above the 200 MA, then you know there is a strong possibility that the index will soon experience a rally.
Normal technical analysis can be used on these following charts to predict market movement.
http://breakpointtrades.com/indicator_percent.htm
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