062716 MetaStock.com - How to Trade Stocks Successfully SBAC chart

How to Trade Stocks Successfully

Why a Stock Market Education is Important

Trading Stocks is becoming an alternative career for many people. It offers a variety of opportunities and advantages that working for a corporation does not. The first step in learning how to trade stocks successfully, is to understand what you need to do to trade a stock for short term profits.

This requires finding a stock that is poised to move up in price, but that also has what is called a “low risk entry.” What is meant by a “low risk entry” is how the price has moved in recent days. There are patterns in a stock chart that tell you, when a stock is ideal for buying with a low risk.

Risk is calculated by the use of a Stop Loss, which protects your capital and profits should the market suddenly go down.

You also will need to learn how to read a stock chart with accuracy. A stock chart is merely a historical set of data that shows how the price moved, and how many traders or investors bought the stock during that period of time.

How to trade stocks successfully means you are able to read the stock chart correctly, which will tell you which Market Participant Groups were buying the stock, and this is critically important information.

Below is a chart that is showing what is called a “bottom,” or when a stock stops a Downtrend. This is when it begins a recovery returning to moving in an Uptrend, which is what traders want to trade for short term profits.

The stock chart also shows resistance, which is where the stock will either stop moving up and move sideways, or retrace which is a brief period of price moving down.

Stock charts do not predict what a stock will do. However, they are a necessary and highly useful tool when considering a stock to trade. Certain patterns will indicate that the giant Buy Side Institutions using Dark Pools are buying giant lots of the stock in an accumulation mode. They want to buy millions of shares of a stock to put into their portfolios, to create the Mutual Funds which individuals invest in. However as an example, they cannot buy 10 million shares of a stock all at one time. So using the Dark Pools they buy the stock in increments over an extended period of time, and this creates a specific pattern on the stock chart.

When you see this pattern, it is time to buy the stock for a short term trade because the Dark Pool buying creates an underlying energy. They are pulling so much liquidity aka stock from the market that it alerts Professional Traders and High Frequency Trading HFTs firms, which quickly move the stock up in a fast momentum run.

Summary

When you understand why certain patterns form, who is controlling price, and how to calculate the best entry for the lowest risk then trading becomes easy and fun.

Learning how to trade the Stock Market does require a solid Stock Market Education. If you want to be trading quickly for extra income or as a career, then you need to take a Stock Trading Course. If you want to try to learn this all on your own, be aware that most people spend 5 -10 years attempting to do this and many thousands of dollars in “hard learned lessons and losses” before they may get it right. That all adds up to a lot of wasted opportunity, time, and money.

There is a lot to learn but you will find it fascinating, inspiring, and amazing. In learning how to trade stocks successfully by taking a course in Stock Market Education, you will be opening a door to a whole world that you had no idea existed.

I invite you to watch a Video or download an eBook about beginning trading at TechniTrader.com HERE. Sign Up for full access.

Followers may request a specific article topic for this blog by emailing: info@technitrader.com

Trade Wisely,

Martha Stokes CMT

TechniTrader technical analysis using a MetaStock chart, courtesy of Innovative Market Analysis, LLC dba MetaStock

Instructor & Developer of TechniTrader Stock and Option Courses

This weekly stock discussion is sponsored by TechniTrader.com a MetaStock® Partner

Copyright ©2016 Decisions Unlimited, Inc. dba TechniTrader. All rights reserved.

TechniTrader is also a registered trademark of Decisions Unlimited, Inc.

Disclaimer: All statements are the opinions of TechniTrader, its instructors and/or employees, and are not to be construed as anything more than an opinion. TechniTrader is not a broker or an investment advisor; it is strictly an educational service. There is risk in trading financial assets and derivatives. Due diligence is required for any investment. It should not be assumed that the methods or techniques presented cannot result in losses. Examples presented are for educational purposes only.

061716 MestaStock - Trading Range Market Conditions S&P500 Index chart

Trading Range Market Conditions

Why Big Blue Chip Stocks are Sideways

Trading Range Market Conditions are rather rare. They do not occur on the long term trend often. This is the most challenging market condition for Technical and Retail Traders. It is a challenge because it seems as if the market is chaotic, volatile, or random in nature.

Often times traders do not recognize Trading Range Market Conditions, because they either do not know about this condition or they do not use charts that show what is really happening.

The chart example below is a Weekly Chart view, and clearly shows the Range Bound pattern.

The Index has nearly consistent highs as if there is a Technical Resistance above price, and inconsistent lows. Many traders are assuming this is a Bear Market, but it is not.

Trading Range Market Conditions occur for several reasons. This one in particular has specific reasons WHY the big blue chip stocks are stuck in sideways patterns.

Here are the reasons why big blue chip stocks are sideways:

1.     The price of stocks over the prior 4 years was artificially inflated, as many big blue chip companies decided to do massive buyback stock purchases. This removed a huge amount of liquidity of the company stock. Since stock prices are based upon supply and demand as much as fundamentals, the drawdown of liquidity forced prices upward, as the corporations intended. However, buybacks are a temporary event and do not last. As the buybacks ended, stocks began to show signs of weakness in the chart patterns as far back as the middle of 2014.

2.     Fundamentals and Financials which had a huge growth out of the 2009 economic contraction, started to slow down in 2014 at the commencement of the Trading Range. Dark Pools who control vast quantities of stocks, started Quiet Rotation to lower their held shares of stock in companies poised for a business contraction. This fueled many Topping Formations late in the year 2014 and early 2015.

This Trading Range Market Condition was predicated, on obvious and easily seen patterns in the charts. By understanding what was going on with stocks beyond just a mere MACD Crossover or an Engulfing White Candle, Technical Traders who were able to analyze the conditions were prepared for this Trading Range.

Summary

What happens next? Trading Range Market Conditions rarely last a long time. Range bound action is usually, but not always a continuation pattern. To determine whether this is a continuation or reversal, it is necessary to study a longer term timeframe, thereby eliminating the “white noise” present in Daily or even Weekly View charts.

Next week this discussion lesson will analyze the longer term chart, to see whether this Trading Range is a continuation pattern or a reversal pattern.

Trade Wisely,

Martha Stokes CMT

TechniTrader technical analysis using a MetaStock chart, courtesy of Innovative Market Analysis, LLC dba MetaStock.

www.TechniTrader.com

Chartered Market Technician

Instructor & Developer of TechniTrader Stock & Option Courses

©2016 Decisions Unlimited, Inc. dba TechniTrader.  All rights reserved.

TechniTrader is also a registered trademark of Decisions Unlimited, Inc.

Disclaimer: All statements are the opinions of TechniTrader, its instructors and/or employees, and are not to be construed as anything more than an opinion. TechniTrader is not a broker or an investment advisor; it is strictly an educational service. There is risk in trading financial assets and derivatives. Due diligence is required for any investment. It should not be assumed that the methods or techniques presented cannot result in losses. Examples presented are for educational purposes only.

Making Invisible Visible: Market Internals Reveal Continuing Bearishness

From the desk of Sagar Nandi and Superior Profit:

Superior Profit Investors are alert to what is happening in the Market Internals to take advantage of opportunities in the outside: in terms of Stock investing.

Exactly one month ago, I had shared the Market Internals of USA Market that was Bearish in connotation. You may study that article here. In that study we had used Traffic Light to color the Candles. You may study more about Traffic Light and other Superior Profit indicators etc. in our Education Center Books.

Today, on 13th June' 16- prior to Market Open, I looked at Market Internal again. And the Bearishness continues. Here is today's NASDAQ and NYSE Market Internals study: today I used Flow color to paint the Candles. You may learn about Flow indicator also from our Education Center Books.

Note that this study is using Weekly interval. Which is what Superior Profit Investors use for Broad Market Internals. On shorter time frame, such study may provide no clear information of use.

If we look back four bars ago (which is four weeks ago - about the time the last Internal study was presented in an eariler Blog), we see that both NYSE (right side chart) and NASDAQ (left side chart) actually recovered from that level. To novice eyes looking only at overall market (say, looking at SPY and QQQ ETFs) market may seem to be strengthening. Not to our Superior Profit Investors who are aware of Market Internals.

Let us study this Internals chart  in some detail - following the pointed areas in the chart.

(1) NYSE Index went to the previous top and hit the Memory Resistance and came down with a Bearish shape Candle (with long Upper Tail). The top of the Tail pierced the Memory line - probably stopping out many Shorts. And pulling in new Longs who look for Breakout trades (in Superior Profit Way, we are not gaga about Breakout trades if you follow us regularly ...). Only to frustrate the Longs with the Bearish Candle at end of the week.

(2) NASDAQ Index was weaker in price chart than NYSE. It could not even reach the Resistance Memory Line. And closed the week with a Bearish shape Candle (solid body Candle).

(3) NYSE made more 52 Week Highs relative to the last peak. Which is Bullish. And this again probably mislead many investors. Fooling them into thinking that market is going to rally. The 52 Week Highs were probably in strong stocks that were making new Highs were big players were selling other stocks. A well known ploy of big players to mislead small investors. Why we think that Market was not actually strong? We see that from subsequent Internals study.

(4) NASDAQ was not making a new peak of 52 Week Highs. Here it was sideways. Again showing a weak NASDAQ relative to NYSE.

(5) In terms of Stocks Advancing vs. Stocks Declining, NYSE was clearly Bearish. Declining stocks made Deeper Troughs than Advancing Stocks could make Higher Peaks.

(6) NASDAQ Advance Decline showed the same picture as NYSE. Decliners outpaced Advancing stocks.

(7) NYSE Up vs Down Volume pained same Bearish story as NYSE Advancing Declining study. Bears were stronger - making Deeper Troughs.

(8) NASDAQ Up Down Volume shared same characteristics as NYSE Up Down Volume. Indicating Bearishness.

 

The above point by point analysis - which takes only few minutes for a Superior Profit Trader, reveals the broader picture.

Between the four studies each of NYSE and NASDAQ that we perused: Indices Price Move, 52 Week High Low, Advancing Declining Issues and Up Down Volume, only 52 High Low of NYSE is of Bullish implication. All the other 7 studies are Bearish. Giving rise to the overall Bearish conclusion on Broad Markets.

How to use this information? It could be used in many ways by Superior Profit Investors:

A) One could look to tighten Stop on existing Long positions - specially those instruments that move in tandem with Broad Market. Or may exit those positions and book profit. At least partial profit may be booked ... to protect profit. One of our Superior Profit Traders had booked quick profit in a recent Mylan trade shared in Traders Community - not holding on to the trade for longer.

B) One could look for Short Opportunities. Using CUE Sonar (Explorer in Metastock) and CUE Charts to look for Trend Reversal / Top Catching investments ... you may look at recent analysis of Facebook in our Traders Community for one such potential trade idea.

C) One could look for instruments that were not correlated with Market. Which might have been languishing while Broad Market was rallying for last year and more ... And look for Long opportunity in those. You may look at recent analysis of Natural Gas to see how such an investment could be identified.

Other possibilities exist. Using Stocks or Options or Futures etc. as per the liking of a particular investor.

And Superior Profit Investors make profitable decisions using such analysis every time. Confidently.

Sagar.

Volume Reversal Tutorial for SPY

From the desk of Top Market Timer Mark Leivovit,

A Leibovit Negative Volume Reversal was posted Thursday in both the DIA and SPY triggering the purchase of an inverse ETF position at www.vrtrader.com and confirming a top in the major indexes.  Also presented are a couple of important Leibovit Positive Volume Reversals in WBA (Walgreens) ahead of this past Friday's big rally accompanied by news - news that was known in advance by the saavy buyers who created the Leibovit Positive Volume Reversal.

Happy Trading.  

10%+ Profit in Less Than 10 Days using Rubber Band Like Stretch

From the desk of Sagar Nandi and Superior Profit.

Well, I understated.

The actual profit would be about 15% in 4 trading days in the Short trade illustrated below. And the Long trade generated about 30% profit in 7 trading days. Both trades using Rubber Band Like Stretch and Release of that Stretch.

We may say, 10 score out of 10 in each of the trades in terms of Entry Timing. And equally high score in terms of Disciplined Profit Booking.

Once we have a robust trading system (I use CUE Global on Metastock) and follow Superior Profit disciplined Way, we usually end up with profit. As these two trades show.

Let us first look at what is Rubber Band Like Stretch and Stretch Release?

When a stock moves considerably up or down, it goes to a Stretched state - somewhat like a rubber band. And it usually needs to pause and take a breath before continuing in prevailing direction. When it pauses, traders would like to book some profit and that moves the price in reverse direction. When this reverse direction move starts, the rubber band Stretch is Released.  We say that the Stretch is Released.

This Stretch Release shows up as Up or Down Arrow in CUE Charts. This is a highly responsive signal. Meaning, it responds fast to rubber band tension change.

How to use it? If a trader is looking for Reversal Swing Trade to catch the local Top or Bottom, it may be done using Stretch Release. It could be used for Swing Trade as well as for Day Trade. Below real life trade taken in recent weeks examples illustrate the use of Stretch Signal in Swing Trades.

Note that Stretch Release is a "fast" signal. A trade entered based on only a fast signal is prone to whipsaw and stop out. That is why Superior Profit Way suggests to combine Stretch Release with additional confirming signals' before taking a Stretch Release Reversal Trade.

What could be additional confirmation signals?

It could be Heavy Activity at or just prior to Stretch Release. That typically indicates exhaustion and need for the stock to pause.

Another confirmation signal could be price hitting support or resistance level.  Such support / resistance could be in the form of CUE Memory Line, Double Top/Bottom or the Longer Term Direction Lines.

CUE Headwind signal could be yet another confirmation signal: Headwind indicating that up or down momentum is slowing down.

You may read more about Stretch Release, Headwind and other CUE signals and trading way in the Education Center Books.

Now let us go through an actual Stretch Release trade that was announced in Superior Profit Traders Community as the trade signals were generated.

On 24th May 2016 we had alerted about Chesapeake Energy (CHK) in our Traders Community. You may access that post here.

Below CUE Chart of CHK explains how the trade was initiated on 14th May'16  - the day when CHK went up by more than 10%. (this image is taken from the above mentioned Community post and annotated to explain the entry signals in detail).

Following standard Superior Profit guideline, one would not take a Long trade when Weekly Backdrop is Bearish; as was in this case. So, this entry would be considered an improvised trade. And probably it was taken on the analysis that CHK was at extreme (Pendulum) Low and that price was reversing from Double Bottom with strong strength - indicated by the 10% move up on entry day. Our Superior Profit Trader who posted the trade also looked at some peer groups of CHK on 24th May - using XENITH - coming to conclusion that the industry/sector state may also justify a Long position on CHK.

How did the improvised trade play out? Let us look at CHK as of today, 31st of May (after Market Close) to see the result.

From the narration of points 1 to 3 we can see that the Long Trade using Bullish Stretch Release had resulted in 22% profit in 2 trading days. Assuming partial profit was booked and that remaining position is currently held at 9%+ profit, we may see that net profit as of today is about 15% in 4 trading days from 24th May Entry to today's date of 31st May.

Below is the brokerage snapshot showing entry price of 3.88 and 9%+ profit on remaining CHK position being held by a CUE trader - entry being on 24th May - precisely when the Community post was submitted.

The chart above also illustrates that Stretch Release could be used for Short trades as well. For example, at point 4 where Stretch Release in Bearish direction coincided with a Bearish Headwind and price bouncing down from Very Slow Direction line. That trade would result in profit of about 40% in 7 trading days. If partial profit was booked earlier around 20% profit level, this Short would result in a net profit of about 30% in 7 days.

In this way, following disciplined Superior Profit Trading, a trader could benefit from both Short followed by Long trade. Capturing a significant total of about 30%+15% = 45% profit in few weeks using Stock.

It was pretty good result in my opinion. And both the Long and Short the trades could be taken relatively easily using Stretch Release signal and combining it with other supporting CUE signals.

Does your system allow you to identify and execute trades in such unambiguous and easy way?

Sagar

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These products are not a recommendation to buy or sell, but rather a guideline to interpreting the specified analysis methods. Only investors who are aware of the risks inherent in securities trading should use this information. MetaStock in no way endorses the products and services advertised and accept no liability whatsoever for any loss arising from any use of these products or their contents.