DaytradeTeam Profitzzz
Recaps of DaytradeTeam Trading Systems Performance
IBM Could Be Headed for Trouble--will Others Join?
For a current example, let's take a look at IBM:
Notice how IBM has put together a decent move to the upside over the past 9 months, but has started to falter in the last month or so. Even more telling is the head and shoulders formation as outlined above. Now take a look at the 9 month charts of GOOG, AAPL, and QQQQ. It's still early, but these stocks may be starting into the 2nd shoulder of their own formations, and that's definitely worth keeping an eye on.
Here's how to play this for a high profit potential swing trade:
Watch 81.00-81.30 as a support level for the stock. This is the "neckline", the support level where both shoulders and the head of the formation have been built off of (and returned back to). The key for every head and shoulders formation is the break of the neckline. Until that occurs, the formation is simply a red flag that something bad might be about to happen.
If IBM can breakdown under the neckline on decent volume, look for short selling opportunities on any low-volume retracements back to the 81.00 area. Remember, once a support level is broken it is very likely to provide resistance--and that can be very helpful to shorts who take advantage of this formation.
Note that the head and shoulders formation is an indicator on any time-frame of chart, so feel free to use it for day trading or even options trading!
The Three Directions of Trend
People most often think of the market as either moving up, as in an uptrend, or down, as in a downtrend. However, the stock market spends about one third of the time moving horizontal, or what is called a sideways trend. It is supply and demand that pushes the market into this horizontal movement. You may also hear this action called a trending range or sometimes, a line. Although sideways trend is the correct term, occasionally will hear it referred to as “the market is trendless”.
Three Classifications of Trend
Confusion occurs sometimes what a person asks what the trend is because of the different traders’ perceptions. Long term traders or investors may view a few days or even weeks movement in price insignificant. Whereas, a stock trader sees a major uptrend when viewing just 2 or 3 days movement, and a day trader in the movement over a few hours. The different perceptions makes it necessary to understand the degrees of trend so you will know you are on the same page as others involved in the same trade.
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Trend in Stock Trading
Understanding the concept of trend is extremely important to technical day trading. Traders will use a variety of tools to measure it, such as support and resistance levels, price patterns, moving averages, trendlines, etc., for the purpose of trading with the trend or identifying when the trend has ended.
Just what is trend, and why is it important? .
First let’s take a look at what it is. Generally speaking, trend can be defined as the direction in which the market is moving. More precise, trend is a series of zigzags, known as highs and lows which flow in succession. It is the direction of the highs and lows that constitutes market trend. These successive waves can be classified into a few categories:
- An uptrend which is defined as a series of successively higher peaks and troughs:
- A downtrend is a series of declining peaks and troughs:
- A sideways trend is a display of horizontally moving peaks and troughs:
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Easy Profit on BEAS by Using the #1 Exit Rule
In fact, our Small Cap Swing Trading System just exited an easy 5.0% winner on BEAS using that very same #1 rule of day trading exits:
Notice how we bought BEAS on a nice dip after a recent high in its uptrend. We then patiently waited as the stock struggled to make new highs during the end of the year as profit-taking took over and almost all stocks struggled. Then, almost like clockwork, BEAS exploded higher on nice volume today, and we exited into the sharp wave of buying for a nice profit.
Did we sell too soon? Maybe--but when you sell you only have two options: You either sell too soon or too late. Guess which of those I prefer ;)
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SIRI and XMSR Worth the Risk Here
Those two items have certainly had a negative effect on the stock of late, but from a technical point of view, the outlook from this point is certainly favorable from a risk/reward standpoint:
On the 9-month chart, you'll notice that SIRI is nearing its long term uptrend line here and showing some oversold signals with the 14 day RSI near historical lows where the stock price has bounced in the past. Look for opportunities to buy SIRI or enter bullish options spread positions with the mentality that if the uptrend line is broken on heavy volume, you'll exit quickly with only minor pain. A short-term target of 7.00-7.25 should be adequate.
XM Satellite Radio (XMSR) is in a little bit of a different situation technically:
Notice how XMSR has moved into a well-defined trading range over the last two months between 27.90 and 31.10. XMSR is currently nearing the bottom of this consolidation range, and could be in a very nice position to enter a bullish vertical credit spread or other bullish net-credit options trade. This allows you to profit from time-decay of the options premiums should the support level hold here, but exit with a very small loss (or even a gain) should the support level fail later this week.
Come try out a trial membership to the DaytradeTeam Live Trading Room and Options Strategies Today. I'll show you exactly what I'm watching for, the strategies that I use and send you my real-time trade alerts!
Stock Trading: AMAT has Solid Uptrend and Support to Lean On
Broken Levels of Resistance are Automatically New Levels of Support
For a current example, let's take a look at a 6 month chart of AMAT:
Notice how late this summer, AMAT was unable to make a significant move above 18.50, even making a double top and confirming it as a solid resistance level as the stock moved lower over the next few months.Well, fortunately for AMAT shareholders, things have recently taken a turn for the better. If you look closely, you will notice how once the stock broke 18.50, not only did it breakout to new highs, but it also confirmed 18.50 as a new support level, bouncing upwards off of it twice. This is a great example of an old resistance level becoming support immediately after being broken.
Now AMAT is pulling back a little bit and starting to test the uptrend line that has held successfully for the past six weeks. At just under 19.00, this could be a good opportunity to start picking up some shares of AMAT on a pullback from their recent high. You will have an uptrend line as initial support, and a former double-top resistance line at 18.50 as primary support.
From a risk/reward standpoint, you can't ask for a much better setup than that.
This technical analysis rule can also be applied when day trading and options trading, so have fun!
Learn from me as you watch me trade and get my alerts in real time each and every day in the DaytradeTeam Live Trading Room.....
Stock Trading Alert---KLAC Old Support Now Resistance
KLAC was in a very nice uptrend channel up until the middle of last week, until it broke under its uptrend line and moved sharply lower on fairly heavy volume:
Now KLAC finds itself in a difficult situation, bumping back up against the old uptrend line, where it is likely to find significant resistance. We will be watching KLAC very closely over the next few days, possibly entering into a bearish options spread position or even short selling the stock for a swing trade. We will also be watching for day trading opportunities on KLAC--especially if the stock can penetrate back into its old uptrending channel.
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Halliburton Stock (HAL) Swing Trading Alert
The first thing I notice about the 20 day chart of HAL is the ascending triangle formation that it has formed. Notice how the stock continuously has made higher lows (the ascending line) while repeating highs at the same level (the flat upper line of triangle). This is a bullish formation.HAL has broken out of the ascending triangle today to the upside (highlighted in yellow), indicating that a breakout toward 70 is very likely over the next few weeks. In fact, we sent out a bullish trading alert on HAL today at 65.35---about 10 minutes before it started it's big move to the upside before closing at 66.71! Look for a low volume pullback to the former resistance line of 66.20 as a great entry point for a bullish stock trading position.
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Still Bullish on RIMM (Call Options)
Today I'm telling you that nothing has changed except the amount of discount RIMM calls are selling at due to the patent infringement lawsuit:
Notice how in today's stock trading RIMM moved down to the 60.00 support level and neckline of head and shoulders reversal pattern that it put in a few weeks ago, but FAILED to break that level even on "terrible news" (was this a day trader's dream or what?).
Here is how this will likely play out:
RIMM will now "see the light" that they should have seen 500 days ago and settle the case, write it off as a huge loss and get back to business. Wall St will be happy to have the dark cloud of litigation lifted from the stock and institutions will start moving in. Heavy short interest will be squeezed and a target of 87-92 in Jan 06 will be reached.
Of course, there is a TON of risk left in this stock to the downside--management hasn't exactly won any awards for their ability to avert disaster so far--so use call options that limit your risk!
I want you to see first hand what all the hype is about:
McDonald's Setup Makes Me Smile
Well, the beauty of technical analysis is that you don't have to care anything about what the company actually does. The only thing that matters is the stock trading, and I like what I see on MCD.
The first thing you'll notice on the chart above is the 3 month consolidation pattern that MCD has made between 32 and 34. Typically these types of tight trading channels are the base for a large, extended move in one direction or another. Just look for a break of the consolidation range on above average volume and play the stock in that direction with a 4% trailing stop.
Look for a break (and hold) above 34.25 on volume of more than 9 million shares as your indicator to initiate a bullish position.
The key here is patience. Getting in now at 33.95 or 34 may be tempting because you will already have an extra .25 profit by the time the stock begins its breakout move. Unfortunately, this type of thinking gets a lot of traders in trouble because they are ignoring the power of the 34.00 resistance level that has made this consolidation pattern so appealing in the first place. By simply waiting for a move above 34.25 on good volume, you put the risk/reward ratio in your favor by a huge margin---where if you get in now you actually have a greater chance of the 34.00 resistance level holding and losing on the trade than winning.
If the stock never breaks 34.25 on big volume, we'll just keep on looking for other opportunities in a very tradeable market--including in options trading.
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Stock Trading Alert---QCOM Triple Top
Notice how QCOM has failed three seperate times to break the 46.00 resistance level. The first time, QCOM fell from 46 to 41.50 on a two week pullback. The second time, QCOM bounced off of the 46 resistance level and dropped all the way to 39.02 on very heavy volume and a large gap lower. Once again, QCOM has failed to break the 46.00 level, completing the triple-top formation and is currently sitting right at 45 in what looks like the beginning of yet another pullback.Here's how I would play the stock from here:
I'm basically looking at two possibilities for an alert on QCOM for DaytradeTeam members late this week:
- A basic short sell stock trading position that profits from QCOM's drip in price over the next few weeks. Our target on this trade would likely be 39, with a protective stop order at 46.46 to limit our loss should the 46.00 resistance fail. If the move down towards 45 is swift enough, we will likely look to sell December 40.00 put options against our position to generate some income from the trade.
- A bearish options position. Over the next two days we will be watching the DEC and JAN options premiums on QCOM extremely closely to determine what type of spread would have the best profit potential with the lowest exposure to risk. Possibilities include a bearish vertical credit spread, a 40.00 butterfly spread or even a simple directional position on long-term, out-of-the-money put options.
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High RSI for QQQQ is No Problem!
Let's take a look at the year-to-date chart of QQQQ:
Notice how in 2005 there have been two other times when the RSI hit the 70 level, both naturally coming after significant runs higher in the stock.
On the first occasion, in the middle of May, the RSI hit 70 as QQQQ hit 37.50. Was this a top for that cycle? No. The Q's ran over a dollar higher over the next two weeks before topping out, with the RSI holding above 70 the entire time.
The second instance took place in late June, with QQQQ hitting 38.65 as the RSI crossed 70. Again, this was not a top. The stock ran another 1.50 higher before topping out at 40.12--again about two weeks later.
Bet on History Repeating Itself:
Well, here we are again. A big run to new highs and the RSI hitting 70. As we've seen by looking back at the chart, the only other two times this has happened this year the Q's have seen an extension of the rally over the following two weeks by an average of about 4.2%.
When history repeats itself (as it tends to do), we'll have a nice continuation of this move through the end of November and up to 42-42.25 on QQQQ before we finally top out.
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2.
CSCO Breaks mid-term downtrend off long-term support
Looking at the chart above, we see that CSCO moved lower consistently for weeks in the mid-term downtrend. However, when long term support hit at 17 – 17.15, CSCO was able to bounce and bounce hard, breaking the downtrend line. This is a key lesson to remember: long-term patterns will often out-trump (dominate) mid and short term patterns and be the REASON that short term trends finally end.
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AAPL slowed by earnings, only temporarily
AAPL was on a very nice uptrend for months before the Oct earnings slammed the stock. Investors and traders were not shaken from the bull-side, however, and jumped back in AAPL long. AAPL has now established an even more aggressive uptrend, outpacing the previous one. With AAPL trading at the low end of the uptrend, this could be an excellent opportunity for a "buy on dip" swing trade or as a opportunity for some aggressive call option trades.
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