Friday, May 24, 2019

Market Pulse through some Main Indicators



SP500 Index SPX, 2826.06


May, is always a difficult month for the stock market, and as I said in the previous post 'Sell in May and Go Away', the explanation of its recent fall is in the swings of the TradeWar, there is no more. It seems Wall Street discounted from January to May a "great" agreement between the US and China with the impressive rise of the SP500 (also thanks to stock buybacks, of course!) and now notice it will not be like that. Today, in moments of maximum tension, with the recent case of Huawei, the market seems to have opened its eyes not only to the complexity of this trade agreement but to assess the already many contradictory results in the US economy (for example, the recent very low ISM). Therefore, it's logical to presume that this correction should continue in next days or weeks. Current Trump's desperate last statements or tweets to bring the market up are notorious. He has done it before, let's see if he does it these days. That is the stupidity of today's market ...

Technically, the SPX made it difficult to overcome the strong resistance at 2,950 at the beginning of the month and its recoil is reaching the 23.6% of its Fibonacci, where it is forming a clear head and shoulder pattern with the last candle touching the neckline support. Its resolution will be key this week: if rebound it could enter to a moe clear ranging mode, with the possibility of overcoming the Kijun and the Ichimoku cloud in 2,874. If falls, its next support would be the powerful SMA200 in 2,777, and further down the 2,718 the 38.2% of its Fibonacci.


US 10-year Treasury Rate TNX, 2.32%


The TradeWar tensions and the indecisiveness of the market move investors taking refuge in the solid US Treasury Bonds, instead of other classic safe-haven instruments such as gold or Japanese yen. Today the benchmark US 10-year notes yield TNX has reached 2.3% the lowest since 2017, even below the 3-month Bill, which again revives the fears of a yield curve inversion.

Technically this indicator is moving in a bearish downtrend channel since January, being now in the lower line, prior to a resolution: could rebound to the channel or break this line and fall to levels of 2.2%. In the short-term, I see here a necessary correction upwards. To follow this week through the US T-Bond ETF TLT or triple speed 3X TLF (bullish) or TMV (bearish).





iShares Russell 2000 Index 
 IWM, $150.79 


The small caps, followed by the Russell 2000 IWM, generally suffer the swings of the market in a more marked degree, due to its greater volatility. Today, it's not exactly the best sector to invest in the middle of a Trade War but you can take advantage of its current ranging price for a swing trade. 

Since January it's moving orderly in a narrow horizontal channel between two clear support and resistance, $150 and $160 respectively, in which its main indicators are converged: SMA averages 50-100-200, and Ichimoku lines and cloud. Its ADX=18.6 (less than 20) confirms the range zone, and for these cases, the Stochastic is the best indicator. It's in 13.27, that is to say, very strong oversold, the reason why an upward rebound in the short-term can be expected. Mindful that its movement this week can correlate and influence other main indices such as the SP500 and Nasdaq.



SPDR Financial XLF ($26.86) and Technology XLK ($73.30) Funds


Some brief notes from the two most important industrial sectors of Wall Street: Financial XLF and Technology XLK, both unfavored in the current Sector Rotation, leading by the bearish Utilities sector XLU.

The Finance Sector can suffer more than any if the yield curve inverts. In addition to this, the crisis of certain major banks in the sector such as the Deutsche Bank DB (in historical lows) and a certain weakness of the Big Four, at the expense of Buffett and Berkshire, justify their bearish bias since April. Technically its weekly chart shows its price bordering his SMA50 and 100 averages, in neutral mode (yellow point in the last candle) according to the Elder Impulse System indicator.  FAS and FAZ, triple velocity ETFs of this sector, seems interesting to follow this week.

As for Technology, after its price forms an inverted V, since one month it's correcting very strongly due to the high tension in the Trade War, which has taken a decisive focus on technology. Trump and Xi know the importance of this sector, they know that who dominates the technology will become the number-one commercial world country. That is why the Huawei case is seen as only the beginning of a "Tech Cold War" that will not end even if both countries reach an agreement. Chinese reprisals against Apple AAPL are feared soon, which can deepen the XLV fall.

Both sectors find their price between the EMA exponential averages of 13 and 26 of their weekly chart, the "Value Zone" defined by Alexander Euler as the ideal moment to invest in a stock. Let's wait for some next news to predict a movement here. Now fundamentals are key here, more than technical analysis.


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Saturday, May 4, 2019

Sell in May and Go Away? Depends on Trade War.


Market Pulse.


"Sell in May and Go Away" says the popular phrase, which is also a well-known adage in Wall Street. Last week the stock market closes in a moment of grace: the SP500 SPX in all-time highs and great numbers in economic events, especially the recent Employment data with great jobs numbers, with a 50-year record unemployment rate and flat average hourly earnings. That's the perfect combination for bull investors: the U.S. economy is strong and with growth without inflation. Also Wall Street is closing an amazing Q1 Earning SeasonThe only divergences are some market overbought signals (not critical yet) and the recent Powell speech, that Wall Street disliked, especially when he told that only a "persistently" low inflation would make the FED consider a rate cut. 

Finally, the Trade War is a separate chapter in this story: could finish (or not) with an agreement in the next weeks, nobody knows, probably neither Trump. As I always said, its resolution is key for the future rise (or drop) of the markets in the short-term.


Update: Today, May 5th. 

Trump in a tweet: Trump vows higher tariffs on Chinese goods.
Answer from Chinese: China considers skip trade talks.
Consequence: now, 22:40 EST, sell-off in world futures markets  SP500 /ES -2%,  Oil /CL -2.5%, DAX -2%, HangSeng -4%, VIX /VX +16%.







"Main15" Stock Watchlist for May


Some brief technical notes and forecasts of the stocks that make up my watchlist "Main15" for May. As usual, remember, they are NOT buying suggestions, only my personal ideas.

1. Cree CREE: after a successful earnings report, continue strong its bull rally, more than 10% in April. As it's trending, I'm only checking weakness signs in its MACD (and its financial news, of course) for taking profits and entry in the pullback. Great stock for all 2019.
2. Cognizant CTSH: its recent Q1 earnings report disappointed Wall Street traders, closing down 11% the session. It seems an entry short is the best play for the short-term.
3. Facebook FB: great performance in April, far overcoming all resistances, now going towards the $200, despite the usual uncertain news about its privacy and data management of its applications. His next resistance at $198, the 78.6% Fibonacci retracement of its fall since August.
4. Fiserv FISV: last weeks returns to its ranging channel between $82.5-87.5, due to its earnings report that beat EPS, flat guidance, but miss sales. I prefer to stay neutral in this stock, but checking carefully the level $87.50 for a possible breakout.
5. General Electric GE: trading now at $10.50, is again its an interesting stock for the short-term, as recently beats earnings and overcomes many resistances in April: the three daily SMA (50, 100 and 200), and the Ichimoku cloud. I'm long here.
6. Illumina ILMN: this health-sector stock came here from my Radar watchlist, after a good earnings report, beating EPS and sales, with flat guidance. Technically is now above all its daily SMA, touching the upper line of an important downtrend channel that could send this stock to $350 levels. Waiting for a more clear breakout: it's my entry signal.
7. Lennar LEN: Housing sector is recovering this year from a disappointing 2018, and Lennar is a key stock in this sector with its 35% YTD gain. Stock mainly for long-term investing, its next important resistance is in $54.68, the 50% Fibonacci retracement of its 2018 drop.
8. Netflix NFLX: the popular FAANG stock is now in my Main15 list due to its recent good earnings and nice world subscriptions numbers. Disney DIS new streaming service was a tough jab that I'm sure Netflix could assimilate well in the future, due to Hastings abilities. Now the stock is in a ranging channel $340-380 all the year, that yesterday overcomes. Probably a breakout is near here.
9. Paypal PYPL: same as in April, technically is unstoppable. One of the few stocks that did not suffer the market correction at the end of last year. Permanent member of my watchlist, I continue long here, with a tight stop loss now.
10. Roku ROKU: as an stock in a ranging phase (ADX<20) rebounding in a channel, it moves well according to the Stochastic indicator. I twitted that two weeks ago, for a nice rebound and next profit-taking. Today is near the upper line of its downtrend channel. I'm neutral, due to its huge volatility, waiting for signals and next Earnings Report.
11. Snapchat SNAP: as I remark always, it is a stock only for short-term speculation, never for a long investing. It's approaching its real valuation, I presume near $12-13. Probably recover to that levels in May due to upgrades because it slightly beats its recent earnings.
12. Atlassian TEAM: another stock winner, in my watchlist since January. I'm long here since it broke the psychological $100 level. Sank after its recent earnings but now is filling that gap, breaking its SMA50. Good pullback for an entry long.
13. Tesla TSLA: continue being the most hated (and the most loved) stock in Wall Street, due Elon Musk personality. Its fundamentals, news (as recent capital raise), and Musk tweets are key in its performance. Technically, the same as ROKU, is rebounding fine in a downtrend channel all 2019. Technical signs in MACD and Stochastic indicate some days in bullish bias.
14. Twitter TWTR: the bird breaks its 9-month resistance at $35, due to its good earnings report, and now the sky seems is the limit. Many bank upgrades confirm that. Long.
15. US Steel X: in April sank near 30% from $20 to lowest 2-year levels ($14.39) due to a Credit Suisse downgrade to $13 that make this a good stock for shorting it that month. Now, after an amazing earning report, it seems the gap could be filled in the next weeks. News of its new billion-dollar plant, a +17% day-recover and also an indirect Trump tweet are very good signals. Interesting stock if it increases volume because it usually takes off strongly.


Images were taken on May 4th, 14:25 EST 



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Friday, April 26, 2019

The NH-NL index do it again



By kind permission of Elder.com, the website of the recognized trader, Alexander Elder, I reproduce for you, literally, its recent article "Books and Trades #256: A Spike Lesson... Education... A new book special" of April 24th, about the accurate signal that gives the New High- New Low Index (NH-NL) indicator in the powerful market recovery since late December 2018, post which I publish hereNot popular in trading platforms,  in www.indexindicators.com you can find this indicator for the SP500 or other indexes. Just select the stock index, and in Breadth indicator the NH-NL option.

Now the SP500 SPX is all-time highs again and, in Elder' words, the question now "is whether the upmove will continue more or less uninterrupted or whether there’ll be a retest of the initial low like we saw in 2016. Some gravity is seen returning to the markets".


Dear Trader,
The letter I had sent to you right after Christmas, was headlined “A major buy signal on stand-by.”  The Spike signal triggered two days later and produced a record-setting rally.
Spike signals are very rare – they occur only a few times in a decade.  They are extremely powerful, but most traders fail to take full advantage of them.  I hope that the following recap will help you be better prepared when this signal occurs again.
A Spike is the strongest signal in technical analysis (which is why SpikeTrade group is named after it). It occurs when weekly New High – New Low Index (NH-NL) drops below minus 4,000 and then rises above that level. Do not confuse it with a Spike Bounce signal which comes from a daily chart in the monthly look-back window.  That lesser signal occurs many times a year (3 times so far in 2019) and delivers more modest rallies.
Let’s review three charts, showing the latest Spike signals, and then draw a lesson from them…


In 2009: an explosive 35% rally in 14 weeks, followed by a great deal more after a reaction to less than one ATR below value. In 2011: not shown because that Spike signal occurred intraweek. Still, it was followed by a great lasting rally. 

In 2016: an impressive 10% rally that lasted 20 weeks, followed by a lot more after two reactions to one ATR below value.
In 2019: a 16% rally over a 15 week period – and it may last even longer.
Most traders fail to take full advantage of Spike-driven rallies because they treat them as normal rallies and sell too soon.  It pays to hold a position taken after a Spike signal for a much longer time. I hope this review and analysis will help you in your trading. Best wishes for successful trading from all of us at elder.com.
Dr. Alexander Elder & staff
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Friday, April 19, 2019

Trader Notes: Trading with the Range Bars


Basics.


The Range Bars are a different way to create and read a stock chart. Develop by Vicente Nicolellis, it exploits the volatility of the markets, making the time irrelevant in a chart, eliminating it. The main feature of this tool is, in my opinion, the great way it filters the noise, and so, avoiding from our analysis many usual false signals and whipsaws.

In a time-based chart of, for example, 10-minutes, we have a bar every 10 minutes, and so the same number of bars for one hour, and so, for all the session, regardless the volatility of the stock. In the range bars, we don't know how many bars are going to be plotted because it depends on volatility: when it's high, more bars are printed. For low-volatility, fewer bars will be print.

Three basic rules define a chart with Range Bars:
- Each range bar equals a high-low range, the specified range that we have to decide.
- Each range bar must open outside the high-low range of the previous bar.
- Each range bar must close at either its high or its low.

The best way to understand the power of this tool is by comparing, in your trading platform, a usual 1-minute time-based chart, with a range bar chart, during an hour, or better, for a complete session. Spend your time watching the range bars in action, trying with different values of ticks as range setting for each stock or instrument, viewing when you get more clear charts, with less noise, so you can draw our usual support and resistance levels, trendlines, channels, triangles, etc.

As a tip, many traders recommend, as a range setting, the Average True Range (ATR) of the stock. That is a measure of volatility, consisting of a 14-day moving average of the true range (high minus low). Finally, another advantage of watching them in action is that we can notice the "timing" of the bars: the slower the bars were print, means lower volatility. The faster they were print, the greater the stock volatility, and so, better trading opportunities.


The best way to view the goodness of a Range Bars chart (below) is by comparison with a 1-min time-chart (above). Highlighted in yellow is an aleatory lapse of a session, between 13:00 and 14:30 EST. Compare the many whipsaws in the time-chart, that can confuse a trader, versus the clean candles in the Range Bars, almost flat, with unnecessary noise. That happens every moment in a daily session. A consequence of this is that the drawing of trendlines, supports-resistances, and patterns is more clear and trustworthy in a Range Bars chart.
Also, we can verify that in the last 30 minutes of the session, the candles in the Range Bars chart increases due to more volatility in the stock, a detail that we can't check immediately in the time-based chart.





Intraday Strategy using Range Bars 


After many testings, simply by trial and error, I prefer to use the Range Bars for a day-trade, with the ATR as range setting. Choose your own timeframe in the same way, always according to your favorite instrument and trading system.

In the web, you can find some strategies for use with range bars. After analyze and test many of them, I get better results with one described by Rockwell Trading. It's simple and powerful. The strategy use range bars in conjunction with the Bohlinger Bands (BB) to identify trends, although the BB works best in ranging than in trending behavior of a stock. For uptrends, use the upper BB, and for downtrends use the lower BB. A setup parameters of 12 for moving average and 2 for the standard deviation, works fine for day-trading. For identifying strong up-down trends, we need two more popular indicators: MACD (using its standard setup with 12,26,9) and RSI (Relative Strength Indicator, set up with 7 bars, oversold 30, overbought 70).

a) You identify the ideal entry point in a strong uptrend when:
- The upper line of the BB is pointing up 45 degrees or more and range bars are touching the band as a magnet.
- Confirm the uptrend if the MACD line is above zero AND above its average line. Use this to avoid false signals. 
- The RSI is a second confirmation: in an uptrend verify is above 70 and stay there for a while. 
- Only entry when the three technical indicators match with the conditions.
- End of Trend: when upper BB starts to flat or turns around, or MACD or RSI confirmations changed. Any of them.

b) The same procedure works for strong downtrend
- The lower line of the BB, the primary indicator, is pointing down 45 degrees or more and the range bars touching the band as a magnet.
- Confirm the downtrend if MACD line is below zero AND below its average line. Use this to avoid false signals.
- The RSI is a second confirmation: in a downtrend verify is below 30 and stay there for a while.
- Only entry when the three technical indicators match with the conditions.
- End of Trend: when lower BB is flattening or turns around, or MACD or RSI confirmations changed. Any of them.


Last week, US Steel X tumbles due news of two downgrades (Credit Suisse and Bank of America) and then technically because a breakdown from its 2-year support at $18. Since that day the stock is in a clear bearish bias, the trend to use for a short-term trade.
As you can view, the chart with range bars (using the ATR as range) fulfill the conditions of the strategy at 9:00 EST: price touching the lower BB that is pointing down 45 degrees, the MACD line (blue) is below both zero and its average (red), and the RSI is below the 30 level. So, the entry point is in that candle, with a stop loss in $16.9. Usually, this strategy is quick, in this case in less than 30 minutes appear the exit signals, simultaneously, for a gain of $0.4 per share. A simple strategy.







As 

As other strategies I post in this blog, this one, being intraday, requires constant vigilance and risk management and is a good method to avoid one of the main causes of losses in stock trading: the false signals. Try it first on PaperMoney mode, because requires practice: you will be amazed how it worksTake note that there's no infallible or magic indicator or strategy: all of them give sometimes errors. 

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Monday, April 8, 2019

Breakout Stocks to Follow this Week


Celgene Corp. CELG, $95.00


CELG, one of my favorites stocks from the Health Sector XLV for this week. In news, is near its mega-merger with Bristol-Myers BMY, that could give volatility to this stock. Technically, last week broke its 3-month consolidation phase (show in the horizontal yellow channel) with a typical breakaway gap. Today closes at $95, which is also its year-resistance, so it's an important level to watch. Need to confirm this week this gap, and if so, begin its rally mode. 


Roku Inc. ROKU, $60.73



The daily chart of ROKU shows a symmetrical triangle, a classic pattern that could break up or down, it's always undefined. Probably hit by the new AppleTV+ streaming service, this stock sinks today 4.2%, breaking the lower line of the triangle and approaching the stock to its key SMA50 average and the Ichimoku cloud. I put this volatile stock in my radar, waiting for its behavior next days before shorting it.





Twitter TWTR, $34.86



As you see in its daily chart, the $35 level is a pretty resistance to overcome for TWTR. Its four previous touches and rebounds give confidence to this level, and today again touches it. With the stock over its SMA200 average, a strong overcome from this level only could means the beginning of a bull rally.



SPDR Oil & Gas Explore & Production XOP, $32.03


Not properly a stock, XOP is a popular ETF that follows oil and gas. It broke today its 3-month consolidation channel (in yellow), in which is ranging since early 2019. And did it with nice volume and signaling a probable golden-cross (SMA50 average above the SMA100 or SMA200) for next days. I'm following this week, with an eye in the EIA weekly report on Wednesday, and the other in gas low prices, waiting for a turnaround in its bear race.

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Thursday, April 4, 2019

Technical Notes of my April' Stock Watchlist


Market Pulse.


There is a noticeable bullish sentiment from the market, supported by recent good economic data from China, the still unsecured inversion of the yield curve and the increasingly near possibility (almost confirmed by The Financial Times) of a final trade agreement between the US and China. The only doubt of the investors and traders is known if the market has already discounted this fact in its powerful recovery since January. There are only two possibilities:
a) If so, we have attended these months to a usual "buy the rumor, sell the news", and the rise with the news (the end of the Trade War) will be fleeting.
b) If not, their indices will continue advancing to new maxima, among them the expected SP500 SPX in 3,000.






April' Watchlist


Some brief technical notes and forecasts of the stocks that make up my watchlist "Main15" for April. As usual, remember, they are NOT buying suggestions, only my personal ideas.

1. Apple AAPL: undeniably strong after its recent successful event, technically the "golden cross" signal shown on Monday made it exceed the SMA200 average of its daily chart. Now, with all the signals in bull mode, it's heading quietly to its next resistance, the psychological level $200.
2. Cree CREE: yesterday broke the important 2-year uptrend channel in its weekly channel, reaching $61.75 a 5-year maximum. If it does not fall below its now support at $60, its a longwith a tight loss. Follow this stock all 2019.
3. Cognizant CTSH: broke with authority its consolidation phase, overcoming its SMA200 average. Next resistance is the psychological level $75 (coincides with its Fibonacci 61.8% of its fall since August). 
4. Facebook FB: ranging between $160-173, much uncertain news has an impact on its rise. His next resistance at $182, the 61.8% Fibonacci retracement of its fall since August.
5. Fiserv FISV: this week left the 2-month consolidation period in the range $82.5-87.5, and yesterday broke level $90 reaching all-time highs. On my watchlist since January, it's shaping up as one of my favorite stocks for 2019.
6. General Electric GE: now consolidating in the range $9.70-10.5, its recovery seems to have lost strength. Clear support in its SMA50, in $10. Probable correction.
7. Las Vegas Sands LVS: all its averages, in daily and weekly charts, are in bull zone, and  $68.50 is its next resistance, that's the 61.8% of his Fibonacci of its fall since July. In my radar.
8. Lyft LYFT: meritorious its recent IPO, but... can the valuation of this taxi app can be considered serious? It needs to find its real valuation, which I estimate maybe less than 50% of the current one in the long term, similar to cases like SNAP, APRN or FIT. There are still no options puts available, seems easy money short this.
9. Paypal PYPL: technically is unstoppable. One of the few stocks that did not suffer the market correction at the end of last year. Permanent member of my watchlist, I continue long here.
10. Roku ROKU: after recovering all of its plunge, entered in a range zone for 2 months, between $60-70. Its next resistance to watch is in its all-time high in $77.57. Careful with its huge volatility.
11. Snapchat SNAP: as I remark always, is a stock only for short-term speculation, never for a long investing. Now in a powerful recovery since its confirmed the MACD bull divergence mentioned here. It's approaching its real valuation, I estimate in the range $12-13. 
12. Atlassian TEAM: another stock winner, in my watchlist since January. I'm long here since it broke the psychological $100 level. Now is in all-time highs ($114) and could correct soon due to logical exhaustion: $120 seems an interesting level to watch.
13. Twitter TWTR: continues in its range zone between $30-35. In these moments it's in the upper limit, in an important resistance that can overcome soon, sending its price to its next goal: the psychological level $40. In my radar.
14. Ubiquiti UBNT: another of my favorite stocks. It doesn't confirm the MACD bear divergence indicated here (its EMA13 finally never pointed down), so it turned around and kept advancing to all-time highs. Now I'm long, with a tight stop, holding until its earnings report, always a dangerous event due its a very volatile stock.
15. US Steel X: I had the alert for a buy entry in $18, but the stock finally didn't arrive, and has been recovering upwards. Now in $21, the base of the Ichimoku cloud, is its next resistance. Interesting stock if it increases volume because it usually takes off strongly.



Images were taken on April 3rd, 20:44 EST


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Tuesday, March 26, 2019

Watchlist Update: CREE, CTSH, UBNT, X


Cree Inc. CREE, $55.27


Technical analysis is a great weapon for traders when charts are well developed. CREE, as you know, one of my favorite stocks since mid-2018, is likely in a technical correction. The 2-year uptrend channel in its weekly chart, show the stock touching the upper line, and beginning a pullback probably towards the "value zone" (black lines). MACD and Stochastic (not shown) confirm some exhaustion of the rally. And also the Elder's Impulse System changes from green to yellow in the two last candles indicate a pause in the bullish phase. Friday 22th, during the market sell-off, I closed my position and wait for a further long entry, because the stock maintains its good fundamentals, and this good company has road for growth in the long-term. 


Cognizant Technology Corp. CTSH, $71.09


Since January I'm following this stock in my watchlist, due to its low valuation with nice numbers in growth and earnings in 2018. After a great initial month and with an Earnings Report beating the market, the CTSH stock couldn't overcome its SMA200 average and entered in a consolidating period that stills two months, preparing for a breakout or a breakaway gap that didn't happen yet. As the channel is tight, is difficult to predict in which direction it will explode. Just put in the radar, doing jealous surveillance to its price and volume behavior.





Ubiquiti Networks UBNT, $144.20



Since my last post, UBNT soared after Wall Street likes its last Earning Report. The continuation gap moved the stock to $150 levels, an amazing 50% performance YTD. Now an important figure appears in its daily chart, a double-top, a classic technical sign of turn-down in a stock rallying. Also reinforced with a clear MACD bear divergence, that isn't complete, because its EMA13 average (the black line) is still flat. This simple indicator helps me to avoid many false divergences that usually appear in MACD lines and histogram. I'm anxious to confirm this because UBNT corrections are usually very deep, and so, a good opportunity for shorting it. 



US Steel Corp. X, $19.22


A good company that is directly suffering the effects of the Trade War, since its beginnings in early 2018. The stock fall is heavy, near 60% from its peak, breaking all main simple averages and Fibonacci retracements.  X is the typical stock in which news mainly influence its behavior, and the only great news that will explode this stock toward the stars is a deal US-China: so it's unpredictable, only Trump knows...
I'm watching the $18 level as a good technical entry point, due to its behavior in the last two years when approaches this value. I placed the alert there and I will wait. 

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Tuesday, March 12, 2019

Trader Notes: the Ichimoku indicator


Among the many indicators used for technical analysis, one of my favorites for its versatility, since it brings together 'all in one': levels of support and resistance, trend of movement (trend direction), acceleration (momentum) of the price (that´s volatility), and trading signals (bull or bear), is the 'Cloud of Ichimoku', or simply Ichimoku, dating from 1969, today has become one of the
most used by traders for its effectiveness. Its development and operation are detailed in the main trading books, and in many internet sites dedicated to teaching, which is not the intention of this blog, but rather to mention it and use its power to make good trades. I suggest, fervently, study the theory of this indicator to better understand the philosophy of Goichi Hosoda, its creator. One of the best online explanation of the Ichimoku Clouds is in the StockCharts web, it explains calculations, signals and strategies. Briefly, the Ichimoku consists of the use of several lines: 

Tenkan: blue line of conversion 

Kijun: red line of base
Chikou: green line, backward
Senkou: A and B, which encloses the cloud between them 
Kumo: the cloud, which defines the trend

The cloud takes its color according to the relative location of these. Thus, Senkou A over B, green color, reinforces the upward trend), acting in turn the cloud as support or resistance. Looking at the graph of the price of a stock or index can be deduced if the trend is bullish/bearish/neutral (price up/ down/within the cloud), or if there is an upward/downward correction to it (cloud going green to red, or vice versa). 


Finally the crossing of the price of the stock with the conversion and base lines, or the crossing between the same blue and red lines, are those that indicate the strategies and signals of purchase/sale, and are reinforced if they are located above or below the cloud , respectively. That is, the Ichimoku makes trading in the direction of trending, never going against it, giving better results in stocks or indexes in trending mode.  So, the trading strategy could be summarized as follows: 


Bull signs for trading:

- Price moves above the cloud
- Cloud turns from red to green
- Price moves above the base line
- Conversion Line (blue) moves above Base Line (red)

Bear signs for trading:

- Price moves below the cloud
- Cloud turns from green to red
- Price moves below the base line
- Conversion Line (blue) moves below Base Line (red)



Nvdia $NVDA chart shows a bull bias for Ichimoku, with price moving yesterday above the Conversion Line. But always remember: a single indicator never guarantees a good trade.








Intraday "Breakout Strategy" using Ichimoku and ADX


This strategy was taken from the web https://www.forexstrategieswork.com/ which have many other forex strategies as this, for use in stocks. Analyzing many of them in the site, I think this one is  simple, inteligent and accurate. As a preamble, the Average Directional Idex ADX is another popular trending indicator, which ranges between 0 and 100 telling you, if its value is above 20 and the slope up, the stock is trending. In the other side, if its below 20 and the slope pointing up, its ranging. The indicator does not say if the stock is in bullish or bearish bias, only the strength of the trend.  


Over the years, one of the strategies I use is this one who combined the Ichimoku cloud and the ADX for intraday purchase of stocks, that is, quick buys that I usually sell the same day or the next. Work only on stocks that are close to having a breakout, ideal if you touch 3 or more times the resistance without exceeding it completely. I have seen that the timeframe that works best is 10 minutes, but also works well with the 5 minutes. As usual, I prefer stocks with Market Cap >1,000M, good volume >500,000 shares and implied volatility less than 80%.


For a BUY trading signal were going to look at key resistance levels.

- Wait for the breakout TO HAPPEN and if both, the ADX and Ichimoku Cloud, give bull signals in that point, you can place a BUY order at the open of the next candle after the breakout candle. 
- The ADX indicator must be above 20 (30 for more security) and with upward SLOPE at the moment the breakout happens and the price candle must have CLOSED ABOVE the cloud.
- Place the stop loss just below the Cloud and follow the trend (trailing up the stop loss if you want) and EXIT the trade only after we have two consecutive candle close below the BLUE conversion line.

For a SELL trading signal were going to look at key support levels. 

- Wait for the breakout TO HAPPEN and if both the ADX and Ichimoku Cloud give bear signals in that point, you can place a SELL order at the open of the preceding candle after the breakout candle. 
- The ADX indicator must be above 20 (30 for more security) and with upward SLOPE at the moment the breakout happens and the price candle must have CLOSED BELOW the cloud. 
- Place the stop loss above the Cloud and follow the trend (trailing down the stop loss if you want) and EXIT the trade only after we have two consecutive candle close above the BLUE conversion line.

The strategy requires constant vigilance and risk management, and is a good method to avoid one of the main causes of losses in stock trading: the false breakouts. Also, as it is an intraday strategy, it's key that the trend of the entire market accompanies your trade: so, don't buy in a bearish day, and vice-versa.

Try it first on papermoney mode, because  requires practice. Take note that there's no infallible or magic indicator or strategy: all of them give sometimes false signals. Use your favorites indicators in a multiple timeframe (making the strategic decision on the weekly chart and the tactical choices on the daily chart), in conjunction with fundamental analysis for a best trade.


This 10-chart from Comcast $CMCSA show the main features of the BUY strategy Ichimoku + ADX: resistence breakout, candle above the cloud, ADX>30, stop loss place, exit and profit.


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Monday, March 4, 2019

My Stock Watchlist for March 2019


Market Pulse.


Ending February, we have a very overbought market and a bullish sentiment in all Wall Street levels, professional and particular investors. Take note this amazing numbers for this 2019:
- The Dow Jones finished the month with an 11% YTD gain, best two-month start since 1987. 
The SP500 SPX closes February breaking its SMA10 average in its monthly chart, a crucial data watch for smart investors, signaling buy conditions, after three months. Since December lows, the raise is an incredible 19%.
- The Nasdaq COMP with its best week rally (almost 10 weeks) since 1999.  
- Also, the VIX returning to "calm" levels in 13.78, signaling more greed in investors. 

In news, investors were analyzing recent 4Q GDP, which shows economy growth at its fastest clip since 2015: 2.6% annual rate, more than 2.2% prediction, but short than recent 3.4% and 4.2%, both 3Q and 2Q GDP. After this read, the 10-year Treasury Bond TNX increases to 2.72%, in its steepest climb since early February.

The Trade War is still the main catalyst of the markets: its positive advances impulses high the markets. For example, this week, US Trade Representative Robert Lighthizer said, for the time being, that the USA was abandoning its threat to raise tariffs to 25% on $200 billion of Chinese goods. More good news that insinuates that, finally, the deal is near. Now, the market concern is know until when this phenomenon is going to occur, and if finally, Wall Street will like the agreement. Is coming a "Buy the rumor, sell the news" trade when the agreement comes out? It's very likely.

Technically, the SP500 exceeded this month, with much authority, its important SMA200 average, now heading towards the level 78.6% of the Fibonacci of its recent fall, coinciding that level with the difficult 2,815 that was strong resistance in October and November and also making it this week. Overcoming this resistance would lead the SPX to all-time-high levels.  Check this crucial level all the week.






March' Watchlists


So, these are my Stock Watchlists for March 2019. Follow them in real-time through the stock ticker above, powered by Macroaxis, clicking in each symbol for more information. First, view the Watchlist features and the Blog Disclaimer: that a certain stock is in these lists does NOT mean any BUY or SELL recommendation


Images were taken on March 6th, 12:30EST
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