Here’s Where We Draw The Line
Â
Trading off the news can be quite
profitable, but unless you’re related to a buy side analyst or upper management
in the company, it’s probably best to stick to a couple of technical rules to
know when you should be focused on buying or selling.
One of the great rules that our News Reversal
Service uses is to key off of the prior day’s high and low prices. To focus on a
long entry the stock must have gapped lower, below the low of the prior day, and
then stage a reversal that puts the intraday action back through this pivotal
price. The reverse of this would be the rule for sell side entries.
10:04:31
Intraday
Setup Alert
Electronic Data Systems (EDS)
gapped down off a “negative” earnings report, but since the
opening print has reversed course and formed a high level intraday triangle
consolidation, up .18 at 15.90.
10:46:56
Intraday
Setup Alert
Is it (OVER)
at Overture? We had the stock as one to watch in our Nightly
Daytraders Report, unfortunately the downside momentum played out in
a large gap to the downside. The stock has made an impressive counter-trend
rally which now appears to be losing the buyside interest as it consolidates
about half a point from intraday highs. Keep an eye open for potential
breakdowns below 21.40, or 1,2,3
reversal setups for playing in the direction of the daily trend. OVER is down
.81 at 21.55.
Â
Â
Off of “alarming” earnings
reports both EDS and OVER gapped lower in Friday’s trade, and both immediately
rallied off of lows. I personally put both of these trades up on the wire, so
why would I focus on the buy side in EDS and the sell side in OVER? A couple of
factors came into play when making the contrasting decisions on two pessimistic
reports, but the one thread that wove them together was that technical
resistance was overcome in EDS, and OVER hadn’t quite made it “over”
that battle line just yet. Bottom line is sometimes it definitely pays to keep
it simple.