Parlez-vous Stock Market?
Make sure to register for the
upcoming course “The Baker/Ten Electronic Trading Course”, starting
July 7. Click
here to go to the registration page.
My latest trading lesson, Finding
Intraday Trendlines for Daytrading Part I, is also available now.
Trading is not an exact science. If you believe that it is, then I have some
beautiful ocean-front property in Kansas that I’d love to sell you. There are
many different trading styles and techniques, and trying to call exact tops and
bottoms is virtually impossible. Because of this, we can never pinpoint specific
levels. When most people ask me about the stock market, the first thing that
they ask is if I have a degree in mathematics or finance. When I tell them that two of my degrees are actually in French Literature and
Political Science, a look of surprise comes across their faces. I personally
think that these fields of study are perfect for trading, as the profession
requires a lot of both interpretation and visualizing gray areas. If trading was
black and white, I would understand the surprise.Â
The moral of the story: Don’t focus on every 1/16 of price movement when
looking for entry and exit points or support and resistance. When I refer to a
support or resistance level in my column, I am referring to an area surrounding
that level. Many books that I have read provide trading strategies that involve
opening or closing a position based on 1/8 move above or below a given level. My
strategy is one that adjusts for different stocks and different markets. If you
were looking to enter a stock like SDLI
(
SDLI |
Quote |
Chart |
News |
PowerRating) on a breakout, would you
simply place a buy-stop 1/8 above the all-time high? That seems a bit risky to
me, seeing as the stock can move 20 points on any given day. In this example, I
feel that it’s necessary to adjust my entry point based on the movement of the
stock. Try to always keep this in mind, particularly when deciding to exit a
position. We often set our stops at a certain level, only to see them broken
intraday, and watch the price move back above the level by the close.
Trading is a complex profession, but good traders can simplify it to fit
their unique styles and personalities.
Today’s Watchlist:Â
(
CNXT |
Quote |
Chart |
News |
PowerRating),Â
(
ISLD |
Quote |
Chart |
News |
PowerRating),
(
RFMD |
Quote |
Chart |
News |
PowerRating),
(
TERN |
Quote |
Chart |
News |
PowerRating),
(
A |
Quote |
Chart |
News |
PowerRating)
Conexant
(
CNXT |
Quote |
Chart |
News |
PowerRating)Â broke its downtrend by gapping up about three weeks
ago, only to start a higher-level downward move. After finally filling the gap,
it took off to challenge a key low-level resistance area. After closing above
this level on Tuesday, we’ll monitor Conexant for a move up to the 200-day MA,
roughly 7 1/2 points away.Â
Digital Island
(
ISLD |
Quote |
Chart |
News |
PowerRating) gapped above the topside of a
low-level cup-with-handle pattern on Tuesday. As expected, it ran to the next
resistance level and then pulled back. This is the exact reason that we always
need to be aware of the next two resistance levels above any breakout area.
Should you open a long position based on a continuation of this morning’s move,
be aware of the next two resistance levels. Although they look close, each level
is roughly 10% apart. Note Tuesday’s news-based volume spike.
RF Micro Devices
(
RFMD |
Quote |
Chart |
News |
PowerRating) shows us a series of higher lows
with each pullback. On Monday, we saw a bounce off the upward trending line,
followed by a continuation on Tuesday. Watch for a move toward the next
resistance level. In the case of an intraday retracement on Tuesday, we’ll watch
for the 50-day MA to provide support. If this trend of lower highs continues,
we’ll watch for an ascending triangle to form, at which point we will look for, but
not try to predict, a breakout. Short-term traders may want to take
advantage of the current situation, while others should set their breakout
alerts near 116 1/2 (just over resistance).
Terayon Communications
(
TERN |
Quote |
Chart |
News |
PowerRating)
gapped above its former resistance level roughly three weeks ago as well. It
filled this gap over the last three days, while dipping below the bottom of its
near-term trading range. I avoided this breakdown because there was no
continuation following the move. With the Nadsaq pushing 4000 and the techs
slowly returning to favor, we’ll monitor Terayon for a breakout. Set your alerts
near 75.
Agilent
(
A |
Quote |
Chart |
News |
PowerRating) traced out a pullback from lows on Tuesday. After
touching the bottom of its current downtred the stock pulled back once again.
We’ll add Agilent to our list as we watch for it to continue the longer-term
trend. Watch for a break of Monday’s closing high as a signal. Conservative
traders will want to wait for Agilent to take out Monday’s intraday low.
Until Wednesday,
Waiting in the Wings: Nasdaq
4000+
Check back tomorrow
morning at 9:15AM ET for Trading the Open.