Patterns and Volatility


Each evening we focus on the most interesting aspects for the upcoming trading day. The comments are based on observations of the nightly updates of the Stocks/Sectors and Market Bias pages. They are provided for educational purposes only and are not intended to be direct trading advice. Also, keep in mind that these remarks are made up to 12 hours in advance of the markets opening. Therefore, overnight events may alter the outcome of these observations.


At the time this is being published, the S&P Globex Futures are trading 2.00 points lower and the Bond Market Futures are up 3 ticks.

I have found that if you can combine a pattern with high volatility stocks (those on the Trading Where the Action Is List) it often leads to extraordinary gains. Below is a chart of Ameritrade [AMTD>AMDT], mentioned last Thursday (for today, see archive) as a cup and handle and a stock that was in the strong Broker/Dealer Sector [$XBD.X>$XBD.X]. Notice the large gain (over 29 points) it made today as it broke out of its handle. Although trading these volatile stocks is not without risk, the exemplifies the types of moves that are possible when you put sector, pattern and volatility together.


AMTD -Source: Omega Research.

As you know, the Trading Where the Action Is (TWTA) list contains the most volatile stocks and is only for aggressive traders who are willing to assume a high degree of risk in order to capture larger gains. With that said, National Discount Brokerage [NDB>NDB] appears to be in a continuation move higher after pulling back from a breakout. Wave Systems [WAVX>WAVX] has formed a mini-pennant (also known by Jeff Cooper as a “Boomer”) after a strong up move. Look for a trend continuation.


WAVX-Source: Omega Research.

On the Pullback From Highs List, Macromedia [MACR>MACR] looks interesting to me. Also,
Apache [APA>APA], mentioned last night as a pullback candidate, still looks interesting.

On the short side, Supervalue [SVU>SVU] and Saks Holdings [SKS>SKS], on the Pullbacks From Lows List (a new addition to TradingMarkets.com), look interesting as neither could rally on such a strong up day.

Best of luck with your trading on Tuesday!

Dave Landry

Director of Research
TradingMarkets.com