Reading the CVR Signals
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 .50 points higher and the bond market is trading up 2 ticks.
Tonight, we have a CVR III and a CVR I buy signal- one of my favorite combinations- on the Market Bias Page. This suggests an upside bias for tomorrow. However, wait for some confirmation to the upside before getting too bullish as the popular indices were all down today.
Celgene [CELG>CELG], on the Pullback List, is a pattern I call a Trend Knock Out (TKO). This is where a strongly trending stock (or commodity) sells off (a) and takes out (at least) the prior two lows. The theory is that this shakes out the “weak hands†and clears the way for the stock to trade higher.
BEA Systems [BEAS>BEAS], mentioned last night, still looks like it has the potential to resume its longer-term strong uptrend. Just wait for it to take out the prior 1-2 bar highs as it did close poorly today.
For you breakout players, Metricom [MCOM>MCOM], mentioned over the past few nights (see archives), broke to new all-time highs on an expansion of range today.
Stocks in fast moves often only consolidate a few days before heading higher. With that said, Electronic Arts [ERTS>ERTS], on the Momentum 10 Technology List, is in day three of a shallow consolidation.
As you know, the Trading Where The Action Is List contains the most volatile stocks and is only for the most aggressive traders who are willing to assume a higher degree of risk in order to capture larger gains.
4Kids Entertainment [KIDE>KIDE] is a pullback from lows that formed an outside day down today (a) or if you prefer, an inverted cup and handle formation. This action suggests that it may challenge its old lows (around 40).
Best of luck with your trading on Tuesday!
PS – Reminder: Protective stops on every trade!