Watch Out For The Ceiling And The Floor
Before the open,
Micromuse Inc (MUSE)
received a buy recommendation from Banc of America Securities. As you can see on
its daily chart, MUSE is trading just below its 50-day moving average. This is a
vital piece of information for daytraders because it will provide a breakout or a
breakout failure play.
Now, take a look at a five-minute chart of MUSE.
The red line is the level of the 50-day moving average. Do you see how the price
reacted when it came near the average? This was a good example of a breakout
failure.
Let me show you one more chart. This is a five-minute chart of Advanced Fibre
Communications (AFCI).
This morning, AFCI was downgraded by USB Piper Jaffray to buy from strong buy.
The red line is a support level from the daily chart. As you can see, the stock
sold off sharply at the open, but quickly reversed to the upside.
It pays off to know important resistance and support areas.
Till tomorrow,
Eddie