Archive | February, 2010

Understanding Fibonacci

24 Feb

Thinkorswim Flexible Grid Chart

22 Feb

Click here to open a TDAmeritrade account and get thinkorswim® charts, my platform of choice to trade the markets.


Market Data Sources

22 Feb

Here’s where we get some of our data that we use in our analysis.

Wk07: Market Recap

22 Feb

Last week’s write-up pretty much sums up this past week’s action. We broke above the 61.8% on the prior retracement so if we were to reverse lower it should happen on Monday or Tuesday. If we move higher this week we would be looking for move to prior highs over the next few weeks.

Wk08: Market Forecast

22 Feb

In the week ahead look for these news announcements to act as potential market movers

A mix of news is on this week’s calendar including GDP and Existing Home Sales Friday.

Looking at the market breadth for the prior week we do see a divergence. As the market went higher, the Up volume to down volume was decreasing. Typically the Monday after options expiry is down and with less volume on the prior rally a reversal could be in store.

You’ll notice that we always have two plans for the week, one bullish one bearish (or one of the two could be neutral). While no one can predict the market, it is our jobs to react to it, therefore whatever happens we must be ready.

The Hanging Man

18 Feb

The Hanging Man Reversal is a common candlestick pattern we see near the end of a rally. The psychology behind the pattern is simply, retail traders or “late to the party charlies” want to get a piece of the action, but the majority of the move has already happened.
If the following day closes below the hanging man’s close, all the bulls who went long on the hanging man’s close are now underwater in their positions and selling occurs. In order for this pattern to confirm a reversal we need a close the following day below the hanging man’s close.

Options Expiry

18 Feb

Options expiry (third Friday of every month), is this coming Friday. Here are some things to keep in mind.
  • About 2-3 days prior to expiration, time decay drastically decreases (for options you’ve bought), and works in your favor (for options you’ve sold).
  • The week of options expiry tends to be an up week followed by a down Monday.
  • If you’ve sold a naked put and the stock is In-the-Money (ITM), you will be required to purchase those shares come expiry.

Wk06: Market Recap

16 Feb

Looking at the markets in terms of supply and demand is one of the most common and simplified ways of analysis. Identifying where the market is “valued” describes balance. Looking at the weekly chart of the S&P500 we notice two very important things.

1. The prior week’s candle is a doji bar or spinning top as talked about in Japanese Candlestick Charting Techniques by Steve Nison. This is a potential reversal bar, with confirmation, in this case, a close above the high of that bar.

2. We also notice that the current weekly candle’s body engulfs the prior week’s body, bullish engulfment. Volume on the SPY during this decline has increased, giving weight to the bears.

We will watch for a break above or below week 6’s candle to confirm that the market is moving into a new area of value. This value concept can been further explained using The Auction Market Process aka. Market Profile.