The Jethro Stockwatch Club

Market and Investors.com - part 2

2008-02-12T17:01:00.001-06:00

Charts below are provided courtesy of Stockcharts.com.
Please visit their site for more chart information.
http://stockcharts.com/

Click on the Chart to enlarge.

Below is a chart of DJIA 2/12/08.
Possible support trendline.

Below is a weekly chart of DJIA close - 2/12/08
Notice high volume - dow trending in this area for several weeks.

Below is the NASD daily. Close 02-12-08.
Possible resistance to support line.

Below is the NASD weekly. Close 02/12/08.
Several weeks above the trendline.

02-12-08 Stocks on the move page IBD.
You want to review the stock check-up, review the other charts in the same industry.
You will see if the industry looks ok while reviewing the charts.

WW appeared on the list. The Stock Checkup revealed FCN, EXPO, ICFI, BKR, WW as the best in the Industry Group. We will review the charts below.
If you review IBD data daily you will be in tune with market and able to make your own decisions regarding your money and your investment goals. You will become the "expert".

Below is a daily chart of WW.
WW had 2 very high volume days. Maybe institutional buyiing. You want to reviw other charts to determine if institutions are accumulating other stocks in the same industry. This chart is very choppy. Extended over the 10 MA, not a good buy at this time.

Weekly of WW. Help you to determine a trend.
Trendline of possible support drawn on chart. Notice the 40 MA weekly is above the 10 MA weekly. Similar to 200 day over 50 day. Nice up volume on the weekly chart. The weekly chart filters out the daily noise. (choppiness)

BRK was a stock found after using the stock checkup page.
Stock is trading between the 10, 20 MA and the 50 MA. The 10 ma is moving up and crossing the 20 MA. Like to see 10>20>50 for an uptrend.

BRK weekly
10 MA weekly below the 40 MA. Would like to see 10 >40 for an uptrend.

EXPO daily.

Nice up volume spike. Possible accumulation. It is has pulled back to the 10 MA.

EXPO weekly.
Some nice up volume weeks.
10 MA > 40 MA. Stock appears to be in a weekly uptrend.

FCN Daily.
10 and 20 MA lower than the 50 MA. Could be rolling over to the downside. Lower Bollinger Band is Horizontal could be starting to base here. Caution is the keyword.

FCN weekly.
10 MA rolling downward. 40 MA still uptrend. Weeklt uptrend still is valid. Seems to beholding the 55.50 area.

ICFI Daily.
Stock closing in upper BB. 10 > 20, 50 MA. 20 Ma and 50 MA are very close. Volume is light.

ICFI Weekly.
Possible support trendline drawn on the weekly chart.

Investors.com is filled with useful information that will assist you in your investment goals.

How to use Investors.com

2008-01-29T16:26:00.000-06:00

Charts below are provided courtesy of Stockcharts.com.
Please visit their site for more chart information.
http://stockcharts.com/

Click on the Chart to enlarge.

If you are new to investing Investors.com has a wealth of information.

The "How to Invest" tab has "The Learning Center" which provides:
Lessons on Buying and Selling
CANSLIM
Lessons on Options
A Financial Dictionary

Investors Corner and Investor Education also has information to ease the investing learning curve.

The Home page has Several sections:
"In The Market" provides Market information.
"Media Center" has mini-videos covering the New America Report,CANSLIM Guides, and Daily Stock Analysis - this video will help the novice and the expert review charts.
Breaking News will stream news such as earnings, etc.

The "Stocks on the Move" is a key to profiting in the Markets. This section will list Stocks going up and down on higher than average volume for each particular stock. This usually is an indicator of institution buying or selling.

The above comments are my summaries of Investors.com. For detailed explanations of each area please see the site.

You should watch the DSA (Daily Stock Analysis ) on a daily basis until you feel comfortable with reading Daily and Weekly charts.

Next review the Stocks on the Move section. Look at both the Up and Down tabs to get a feel for the stocks that are moving up and down. On huge Down days in the market, make a list of stocks moving up. These will generally be the stronger stocks when the market decides to resume the uptrend.

Many people have a hard time and do not know where to start. This is an excellent source of information. To the right of the stock symbol is a checkmark. If you click the checkmark you get a stock check up provided by IBD as discussed in the Daily Stock Analysis videos. You will see the 5 best stocks in the Industry Group along with other information. Make a note of the Industry Group if you see stocks in the same industry group appearing on this page within a few weeks. Then Institutions may be accumulating positions in the sector. The same goes for the Down side. When Institutions buy - Stocks go up, when they sell- Stocks go down. This is a good tool, so you can stay ahead of the general population.

At the market close on 01-29-08. The Up stocks were: RATE, PRSC, GFA, FSLR, CHU. The Down Stocks were: ICUI, NHWK, DM, VMW, JDAS.

I will go through one example using RATE. Your market performance will be directly proportional to the amount of research that you do everyday. More research should give you better results.

The Stock Check-up of RATE provides some of the following:
Diagnosis A+
Industry Group = Internet Content
Group Rank A

The 5 best stocks above $10 in the Group sorted by best overall rating are:
RATE, BIDU, SNDA, SOHU, and JRJC.

Next you need to look at the charts to see how the Stock and Industry are looking technically. If the charts look good and similar watch to see if institutions buy other stocks in the same industry in the near future.

Look at the Daily and Weekly barcharts using IBD. Then look at candlestick charts with some overlays to get a better picture of the technicals.

Below is the Daily Chart for RATE.
Rate appears to trade with high volatility (wide swings). The 20 MA is above the 50 MA. The 10 MA has just crossed above the 50 MA. JAN 28 RATE closed near the trendline. JAN 29 it pierced the upper BB and pulled back a little, leaving a show on the top of the candle. This stock should be observed at this point since it is higher than the moving averages with a gap. It will most likely pull back or base sideways at this level.

Below is a Weekly chart of RATE.
Two possible trendlines have been drawn on this chart for support and resistance. RATE has had 3 weeks of up volume in a down market. That could be considered strength.
This stock is too choppy for me. The up to down swings are too large.

Below is a Daily chart for BIDU.

This stock has fallen and may be attempting to base at this level. But is also is not a buy here.

Below is a Daily chart for SNDA.
It has some of the same characteristics as BIDU. It has fallen, pierced the lower BB, it has bounced higher and may be trying to base near this level. Not a Buy for me.

Below is a Daily chart for SOHU.
It has some of the same characteristics as SNDA. It has fallen, pierced the lower BB, it has bounced higher and may be trying to base near this level. It is in a downtrend along the 10 MA. Not a Buy for me.

Below is a Daily chart for JRJC.
It has some of the same characteristics as SOHU and SNDA. It has fallen, pierced the lower BB, it has bounced higher and may be trying to base near this level. It is in a downtrend along the 20 MA. Not a Buy for me.

This industry is not technically acceptable for me to buy at this time.

If you go through this procedure with the "Stocks on the Move" daily you will get a feel for what is working and what is not working.

Oilgas refineries appears to have bottomed. Look how the stocks move together.

Review VLO, HOC, TSO, ALJ, FTO, WNR. This is not a recommendation just an industry to observe. Review the weekly charts and determine if they are cyclical in nature.

Create a stock log (journal) and write down your findings.

You worked hard for your money, no one cares about your money more than you.
So invest wisely not on hype or other people's opinions.

Have a great day!

Chart Basics 9 - Market 01-22-08

2008-01-22T18:46:00.001-06:00

Charts below are provided courtesy of Stockcharts.com.
Please visit their site for more chart information.
http://stockcharts.com/

The Chart below is the DOW for 01-22-08.
Click on the chart to incease the size.

The Dow closed at 11971. The approximations for the drop that wee drawn on 01-15-08 have been re-drawn on this chart. The Dow Opened near the close of Friday 01-18-08 which was near the previous support line.
The Dow fell very close to the previous resistance. The Candle of 01-22-08 pierced the Head and Shoulders measured move. The Closed near the trendline.

Below is a chart of the Nasdaq with possible support lines that were drawn on 01-15-08. The Head and Shoulders measured move pierced the candle of 01-22-08. The close of Friday 01-18-08 was near the Support -Resistance line drawn on 01-15-08.

Below is a chart of the SP500.
The Body of the candle was near the Head and Shoulders measured move tat was drawn on 01-15-08.

Below is the Daily DOW with a close on 01-22-08.
Was the volume enough to satisfy a bottom?

Chart Basics 8 - Market 01-15-08

2008-01-15T19:45:00.000-06:00

Charts below are provided courtesy of Stockcharts.com.
Please visit their site for more chart information.
http://stockcharts.com/

Below is a Weekly chart of the DOW - Head and Shoulders possible measured drop.
and various support and resistance zones.

Below Weekly Chart of Nasdaq

Below Weekly SP500

Below Daily DOW

Below AAPL - Which way will it go?

Chart Basics 7 - Review Dow from 01-02-08 to 01-08-08

2008-01-08T19:32:00.000-06:00

Charts below are provided courtesy of Stockcharts.com.
Please visit their site for more chart information.
http://stockcharts.com/

Below is the chart of the Dow discussed on 01-02-08. This chart illustrates the Head and Shoulders pattern.

Review the Head and Shoulders pattern in the market. 01-08-08.

We will review what we have learned tonight.

Please set up Stockcharts - with the following Parameters.

Range - 6 month
Type - Candle
Size - Landscape
Volume - Separate
Check - Price Labels and Y-axis Labels

Overlays
Simple moving average - 50
Simple moving average - 200
Bollinger Bands - 20,2

Enter your Symbol and click Update.

For more information regarding charts refer to the Chart School on http://stockcharts.com/

Chart Basics 6 - CPLA and Market

2008-01-02T19:06:00.001-06:00

Charts below are provided courtesy of Stockcharts.com.
Please visit their site for more chart information.
http://stockcharts.com/

CPLA - Notice consoliation period in August 2007. Bollinger Bands almost horizontal. The 10 MA, 20 Ma, and the 50 MA are located inside of the Bollinger Bands. A nice buypoint would be the breakout candle with high volume at the arrows.
Chart below.

CPLA - Secondary buypoints after sligh pullback and consolidation periods. Buy as CPLA breaks out with volume. Indicated with arrows. Chart below.

CPLA is turning down. CPLA has fallen below the 10MA and 20 MA. Get your stops ready. Nice sell stops - current price below the 20 MA, below the 50 MA, below the lower Bollinger Band, below the previous resistance ( which now should be support), below the previous support. Chart below.

NASD chart below. NASD closed at the 200 MA after falling below it. NASD is below the 20 MA and 50 MA not good. Watch for falls below the lower Bollinger Band and previous lows. Get your stops ready. And Short candidates.

SPX - does not look pretty. SPX is below the 20 MA, 50 MA, and 200 MA. Closed at the lower Bollinger Band. Watch previous lows. Getready to sell, sell, sell!!!
Chart below.

DJI is below the 20 MA, 50 MA, and 200 MA. The DJI closed at the lower Bollinger Band. Not Good. Watch previous lows get your sell stops ready.

Hmmmm Happy New Year??? Not Day 1 of trading.

Chart below.

Chart Basics 5 - Candlesticks NASD, PX

2007-12-26T18:59:00.000-06:00

Chart Basics 5 - NASD and PX

Charts below are provided courtesy of Stockcharts.com.
Please visit their site for more chart information.
http://stockcharts.com/

What do you see in the NASD barchart below? 50 MA and 200 MA
WED, THU, and FRI Dec 19-21, 2007

Notice the WED, THU, and FRI closes when Bollinger Bands are present.
Chart below.

Notice Closes on Candlestick chart with Bollinger bands.
Chart below.

Notice candles at the 10 Ma and 20 MA on the chart below.

It appears as though candlestick charts will work for the markets.

PX will be reviewed in the charts below. The barchart has a cup and handle we will go through the technical analysis. The chart below is a barchart with a 50 MA and a 200 MA. Notice the cup and handle. A double bottom is also present on this chart ( underlines ).
50 MA > 200 MA = positive trend.

PX - weekly chart - verify trend and cup with handle formation.
40 weekly MA is approximately the same as a 200 daily MA
10 weekyl MA is approximately the same as a 50 day MA.

PX daily candlestick chart below. The Bollinger Bands are green, 20 day MA is green dotted line.
10 MA is red line. 50 MA is Blue line. Notice when Bollinger Bands become Horizontal and contract a move follows.

PX is upper part of BB. 10 MA > 20 MA > 50 MA.

Chart below - In the left circle you can see that the 50 MA acted as resistance. In the right circle the 50 MA acted as support. A resistance buy point line was drawn at the top of the chart.

PX could have been bought on this white candle as it broke resistance. If you missed it hopefully it will pull back to the 10 MA. Chart below.

APD is in the same industry as PX - it is also breaking out of a tight Bollinger Band pattern with the 10MA >20MA >50 MA.

The chart below is ARG. It is also in the same industry and appears to be breaking out.

Chart below.
PX looks like it popped !@### Oh well see if it will pull back to the 10 MA.

Notice the gap between the 10 MA and the candle.

Chart Below.

PX pulling back inside of the Bollinger Band now. Lower negative volume.

Chart Below.
Ahhhhh PX hit the 10 MA now wait for a positive day. I would wait for the next candles above the White candles body.

Chart below.
Buy on the white candle as it travel past the top of the previous white candle.
Notice the high positive volume.

How would you have done? Take a look below.
Cup and Handle with 10MA > 20 MA > 50 MA

APD could have been played as well. 10MA > 20MA > 50 MA.
Chart below.

Hope you can recognize the tight Bollinger Bands with the 10 MA > 20 MA > 50 MA in the future.

Remember the stock could turn take an explosive turn to the south. So monitor closely until you have a cushion.

The above examples are for illustrative purposes only.

Good Luck.

Chart Basics 4 - Bar chart to Candlestick chart

2007-12-18T02:28:00.000-06:00

Charts below are provided courtesy of Stockcharts.com.
Please visit their site for more chart information.
http://stockcharts.com/

Chart below is a HLC Barchart.

Chart below is an OHLC Bar Chart.

Chart below is a Candlestick Chart.

Chart below illustrates the Open and Close on an OHLC Barchart.

Chart below illustrates the Open, High, Low, and Close on a Candlestick Chart.

Chart below illustrates Support and Resistance trend lines.

Chart below illustrates a Candlestick Chart with Bollinger Bands.

Chart Basics 3 - Trends, Entries, Exits

2007-12-16T00:36:00.000-06:00

We will discuss Trends, Entries, and Exits in this session. We will use a chart of APPL, dated October 11, 2007.

Charts below are provided courtesy of Stockcharts.com.
Please visit their site for more chart information.
http://stockcharts.com/

In the following chart a bullish trend is verified by observing the relationship between the 10MA, 20 MA, and 50 MA. A bullish trend is confirmed when the 10 MA > 20 MA > 50 MA.

If the stock has been trending between the Upper Bollinger Band and the 10 MA, I will usually enter my position when the stock gets close to the 10 MA. When you review charts you will see a stock gap higher and then move sideways towards the MA. If you see too much space between the candles and the MA it would be prudent to wait for a return to the MA. It is similar to placing a rubberband around your wrist. If you stretch the rubberband you will see a gap between the rubberband and your wrist. If you release the rubber band it will return to your wrist. The amount of pain that you feel when the rubberband snaps back to your wrist will depend on how far that you have stretched the rubberband prior to release. If you buy a stock that has gapped too high prior to coming back to the MA you may feel a lot of pain. So relax and wait.

AAPL traded with gap above the 10 MA from Sep 24 to OCT 6 on this chart.

On the chart below AAPL seems to trade between the upper Bollinger Band and the 10 MA. As illustrated on the chart in JUL. Bollinger Bands are often utilized to determine an exit point or a trend reversal. If a stock is close to the upper Bollinger Band and the trend reverses. The stock will generally trend lower until it hits the lower Bollinger Band or a MA. Near JUL 29, 2 candles touched the upper Bollinger Band their highs had approximately the same value. They both had tails on top of the body. When I see that pattern I general watch for a pullback. AAPL reversed its trend and fell to the lower Bollinger Band. Notice the Candles at AUG 1 and AUG 6 the tails were at the bottom of the Bollinger Band and the lows had about the same value. AAPL attempted to go higher but the 10 MA and 20 MA acted as resistance. The 10 MA crossed below the 20 MA a bearish signal. AAPL then fell through the 50 MA and the lower Bollinger Band. It attempted to go higher but hit resistance at the 50 MA. AAPL then descended down until it pierced the lower Bollinger Band on AUG 16 with huge volume. The Bulls were able to push AAPL back up to the lower Bollinger Band for the close. The huge volume was a sign that AAPL may have hit bottom and the trend was ready to change. The lows for AAPL the next 3 days remained about the same. A good sign.

The chart pattern formed on AUG 15, 16, 17 is a strong reversal pattern. One worth remembering. AUG 16 gapped down from AUG 15. AUG 17 gapped up from AUG 16. AUG 16 had huge volume with a large tail on the bottom. The Open and Close for the day were approximately the same. If we were really interested in wasting brain cells we might call the candle on AUG 16 a doji. The 3 candle pattern might be called an Island Reversal. But who cares I just think in binary - $$ or no $$.

I drew the Support and Resistance lines on the chart. AAPL was turning Bullish as the 10 MA crossed the 20 MA near AUG 30. A day or two later the 10 MA crossed above the 50 MA. Near SEP 17 the 20 MA crossed above the 50 MA. If you review charts and see consecutive small candles and the 10 MA, 20 MA, and 50 MA close as in this chart. The Stock usually explodes after the breakout. My favorite $$$$ pattern.

On the chart below: Circled are the 2 candles that signaled a possible reversal. You could have prepared your exit points at that this time. Exit just below the 10 MA. Exit just below the 20 MA. Or you could have waited until the 10 MA crossed under the 20 MA. If you are in AAPL for the long haul it probably does not matter. If I save 20 of the 30 points while the stock is going down and re-buy the stock as it goes up I am happy. My Jethro brain tells me I took home an extra 20 points of $$$$. Uncle Jed would be proud.

Below are several entry points for AAPL. I wait until a stock breaks above my buy point with volume. AAPL broke above the resistance line with increased volume near SEP 24 on the chart. If you missed the first day, you could have purchased the next day just above the top of the candle body of SEP 24. This Candle did not have a tail on either end, it also had higher volume than the previous day. This is generally signifies strength in the trend.

If you missed the buy point and you see the large gap - the empty zone above the 10 MA. Just sit back and relax and wait for the stock to come back to you. The OCT 6 red candle tagged the 10 MA. I like to buy on strength so I would have bought OCT 7 just above the top of the red candle on higher volume.

How would you have done if you bought AAPL at either one of the buy points? You bought AAPL after you saw the uptrend, the 3 MA were close and properly aligned, your buy points were above the resistance line.

Lets see what a 20 day hold would have returned, we will look at the close of OCT 31.

Notice how AAPL trends close the 10 MA from OCT 13 to OCT 22. OCT 23 had a nice gap up.

I most likely would have taken some $$$ off of the table and moved on to next trade. If you opted to stay in the position get your exit strategy in place. And watch how AAPL trades as it gets close to the 10 MA.

40 point in 3 week is enough for me, approximately 25%. There is another stock in the market setting up to trade.

The chart below is AAPL on NOV 7, 2007. Notice the consolidation area after the OCT 23 gap up. Tight small candlesticks. Volume is decreasing. You can think of a consolidation area as a storage of energy. When the stock breaks out of consolidation it moves with Momentum. Notice Nov 5 and Nov 7. The bearish candles closed just below the 10 MA. The volume on NOV 7 was higher than the day before. If I were still in this trade I would probably place a stop just below the 20 MA.

The chart below is AAPL, NOV 8, 2007.

AAPL fell below the 20 MA on huge volume. The candlestick was similar to the candle on OCT 11. However on OCT 11, the bulls were able to push AAPL above the 10 MA. On NOV 8, the bulls were not able to push AAPL back above the 20 MA. A bearish sign.

On NOV 8 AAPL filled the gap between the candles of OCT 22 and OCT 23.

On NOV 9, AAPL had more negative pressure. AAPL closed just above support at the lower Bollinger Band. AAPL is very close to the 50 MA. If AAPL penetrates the 50 MA then look out below.

On NOV 12, AAPL fell through the 50 MA. AAPL is now below one of our buy points. If you did not exit prior to this drop then you wasted about 30 days of your precious time. 30 days gone with no gains. AAPL will most likely recover back to the 190 area. So long term investors have nothing to fear.

A short term investor such as myself would call this a loss. A loss of gains and a loss of valuable time. Some would say: "You did not sell it so you did not lose." Waiting for a stock to come back to a previous high is lost time and dead money to me. My $$$$ could be working on another trade to make more $$$$.

Study the charts - they are a tool that will help you.

Do charts always work perfectly? - NO!!!!

Does a map always display a detour? - NO!!!!

They both will give you a sense of direction!!!!!!

We all trade and invest differently - use what works for you.

When I hear people say that they do not refer to a chart prior to placing a trade. I always think of the blind squirrel. Put a blind squirrel in a yard full of acorns. Eventually the squirrel will find an acorn.

If I were collecting acorns - I would rather use the tools available to me and collect a bushel full of acorns.

Note : As of NOV 13, 2007 I did not own AAPL.

If AAPL has a volatile day on NOV 14, 2007. I may be day trading. Leaving 16 points on the table NOV 13,2007 was just too much!!!!

GOOD LUCK with YOUR TRADING or YOUR INVESTING!!!

Have a great day!!!!

Jethro

Chart Basics 2 - Candlestick Chart

2007-12-16T00:33:00.000-06:00

We will now review Candlestick Chart Basics. Again we will use AAPL, with a close date of OCT 11, 2007. Below is an example of a Bar Chart with Trend Lines. And a Candlestick Chart with the same data and Trend Lines. I do not have a position in AAPL.

Charts below are provided courtesy of Stockcharts.com.
Please visit their site for more chart information.
http://stockcharts.com/

Click on Bar Chart to enlarge

Click on Candlestick Chart to enlarge

Candlestick Charts display the same information as a Bar Chart but the information is easier to comprehend. The thick rectangle on the candle is the Body. If the Body is Red then the Open is higher than the Close. The Top of the rectangle is the Open. The Bottom of the rectangle is the Close. The lines above and below the Body are called Shadows. The Shadows indicate the high and the low for the day. We will keep things simple and just call the shadows tails. If a tail is on the bottom of the Body that depicts a Bullish action. The Stock was pushed to a low by the Bears, but the Bulls came into the stock and pushed the stock higher. Tails on Top of the Body is a bearish sign. Tails at the bottom of the Body is a Bullish sign. Tails on Top and the Bottom of the Body indicates the Bulls and Bears are at war. Long Candle Bodies indicate momentum. The momentum is confirmed by looking at Volume. On Oct 11: the candle body was large indicating force. The tail on top was smaller than the tail on bottom an indication that the Bulls won and were able to push the Bears back above the 10 MA. The volume was huge so this was a major battle.

We will now add the overlays to the Candlestick Chart. Bollinger Bands with a 20MA. A 10 MA. And a 50 MA. On OCT 11 : The High found resistance at the upper Bollinger Band, small tail on top of the Body. The Low found support at the 20 MA, the long tail at the bottom of the Body. AAPL Closed just above the 10 MA, the low of the rectangle body.

If you put the overlays on your charts you will get a feel for how a stock performs at each overlay. Does the stock fall and then bounce off of the 10 MA? Does it break though the Upper Bollinger Band and then fall back to the 10 MA? When a stock falls through support at the 10 MA does it find support at the 20 MA and then continue the upward trend?

We will review some of these concepts in the next session.

Some people think that Charts have no bearing on your investment results.
I use Fundamental and Technical Analysis for short term trades. But, I also utilize a map when I am in unfamiliar territory. Some would have you believe that learning how to read a map (chart) was a waste of time. I guess that would be true if you had a lifetime to wander around in the dark and hope you find your destination.

If you have a position in a stock and the market rises for the next 10 years then you will have a high probability of achieving a positive return on your investment. You can snooze like Rip Van Winkle and when you wake up from your sleep you may have huge gains if the market went up while you slept.

I personally use charts for entries and exits after I have researched a company and its sector. I place time limits on my trades. If the position does not move in my specified time frame then I will exit the position. Time is precious and I do not like to wait for a stock to perform. Some people are comfortable waiting a year or more for a move. I prefer to take swift profits and move on to the next trade.

What woks for me may not work for you!!! We all are different. I would rather have a map than rely on strangers for directions when I travel in a foreign territory.

We are all individuals that participate in the Market - Some play the news, some play the earnings reports, some play options, some use fundamentals, some use technical analysis. Some use a bit of each. You need to figure out what works for you!!!!

The market is an equalizer - no one is an expert!!!! If someone proclaims that they are an expert and they have never had a losing trade then just run from them..... everyone experiences a loss in the market. The trick is to figure out what works for you. Maximize your gains. Minimize your losses. Determine what you are willing to Risk in exchange for the potential Reward.

If you ask me how I did in the market today - I would probably tell you about my losses, not my gains. I have to review my losses to see where I went wrong. Sometimes it was not an error that you made - it was just the market.

Have a great day!

Jethro

Chart basics 1 - The Bar Chart.

2007-12-16T00:30:00.000-06:00

The Bar Chart

Your friend told you to look at the bar chart of AAPL, after the close of Oct 11, 2007.

If you are like me, the first time I reviewed a chart - you probably said: "Whoopee - now what!!"

We shall review the following AAPL Chart. I do not currently hold a position in AAPL.

Charts below are provided courtesy of Stockcharts.com.
Please visit their site for more chart information.
http://stockcharts.com/

Charts: Courtesy of StockCharts.com.

Click on Chart to enlarge Daily Chart

The Open price is the left pip on the bar 169.40. The Close is the right pip on the bar 162.23. The High for the day was 171.88. The Low for the day was 153.21. If you are new to charts you are probably thinking - charts are complicated. These charts are Voodoo Magic and will not help me find an exit or entry point.

Weekly charts are utilized to determine the underlying trend of the stock. The weekly chart is plotted with data for the entire week. The weekly chart below has the same time-frame as the daily chart above. A support line has been drawn connecting the lows of several weekly bars. Support lines assist you in identifying the trend of the stock. If support is broken (stock falls below the support line) then the trend has been broken and it may be time to exit your position.

Click on chart to enlarge Weekly Chart

The chart below has support and resistance lines drawn on a daily chart. The support line is an approximation drawn along the lows of the daily bars. The resistance lines are drawn across the highs of the daily bars. When a stock breaks out above the resistance line the stock usually trends higher. Wow - a Breakout!

Notice how AAPL found support at the SUPPORT line on OCT 11 and then bounced higher.

Click on the Chart to enlarge

We shall now add a few overlays to the bar chart below to get a better picture of AAPL. We will add Bollinger Bands with a 20 day Moving Average (20 MA) in green. A 10 MA in blue. A 50 MA in red. Notice the high of AAPL on OCT 11 it hit the upper Bollinger Band and then retraced. The Low for AAPL on OCT 11 hit the 20 MA support and bounced higher. AAPL closed just above the 10 MA. Charts are Hocus Pocus? I do not think so. They tell the story.

Click on Chart to enlarge

The next post will contain information on Candlestick charts. We will use the same date range for AAPL so we can compare a Bar Chart to a Candlestick Chart. They both use the same data but the Candlestick information jumps out at you.

I actually utilize both chart styles prior to entering a trade. I like to use the Bar Charts to determine support and resistance zones and then I use Candlestick charts to determine my entry and exit points.

Have a great day!

Jethro

Why use Charts?

2007-12-16T00:21:00.000-06:00

Why use Charts?

Stock charts are similar to road maps. If you are planning a trip, you most likely will reference a map to get a sense of where your destination is in relation to your starting point. For example: You plan to travel to Baton Rouge from New York. You have decided to fly into New Orleans and drive to Baton Rouge. You most likely will refer to a Louisiana State map to get a sense of where Baton Rouge is in relation to the New Orleans Airport. Once you arrive in Baton Rouge you might need a detailed City map to plot your course inside the City of Baton Rouge.

Charts are used in a similar fashion. Weekly charts are like the State map. They will give you the general direction. Weekly charts eliminate the daily noise, so that you can see the general trend of the stock. You want to enter your position in the same direction as the trend. If the stock is trending up, go Long. If the trend is down, go Short. Daily charts and Intraday charts will help you to determine your entry and exit points depending on how long you plan to hold your position.

Is chart analysis is fool proof? Of course not! Are all vacations great? Some are better than others. You plan your vacation for months and then poof a Hurricane enters the Gulf of Mexico three days before your trip. What do you do? If the bridges get washed away your maps will no longer be valid. Your vacation may not go as well as planned if everything is destroyed prior to your proposed arrival. Stock Charts behave in a similar fashion. If the market deals you a bad hand then your chart and research may no longer be accurate. After a market storm do you hold your stock until it recovers? Do you short a stock to take advantage of the disaster? Do you buy another stock? New Orleans is still a disaster zone, so you may have to hold your stock for a few years before it will recover. You most likely would make a decision regarding your vacation plans promptly so you do not waste your valuable time-off from the job. When the Market Storm arrives you should promptly decide if your hard earned money should remain in your current positions, on the sidelines (cash), or utilized in a better financial vehicle.

Why do people seek the advice from the experts regarding stocks? I am not sure about that answer, but I do know one thing - the experts lose too! If they do not lose then they are not in the game. Katrina’s happen!!! Market Storms happen!!!

If you want to improve your results, educate yourself. A little research will go a long way to achieve your financial goals. Will you make mistakes along the way? Of course, we all do. The trick is to minimize the losses… plan your trades…know your entry and exit points prior to the trade… do not rely on hope. Keep a log of why you bought the stock and why you sold it. Review your log and learn from it. If you rely on the experts, what will you do when they exit market and no longer provide advice?

Just keep things simple and you will do just fine.

I plan to illustrate charting techniques that work in the future.

Jethro