Bank of America (BAC) 03/16/12

BAC broke out of its flag this week and did so on higher volume. It is both riding the general market breakout of the Dow:13000 and NASDAQ:3000 rally, plus having unexpected;y passed the recent stress tests (which C did not).

The Measure Rule here determines a price appreciation target by taking the movement from the onset of the appreciation to the top of the flag (left most green line), then applying that from the bottom of the corrective flag formation. Target is 11.10. (horizontal green line).

Price appreciation is in high gear as shown by it "walking" the upper Bollinger band--and doing so on higher-than-average volume. Note the lower Bollinger band (arrow) has yet to turn up or even move sideways, indicating the momentum is still strong. This indicator is a Cox-developed one; you will not find it in any book.

The price target is not only a high probability of being met it appears it will be met soon.

EDC Breakout

Would appear EDC is leading the pack with its breakout. It led the rise before the stall, probably because of the Dow stuck at 13,000, so it rightfully should lead the next leg.

ERX Makes Target 1

ERX has achieved its target from the lower calculation (heavier green) and shows every evidence it achieve the higher one. This target calculation is achieved in 83% of cases, making it a manner of making a living. Nice way to make a living, too, I might add.

High, Tight Flag--Almost

Although this does not quite meet the 90%-rise-in-two-months criteria for the High, Tight Flag, it is close. The flag definitely meet criteria and yesterday shows a breakout.

The value of the High, Tight Flag (HTF) is that the stock will rise 69%, achieving that criteria 90% of the time, with a breakeven failure rate of zero! Statistics are unavailable for almost HTFs are unknown, it seems rational to expect good things and well worthy of a ride.

At this point, the risk seems minimal, just below the lower channel line, while the reward is 37 points--so 37:3 or better than 10:1 reward:risk ratio. With 3:1 the minimal advantage sought, 10:1 with a pattern than seldom fails, ...

The market itself is responsible for the delay since it is working its way through an area of resistance. It's P&F target is 1640, agreeing with the TNA target area.

Weekly MACD Keeps Traders on the Right Side of the Bigger Trend

The chart shows the S&P 500 ETF with weekly candles and weekly MACD (12,26,9). Even though some signals may seem late, this classic indicator combines trend following and momentum to keep players on the right side of trend. Moves above the signal line favor the bulls, while moves below favor the bears. At the very least, traders should attempt to trade in harmony with this indicator.

C Breakout

Citigroup enjoyed a breakout over a longer term trendline. Two targets are calculated, but both appear not realizable for months. I would become more interested when, as, and if the price were to return to the lower channel boundary.

DIG, ERX Breakout?

Today was a pause day in the markets after the dramatic appreciation of Friday, but it is merely a pause day as indicated by the market indicators.

Even with a pause day, some issues are breaking out. DIG, for example, is the Ultra ETF for Oil & Gas, and has been butting up against a resistance level numerous times--but each downward excursion recently has been less. Such patterns indicate a breakout to the flat side, which here is upwards. Today, near the close, it is peaking over that resistance level and closed on the high.

ERX is the 3X ETF for Oil & Gas companies, which has also exhibited the resistance level. Today, it close at that level, but did not peak over. It appears either or both may be poised for a profitable run.

TNA Hits Target

TNA gaped up on today's good employment news to exceed the target set back November 27th, and evoked by breaking out on December 22nd. The Measured Rule used to calculate this target states simply that the lowest excursion below the trendline can be used to calculate a target above the trendline from the point of breakout. This target is reached 85% of the time. The Point & Figure target calculated virtually equaled this target.

Both trendlines (heavy blue lines) were retested and on January 5th a linear regression channel was drawn that remains valid even today. A position taken at that time around 46 would today yield a profit of 17 points in a month. Touches of the lower channel line also provided seven additional entry points during this month, had the initial one been missed or additional positions been wanted.

The position opportunity on January 9th coincided with a Bollinger band squeeze, and prices gaped above a major resistance level the next day. The entire price appreciation has also taken place above the Bollinger band centering moving average. This particular Bollinger band used a 13-day simple moving average rather than the more traditional 20-day average. Had the twenty days been used, the squeeze would have not been apparent.

This trade validates resistance levels (horizontal red lines) because each caused price pauses and retests, the retests providing the additional entry points. It validates trendlines (blue lines), regression channels (black lines with the outer channel lines 2 standard deviations away from the linear regression line itself), the Measure Rule for target price determination, and Bollinger bands (red center line with two blue lines 2 standard deviations away).

Finally, the trade validates the potential of swing trading--the attempt to profit by the variation of prices over a several-day time span.

Pending Market Turn or Pause?

Several issues are breaking their runs either as a trendline or regression channel. These may well be the first hints of a pending market turn or pause.

TNA 02/01/2012

After a couple tests of the lower channel and resistance level lines, it popped up over 6% today.

TNA 01/30/2012

TNA came down and tested the lower regression channel border (black) as well as the resistance level.(red)--see lower left hand window.

As I've noted before, it occurred in the initial hour the market was open, in this case, 10:15 -- see upper right hand window.

Of course, this seems to happen about very fourth day, during the time I am out for designer coffee--and usually without a limit order in.

TNA Hourly 01/27/2012

Attached is the hourly graph of TNA over the last couple of months. You can observe the trendline breakout and retest (blue line), and the working sideways through the resistance levels (red lines). There are two linear regression channels shown (black lines), the longer-term one in heavier lines, the one since breakout in the lighter lines. The price is now following the shorter-term linear regression channel across the width of the longer term one.

The Measure Rule target is shown at 61 just as in the daily graph. Please, recall the Measure Rule is achieved 85% of the time (which also means it fails 15%). A Measure Rule also exists for breaking down or bearish breakouts, but those targets are only achieved 63% of the time).

Please, note every few days the price reaches the lower, short-term channel boundary--and also touches to lower Bollinger band simultaneously. These are good points to enter a trade if one doesn't already have a position or wishes to add to that position. As I pointed out previously, these lows usually occur between 0930 and 1030 in the mornings, and on the hourly graph, this shows. This morning's low did not reach the short-term channel boundary, but reacted to the center line of the longer-term regression channel. It also reached the lower Bollinger band at the same time. Please, note the price has reacted to the center longer-term regression line on several occasions, indicating the line's validity. .

Stochastics also indicate those turns when a position can/should be taken.

Finally, should the Measure Rule price objective be realized, it should come next week. The daily graph indicates earlier in the week than this hourly graph.

I have yet to add new resistance lines since the break above 49. I should, and if you will mentally do so, you will see that the lows providing new entry points usually are support levels from the highs a few days previously. These, combined with the channels, Bollinger bands, and stochastics, provide a further indication of the low point being reached--and show where that point will probably be a day or three ahead of it being reached.

I have noted the overnight gaps are now less evident. I am not sure what the explanation of or for that is, but I welcome their disappearance. They made me nervous and I was having to guess where they would eb the next morning rather than, as now, being able to enter the trade in the first hour of the day.

I am glad you are finding these helpful.

TNA 01/27/2012

TNA is running the channel nicely. It has touched the bottom several times, offering a new, low-risk entry point--and validating the channel itself. Again, the channel is a linear regression line with offset parallel lines 2 standard deviations distant.

Note, too, these lower channel line touches come when price encounters the prior resistance levels (horizontal red lines). It has now broken through the final resistance level and is free to climb to the next up around 61, which is also the target determined by the Measure Rule (green lines).

The two straight blue lines are trendlines which the price honored as it passed through, then retested before resuming its climb. The final retest also coincided with a narrowing of the Bollinger Bands, which indicates a calm before the storm. It subsequently gaped up, then retested the major resistance level it had previous attempted to break through several times.

Not shown on this graph is the observation that TNA makes its daily low sometime between 0930 and 1030 each day, including the days it tagged the lower channel lines. I can stay and watch, or enter a buy order that the lower channel price, thereby not missing morning designer coffee. If I were day trading, I could buy each morning, then sell the tops later in the day, giving me a point or two every day. A point here is 2%, so it becomes a nice profit after several days.

For swing trading, the retest of the trendline was at 45 and it closed today over 55 in fourteen trading days. That's over 20% in three weeks, or $1000 per 100 shares. Not bad; not bad at all.

And it is still running. When it goes into correction, I can flip over and trade its mirror, TZA. That is the bear version of TNA.

The package this is taken from is StrategyDesk, which is free from TDAmeriTrade when you have an account with them. They have a newer package, ThinkOrSwim, also free, but I've learned this one and my brother never convinced me to switch.

I have tried to describe this trade in a manner that you can keep as notes. It seems simple to do, and takes little time each day since one can use limit orders. I don't have to stick around and watch it--which drives me nuts. Hopefully you will find this helpful, and it does help me by explaining it.

TNA Sideways

Sideways movement goes on now as it has since August. US economy shows improvements, but EU overhangs that with consequences no one seems to know.A number of things show signs it will break upwards, at least eventually, but in the meantime, sideways.

The sideways movement has shown fairly reliable, making trading a range profitable. The current short-term linear-regression channel now challenges the longer-term channel. Volume studies are not favorable. However, it has crossed a longer-term trendline, retested it (dark-blue trendline). Same with a shorter-term trendline.

This all points to a continued sideways movement.
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1/9/12: Price driven down out of the short-term channel. Left the trade before it went lower.