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Tuesday, March 23, 2004
Good evening friends,
It was a fierce battle between the bulls and the bears today as the markets were on a major roller coaster ride. After that gap down yesterday, the NASDAQ tried to rally, but it just has no fight in it at all. Tomorrow should be the day that we have been waiting for; we should see the 200 SMA get tested. Keep in mind the chart of the NASDAQ from last night. I showed a weekly chart with the 40 week moving average at 1901. It is no coincidence that the NASDAQ closed at 1901 today, just 3 points from the low.
Tomorrow should be the day the suspense will be over. We will either fall to the 200 SMA and bounce, or we will go tumbling through it. The close will be the key, but keep in mind that if the NASDAQ takes a tumble early and gets to far below the 200 SMA, there will be no sense in waiting to see how we close. By that time, it may be too late. There could be a substantial sell off if the 200 SMA and 40 week average are breached.
My advice is to stay locked on your screens tomorrow and be ready to sell everything if we fall through the 200 and can not recover right away. Cash is King, and it has been for 8 weeks. If you are 100% cash, I would not even trade tomorrow unless you see that we are starting a bounce off the 200 on good volume.
Indicators 101
Indicators have been the subject of countless questions. I have seen a number of people attempt to use indicators as they ask about a particular stock, some properly and others not.
So, I thought it would be a good idea to start going over the various indicators and give a little of my own insight. I want to take the indicators a bit beyond the general definitions that you can get from places like stockcharts.com.
What I want to do tonight is to give you all a high level overview of indicators in general, and their application to technical analysis. I feel like this is the most appropriate place to start before discussing each individual indicator. I am going to try to cover quite a few of them over a number of commentaries. If the market situation calls for a discussion of another topic, we will put indicators on the back burner. So, do not expect one commentary after another on indicators. I will give you the full series over time but there will be times when the market dictates that I discuss other topics.
Indicators, as everyone should know by now, are the basis for technical analysis. They are the clues that are already built into the pricing of a stock on a given day. They are the window through which we obtain a view of the future direction of the stock, but, they are not infallible.
If you ever come across a set of indicators that is 100% accurate 100% of the time, please let us all know! Indicators can give you a very strong idea of the direction of a stock, but you must remember that the stock market is still very tricky. If it were 100% reliable, then there would be no challenge.
You must also remember the catch phrase ‘cut your losses quickly and let your winners run'. Follow that, and you can be right less than 50% of the time and still make a very nice profit over time. Time is also essential. You need to throw away the notion that you can turn $1,000 into $100,000 in a year or less.
Did you ever hear this line? “Want to know how to make $1million on Wall Street? Start with $10 million.” No real system is going to get you there in that amount of time, so do n0t trade like you are gunning for that. Be patient and stick to the plan. Give your investing time and attention and always stick to the plan.
There are literally dozens of indicators that one can use. As such, each individual trader must try various indicators and determine what they like best for themselves. Now is also the time to point out something very important with using indicators. Do not rely on any single indicator!
I personally use allot of indicators when I am looking for stocks. I will let you know as we go through some of my favorites but, I would ask that you NOT ask me for my entire list of indicators or my scanning formulas. A good scan set up can take years to perfect, and asking someone to give their personal scanning system is like asking them for their first born child. We will cover the indicators with enough detail so that you can make an educated use of each, and then determine for yourself what you like best.
Some OTC BB stocks for your watch list include BPWRF, MOBL, LINN, APLL, TCOW, MMGG, and WWAT.
As always, thank-you for your support past, present and future! Have a great night everyone; we will see you all tomorrow evening.
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