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Monday, October 04, 2004
Market Recap
It looked great this morning for the market as the futures indicated we would get some strong follow through buying following Friday's strong close. Things looked great for the Bulls at the open when the markets gapped up and buyers supported the gap for the first 30 minutes. However, it was right around 10:00 am when the NASDAQ ran into its 200 SMA line and that was all she wrote for this rally today. Once this level of resistance was reached on the NASDAQ, all the indices pulled back in conjunction. The Dow's rally fizzled out and closed up just +23 points, the NASDAQ was up +10 points, and the S&P gained +3 points.
I like the way charts are setting up lately and things are looking more bullish. However, until the NASDAQ and Dow can get above their 200 SMA's, caution is advised.
Happy Birthday Bull?
We are in for a wild week. There is a slew of economic data due out this week, Greenspan will be speaking, we have the vice presidential debate tomorrow, and oil is still hovering around $50 per barrel. We also have a birthday to celebrate this week, and it is an odd one: http://money.cnn.com/2004/09/30/markets/bull_birth...
It turns out the majority of analysts are saying we are still solidly in a bull market. Given some of our recent discussions around analysts and what their thoughts are worth, this story has me a bit concerned. The last time I checked, I would say that the market has been trading sideways for quite some time. We have been bouncing in trading channels between support and resistance for awhile on extremely low volume. The NASDAQ is down 5% YTD, and in my book, that is not a bull market. With the Dow and NASDAQ very close to their 200 SMA lines, we could be on the verge of a new bull market but have we been in one for the last year? I would say not.
Be cautious when reading information the analysts have put out there for the crowd. It is the analyst's job to get you fired up, emotional, and excited to be in or get back in the market. We all have to remember to keep our emotions out of the trade and out of the research.
When an analyst writes that we are in a bull market and things are looking good, you need to fight to hold back your emotions. I say this because, if you have been having a bad year, it is likely that you will be very upset to hear some analysts say we are in a bull market since you feel like you are missing out. You may charge into the markets in an effort to catch up to the rest who you think may be doing better than you. This rushed reaction may end up costing you dearly. You could make mistakes and end up on the losing end of the emotionally hurried trades.
The key for me is to not read or project anything into these analyst statements. I look at the charts and they tell me whether or not what the analysts say is true. The charts tell me the market has been sideways for months, and no analyst can dispute the charts. Charts are there and they are factual. Personally, I do not trust anything the analysts say. They are often wrong in their assumptions and sometimes do not even know they are wrong. In my opinion, it is best to follow the charts rather than analysts. If you want to listen to them, by all means do, I am just recommending you follow up on what they say with a little research of your own and take a glance at the charts. After you review the charts, you can better decide if you want to follow the analyst's opinion or not. The charts will always help you make a more educated decision rather than following the herd blindly.
Bottom Feeders
We have been trending sideways and during this time, many stocks have bottomed and have formed solid bases. Although these stocks are still below their respective 200 SMA lines, I believe they have bottomed out. Since the real money is made off the bottom when Bull markets begin, tonight I have started looking for these types of charts. This style was highly successful 16 months ago when we first started this website. It has been a tough last eight months, but I think we can see some light at the end of the tunnel. I will not add these stocks to the bulletin yet, but I will incorporate the charts and list them here each night in a bottom feeder section. These stocks have put in some solid bases on the bottom and look to be turning up. Tonight's bottom feeders include AMCC, KLIC, MCDT, INFA, ESST, and SFE. Remember, these will not appear on the bulletin until they get above their 200 SMA. Once they accomplish this; they should be off to the races and can then be added to the bulletin. I have some charts of these tonight so you can see exactly what a good bottom is.
OTC BB Watch List
- TRLG
Here are some recent IPO's with good looking charts. They will not be added to the Bulletin because the volume is too thin.
- LMRA
- LPL
- SRVY
- RNOW
- ECST
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