|
The contents on this page are a small sample of StockTradersHQ's member resources (FREE Trial!)
1.
Our staff of professional technical traders analyze 1,000's of potential stocks every day to provide you with a list of stock picks with the greatest potential for explosive gains.
2. These stockpicks are traded with our real-time portfolio. Email alerts are sent for every entry and exit. Through the member-only website, you will have our support every step of the way.
3. Our subscription service provides all the resources, stock picks and tools an investor needs to make very profitable, consistent trades while maximizing gains and minimizing losses.
SEE OUR TOP PICKS FOR 2006...
|
|
Tuesday, February 15, 2005
Market Recap
The Dow and S&P continue to shine and out perform the NASDAQ and small cap stocks. I showed these charts a week or two ago and stated that the Dow and S&P were looking much better than the NASDAQ from a technical standpoint and that continues to hold true. Today, the Dow was up 46 points and is now just 31 points away from making a new 52 week high. The S&P has had a similar run; it gained 4 points and is just 7 points away from its 52 week high. These are definitely bullish signs as these two big cap indexes show their muscle. What we should watch for now is a possible double top formation. This will occur if they fail to break through new highs and reverse to the downside. What I would like to see is some consolidation near the highs before attempting to break through. The NASDAQ was up 6 points and is still over 100 points away from its 52 week high and still hovering around in a bearish type flag. With the strength of the other two indices, maybe the NASDAQ will get carried back up and along for the ride.
Trading the News
The problem most people face when trading a news related stock is that they do not know what to do with the news. You have probably heard the expression, “buy the rumor, sell the news”. The professionals respond to news by watching price action and then fading the story. They know that most of the time, news has already been priced into a stock and once the stock gets the news that it is expecting, there is no more anticipation left. Without anticipation, there is nothing to bring in buyers and this causes a stock to reverse. Tonight I will attempt to explain how to trade the news using a few various different situations. I hope this will better equip you for trading news, if you should decide to do so.
Surprise Good News
If the news is a surprise that comes completely unexpected, and released before the market opens, there will be a major gap up. In this case, I would advise not to chase it. Wait for things to settle down and find the true direction of the stock. Many times, a gap up open is the high of the day, other times the stock quickly moves down, regains its momentum, and makes a new high. Your best bet is to wait for this new high to occur. When a new high is made that is signaling the direction of the stock for that day. This is the way to play it, for day trading only. I would not recommend it for swing or long term trading because the stock will most likely return to a short term average line or price support after the hype is over.
Surprise Bad News
If the news is bad, not expected, and released before the market opens, there will be an extreme gap down. Hopefully, you were not long this stock because it will not re-cover for months, maybe years. However, I do play these for day trades because, most of the time, the pre-market low will be the low of the first 30 minutes after the open. If I am going to buy, I buy in pre-market and sell in the first 30 minutes after the open. There is almost always a reaction bounce after the first few minutes of trading. Shorts are covering and that is bringing in buying demand and the stock rises briefly, that is my chance to sell for a quick day trade. Remember, these are only day trades, I would not want to own a stock that just gapped down for any length of time.
News During Market Hours
If news comes out on a stock during market hours, this is a chance if you are quick to take a position fast. If you can get in right away as the stock starts moving, then move on it. However, if you are just 2 or 3 minutes late, then it is too late at least for the initial move. If I cannot get in the stock in the first minute or two of the news, I would not chase it. I would wait to find the direction. Many times, stocks will move up real fast and then fade once the news is digested. Many times, for most inexperienced traders, it is trade first and read the news later. If after the news is interpreted, and it is decided that it is not that significant, then selling will occur and the stock comes back to earth. By this time, the stock has made its move and it is no longer a day trade for me. However, this would be a case for a great swing trade. At this point, I would look at the daily high and low of the stock. When the stock has settled down and has decided its direction, I can play it. For me, if a stock makes a new low, I will take a short position. If it has made a new high, I will buy it. This is because by making a new low or high after the reaction, the stock has signaled a direction and it is now safe to play.
If it should go lower and does not, it is going higher.
If bad news comes out and the market shakes it off, there is a good chance the stock is going to rally. This lack of selling indicates that the news is already discounted. If the news is good and the stock fails to rally, it would be a good idea to short the stock. Short it because there is no buying interest and with a lack of buyers comes lower prices. Remember, it is more important to see how the market reacts to the news rather than to know what the news is.
Experienced traders watch to see what happens after news is released. They are hoping to see the stock fail to act the way it should and then they trade opposite the news. The more anticipated the news is, the more potential for the stock to trade in the opposite direction once the news is released. This is because, if the market was expecting the news, it was most likely already factored in the stock price. Smart money will always sell the much anticipated news as the last of the dumboberries rush in and buy the news that they thought nobody knew before.
Is it Good News or Bad News?
What defines good or bad news is often subjective. I am sure you have seen this before. When there is bad economic news before the opening bell, the futures tank. The market opens with a big gap down and you react by selling all your stocks because you are so sure this bad news is going to start the next bear market. Then, after you have sold your last stock at the low of the day, the market suddenly reverses and stocks start to go up only to end the day in the green. Why does this happen? I will tell you why, it is because the amateur traders open the market and the professional will wait until the panicked herd sells. They then cover their shorts and go long the gap down open because they know that bad economic news will cause the fed to cut rates and lower rates are good for stocks. When the news is bad and the markets stop going lower, it is time to buy. When the news is good and the markets cannot rally higher, it is time to go short. Do this and you will be reacting to the reaction instead of reacting with the crowd. News is not always what it seems to be or, there is some underlying news that may develop from the original news, such as my example above about the Fed. The market knows this better than we do and it does not react the way we think it should. The next time you trade the news, make sure you know what the news really means.
Reminder
There will be no bulletin on Thursday February 24th due to the fact that I will be out of town for that one day. I will not be available for trading that day either. No alerts or trades will be made that day. It will be business as usual on Friday the 25th.
Please tell a friend about our service. As always, thank you for your support past, present and future! We will see you Tomorrow evening.
Do not forget to check your short-term holdings and know when those companies are reporting earnings. Holding a stock through earnings is risky and I do not recommend it. You can always buy the stock back after the dust settles.
http://www.fulldisclosure.com/highlight.asp?client...
Stockcharts Listing
Please vote for us once a day at stockcharts.com. http://stockcharts.com/def/servlet/Favorites.CServ...
Thank you all for voting |
|
|
|
|
|
|
