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Sunday, August 21, 2005
Market Recap
Oil was up $2.00 on Friday but it did not matter to stocks. This should have been a reason to drive stock prices down but on Friday, stocks traded basically flat in an uneventful, low volume options expiration day. The DOW gained a miniscule 4 points, while both the S&P and NASDAQ traded flat with a fractional gain and loss respectively. Tonight we have updates on the 3 big indices and with another week of low volume expected, caution is advised in your trading as we see no catalyst or heavy volume returning to the market to move stocks up until after Labor Day.
S&P Outlook
The S&P broke its uptrend line with a sharp decline on Tuesday of last week. It has since been hovering around the 1220 support area. When an index or stock breaks an up trend line, it is expected that additional selling pressure would come in, thus bringing it down much further. However, after Tuesday's break of the trend line, no additional follow-through selling came in for the rest of the week. This can sometimes indicate that there are no sellers left. The simple fact that volume was light all week could be signaling a short term bottom at this 1220 support level. Also, the Slow Stochastics remains oversold and this can sometimes indicate that a bounce is due. In any case, the upward momentum that we saw for most of the summer has slowed and this index, along with the other indices, is on the brink of a downside move if buying volume does not come in soon. The markets have been closing each day with selling pressure. These weak closes favor a downside breakout but with the market already oversold, it is tough to want to go short at this time. A close below Thursday's low would confirm the downside move with the next support level at 1190. If we do get the bounce we need, then not all is lost. A close above 1240 would resume the uptrend.
DOW Outlook
The DOW is clinging to life by hanging on and closing above support at 10550. A close below 10500 would most likely take it down to the next support level near 10400 but this index also remains over sold and is due for a bounce. For the past 3 trading days, the DOW has closed higher than it has opened which would normally be bullish but the volume has been light and the Chalkin Money Flow (CMF) has gone below the zero line on these three days indicating some distribution is taking place. This of course is a bearish divergence.
NASDAQ Outlook
The NASDAQ is extremely over sold, more so than the rest of the indices however it closed below support at 2150 for 4 days in a row. A bounce should have occurred already but with volume so light and no buyers to be found, it is unlikely for any bounce to occur without the institutional buying to support it. The longer it hovers around this support level with the inability to breakout above it, the greater the chance of a major downside breakout. An up-turn at this point above 2150 would be a bull signal but volume is needed for that to happen and this week being the last week of August, I doubt we will see any heavy volume at all. Look for another week of light volume trading with the indices drifting aimlessly. After Labor Day, volume should be heavy and the markets should commit to a direction, one way or the other.
STHQ Chart Index
If you go to the chart index in the left side menu, you can review and study charts that we have annotated for each stock listed in the past.
For New Members
For all of the new members with us, please make sure to read the link “How to use Bulletin” at the bottom of the Bulletin page on the website. It is critical that you know how to use this trading tool before trying to trade the stocks mentioned. The effectiveness of your trades will diminish if you do not completely understand how the information is presented.
Earnings Calendar
We have added the earnings link for each stock on the bulletin. To access the link for earnings, you can either use the link below or click the link on the bulletin for the corresponding ticker. Click the online bulletin in the left side menu for access to the earning calendar for each stock listed. It is not recommended to hold a position through earnings. You can always buy the stock back after the dust settles.
http://www.earnings.com
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