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Monday, November 21, 2005
Market Recap
The Dow closed above 10,800 for the first time in nine months, and it is trying to follow the NASDAQ and S&P to new four year highs despite the drag GM is putting on it. Today, the markets continued their amazing rally with more big gains. The Dow was up another 54 points, while the Nasdaq and S&P charge ahead setting new four years highs again today with gains of 14 and 6 points respectively.
It was another super day for our bulletin stocks as many powered ahead for nice gains including: GOOG, HOLX, ARBA, CKCM, DESC, ESRX, HANS, NDAQ, NWRE, QDEL, SBAC, and WIRE. All these are up between 3 to 7% each. We thought we did well by locking in a 10% gain on HOLX but in bull markets, stocks keep running. HOLX looks like it wants to be a market leader and keep running. Time will tell, but we may have to change our strategy from locking in 10% gains to a strategy of “let the winners run” It look like there is no stopping the market, so letting stocks run may be the answer to the monster gains.
Top Down Approach
There are several basic approaches to technical market participation. A very simple approach would call for finding patterns with a decent chance of producing successful outcomes, and trading them without much attention to market direction. This approach considers that a setup is powerful enough in and of itself to produce a desired move. Nevertheless, this is not the preferred way to participate in the markets. If we consider that 75 to 80% of all stocks move in the general direction of the markets, it would only make sense to begin the analysis by determining the probable direction of the market (macro-picture), and then finding those stocks that present the best odds of success based on several items. This is what some call the “Top Down" approach.
This means that we should begin by analyzing the broad market picture. Then, work our way down, through sectors and groups of stocks and then finally we reach the individual stocks. The logical order would be:
-Market Indexes
-Market Internals
-Sectors
-Stocks
The first step will always be to analyze the markets. We look at both the Nasdaq and S&P, in weekly, daily and hourly charts for swing trading. Once the macro picture is set, we will proceed to analyze the diverse sectors that comprise the market in search of Relative Strength (RS), etc. We want to know what the hot sectors and groups of stocks are. Most of the time, stocks in a particular group will all move in the same direction. We can go long in the strong performance groups and short the weakest groups. Then once we have identified these groups we can then find the leaders of the groups. Once you find the strongest stocks in the strongest groups, you have identified the market leaders.
Needless to say, not all days will provide us with the above mentioned perfect picture, but this approach will work wonderfully for swing trading in the direction of the market trend. It will also work on a micro basis for day trading. You just have to find the hot or weak group of stocks for that particular day and go long or short in the direction of the group or market that day.
Important Announcement
There will be no bulletin on Wednesday and Thursday nights this week because of the Thanksgiving Holiday on Thursday and only a half day of trading on Friday. Alan and I will NOT be available for trading on Friday due to the fact that this is a very light volume trading day and we both have plans for the long weekend. Tuesday evening will be the last Bulletin and Commentary for the week. We will resume our regular schedule of updates on Sunday Nov 27th. Enjoy the long Holiday weekend everyone and take advantage of this nice break.
Stockcharts Listing
Please vote for us once a day at Stockcharts.com.
http://stockcharts.com/def/servlet/Favorites.CServ...
Thank-you for voting!
STHQ Chart Index
If you go to the chart index in the left side menu, you can review and study charts we have annotated for each stock listed in the past.
Earnings Calendar
We have added the earnings link for each stock on the bulletin. To access the link for earnings you can either use this 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
For New Members:
Please take a moment to read the "How To Use The Bulletin" link at the bottom of the Bulletin page on the website. It is critical you understand 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.
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