Chart Learning - Learn to Trade Stocks With Technical Analysis

Why The Market's Momentum Will Slow Down

2013-05-19T16:32:00.002-07:00

I am posting exclusively for the month of May at The Trade Street, check out this post over there.

Pullback Off Highs -- The Only Pattern You Need To Know

2013-05-19T12:11:00.001-07:00

The following is an excerpt of All About Trends Premium newsletter, sent every day. If you would like to sign up for a free 15 day trial click here (no credit card required).

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There's no question that technical analysis is tricky. Learning how to take a stock chart and make a profit producing prediction takes years of study and experience. But with decades of technicals under our belt, we're here today to show you why there's only one long-side pattern you need to know to profit from this market.

It's time to dissect the Pullback Off Highs...

The Pullback Off Highs pattern is one of the most bullish and constructive long-side set-ups out there. Rather than moving straight up, an index or stock will make a move higher, then spend some time consolidating those gains often down to an area of chart support such as its 50-day moving average, before making another move into new high ground.

When a stock clears these consolidation periods, it's your opportunity to buy them and take advantage of the next run. The bonus part is that when you catch a stock at the beginning of a new uptrend, you'll often get to trade the stock and lock in profits over and over again. That's because buying it at the point where it's just started a new move and is near support, which minimizes your risk. Here's a current example:

In the chart above are 3 things you ALWAYS want to be on the lookout for:

1. Defined Uptrend

The stock should be in a clearly defined uptrend and above the 50-day moving average, the green trend channel above shows that.

2. Pull Back to Trendline Support

We always want to see a stock that's sitting right above trendline support as well (thick green line). Stocks bounce off their trendlines, so we want to take our position just before a stock starts its bounce back up. Trendline support also happens to be near the 50-day average in this case.

3. Oversold Stochastics

Full stochastics are close to an oversold position in the chart above and that's just what we want. Stochastics, an indicator of a stock's momentum, give us a glimpse at just how overextended a stock's price is at any given time. When a stock is oversold, it's time for us to buy.

Once you see all three things, there is only one more step you need to know after that: Draw a trendline off the most recent highs (pink line). That's what we commonly refer to as a Pullback Off Highs Line. Then it's all about an upside crossover of the stock's share price above that line. That crossover is your entry point.

How To Increase Your Edge With Technical Indicators

2013-05-13T13:20:00.000-07:00

I am posting at The Trade Street exclusively for the month of May, check out the article here.

Have You Checked Your Bios Lately?

2013-05-12T15:14:00.000-07:00

The following is an excerpt of All About Trends Premium newsletter, sent every day. If you would like to sign up for a free 15 day trial click here (no credit card required).
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Let's Talk About Those BIOS!!

When one looks at the current trend off the November lows a few things stand out -- namely the pullbacks in terms of the duration, the depth and the percentages they've pulled back.

Take a look at the daily charts below of the NASDAQ Comp and the SPX.They pretty much tell the story within the current trend.

So you see? Overall within the current trend any sell off ought to be a welcome sign for using to get long on.

When we look through let's say the names in our newsletter this weekend and look at the February through March pullback in the indexes we noticed the bios for the most part took the lead higher opposite the markets while other names quietly consolidated and yes even some names bit the dust really hard. The thought that comes to mind overall with regards to individual issues is?

"It's A Market Of Stocks" with something for everyone long and short alike. Which is also another way of saying money stays in the markets but rotates around. Think out of these and into those.

That said, those names that have run the most could easily lag at the least or go into a correction in the next pullback with some other yet to be defined theme moving higher to pick up the slack. After all look at DDD and SSYS in the February through March pullback. Those two names were all the rage and then? POW to the downside. While at the same time the bios did the opposite -- they took off and asserted a form of leadership.

Our game plan is to see how the market opens next week after the opening dust settles and take things one step at a time. We do like the recent action in the bios last week, what we didn't like is the amount of point moves most made in the blink of an eye on Friday. A day or two of backtesting or pulling back would be fine by us for potential going long purposes.

Take AMGN for example.

From a trade what you see perspective? We see an issue that is in a clearly defined uptrend pulling back off highs above the 50 day average plain and simple. THAT is the main reason we issued a Trade Trigger email alert to our paying subscribers last week -- both a stock trade and an options trade. So far so good on both!

And...we've added 3 other bio stocks to the watch list for our paying subscribers -- we just need to see them continue to pull back to a low risk buy point like AMGN did and then we'll likely issue trade alerts on them as well.

DON'T MISS OUT AND READ ABOUT OUR GAINS IN THESE STOCKS AFTER THE FACT!!

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Bonds Hinting At Possible Market Pullback

2013-05-12T10:36:00.003-07:00

I am posting exclusively for the month of May on Trade The Street, check out the post here.

Why You Should Be Bearish In The Short Term

2013-05-07T14:59:00.001-07:00

I am posting exclusively for the month of May on Trade The Street, check out the post here.

Dow 15,000, Now What

2013-05-06T07:38:00.000-07:00

Friday morning we received at least 5 emails and all of them had a theme. That theme was? You gotta be out of your mind to chase anything here.

It's no secret the market was up big on the news driven event called the jobs report. Remember it's the reaction to news driven events that one has no control over. EXCEPT? Except managing one's emotional state. Those who can not control their emotional state? You have no business being in the markets.

So the market gapped up, so what do we do? As usual we wait for the dust to settle first and we look at what are our positions actually doing. We can't stress the importance of this. Case in point? Let's look at BEAV which we shorted at trend channel resistance in tandem with a market that is well overbought in the short-term:

Here's the micro 1-minute chart of it's action the first part of the day on Friday:

When evaluating your trades (particularly if the market moves against you), ask yourself the following questions (all of which pertain to BEAV as shown above):

Are they in trouble from a trade size portfolio risk management perspective? This means do I have more than 5-7% of my portfolio invested in one position?

If you are short a stock, is it extended? YES

If you are short a stock is it at a resistance level or zone? YES

What percent am I down in them, what is the total impact to my portfolio? Not much, all still within acceptable stop loss parameters and the first two of the 3 outcomes we stay grounded in -- win, lose or break even.

Then the next thing I do is ask myself would I be a buyer here based upon our style of investing? NO, we looked at the IBD 50 Friday and guess how many wefound that are sporting low risk Pullback Off High entry point patterns? ZERO, ZIP, ZILCH.

And If I do buy am I chasing something AFTER the fact? YES, in most cases.

These are all the things we ask ourselves every morning and so should you. So you see folks? Questions are really the answer here. Ask the right questions that keep you centered and you'll get the right answers.

Then the biggest centering statement of them all. This is just a moment in time subject to the next moment in time. Don't forget where the market opened up is not a permanent state.

So you see, let cooler heads prevail.

Wear em out or scare em out

In addition to that? Remember how we've said numerous times about how markets wear em out or scare em out? To the downside capitulation spikes serve the purpose of scaring out Nervous Nellie. They also suck in Greedy Gus on the short side AFTER the move has already been made.

So what's the flip side? Spike highs. For Nervous Nellie short sellers it's a scare em out, for Greedy Gus types it's a suck em in on the long side AFTER a move has already been made.

Care to guess which side of the coin is in play today for emotional types?

And then there is another way to look at it. Ever go to a 4th of July fireworks show? What happens at the end of the show? The big grand finale that's what. Then what? Out go the lights and everyone heads home. One way to look at this spike is just that a grand finale of a fireworks show.

As we look ahead to next week, the charts below tell the story:

Friday's action created a gap up that odds favor gets filled really soon. That will be the first level of support to consider. What we'll do is use the long side watch list in our paid newsletter at that time but right now we are not there so give it a few days and then we can look at things on the long side. In that pullback? Well that bodes well for us opportunists because we are already looking at a few short positions that can easily move in our favor here.

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Last Two Times This Signal Was Generated The Market Corrected

2013-05-05T10:29:00.002-07:00

I am posting exclusively for the month of May on Trade The Street, check out the post here.

Great News! I have Joined Trade The Street!

2013-05-02T10:19:00.001-07:00

I have been given the chance to join a new upcoming trading site Trade The Street. I will be posting exclusively over there for the month of May. I have been pretty successful in trading this past year. I get a chance to give free trade ideas live at Trade The Street so be sure to check it out.

My profile is located here.

Be sure to read my blog post of me introducing my trading style and the success it has had.

Also, there will be some very interesting guest posts here in the month of May and continued material from All About Trends.

Trade Management 101

2013-04-29T17:10:00.002-07:00

The following is an excerpt of All About Trends Premium newsletter, sent every day. If you would like to sign up for a free 15 day trial click here (no credit card required).
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By All About Trends

When attempting to make money in the stock market it's all about managing your trades and your expectations surrounding those trades. Below are 3 example of trades we closed today for subscribers and our methodology of why we did what we did.

NQ (We WERE Long 500 shares of this at 8.04 on 4-18)

Well folks, when all said and done we walked away with a gain of $395 in this issue. As far as GLUU is concerned the gain was $270. Between the two of them it was a gain of $665. Not great but not bad either.On its own NQ was a gain of 9.8% and on GLUU it was 20%.

Why focus on $665 per week or even per every two weeks as a game plan to focus upon for those in need of one? Simple. $665 per week is $2,660 per month times 12 months is $31,990 per year.

On a 100K account it's a 32% return in a perfect world, all the while never being more than 50% invested as we rarely if ever get to that level of being invested.
On a 50K account it's 63.8% return on an annual basis raw.
On a 25K account it's 127% (fat chance as 127% is an unrealistic goal, but you have to have a goal and a focus!) $665 every two weeks is $1,330 per month and on a 100k account it's still an annual 15.9% return all the while never getting more than 50% invested.
On a 50K acct. it's 32% return on an annual basis, on a 25k account it's 63.8%. We say perfect world because the world isn't perfect in this sense and nobody on the planet ever hit 18 holes in one nor has anyone ever had a 100% can't lose hit ratio in the markets, but again one has to have a goal and a point of focus and the above is a good one for you hit and runners.

GLUU (We WERE Long 500 shares of this at 2.61 on 4-2)

Between NQ and GLUU we are looking at a gain between the two of them of around $665.00. This puts us in a "We're all doomed to make decisions" stance here. Why? Because if we sell and they go higher? It's a homer Simpson DOH! moment. If we sell and they roll over? We'll that's fine. We don't know the future nor does anyone else. So it's also a "Let's Make A Deal" Game show moment of do we go for what's in the hand showing or go for whats behind door number two and risk the gains in the event we get a flop of a prize behind door number two.

We happen to like both companies and that MAY be the problem - becoming attached to the company and not the stock. As Bill O'Neil says

A company is only as good as its stock.

Think about that statement. Now apply that to AAPL. Sure great company, great cash flow and all the other great fundamentals under the surface but what about the stock overall? After every low the stock gets a bounce but that bounce fizzles and lower lows it goes. We took a shot at it on a retest of lows in the 426 level and that retest of lows failed plain and simple. Speaking of AAPL? See below. Lastly with regards to NQ and GLUU? We're apt to take the money and run here as $665 a week or two in gains is a healthy year when you add it up over time as outlined above.

AAPL (We WERE Long 20 shares of this at 426.87 on 4-2)

Rocky Says AWESOME! Awesome? How can Rocky Balboa say awesome when we took a loss? Simple because at All AboutTrends we practice what Rocky preaches and that is:

"Sometimes it ain't about how hard you hit, it's about how hard you can get hit and keep moving forward. How much you can take and keep moving forward because that's how winning is done!"

That said we took some punches with AAPL for awhile when it fell apart. At the 385 zone we were down 42 points or $840. We never sell a damaged issue after it's fallen, we always wait for a bounce (GS and C were the same way for us too by the way). We faced our fears during that time and managed our fear of loss while in the loss zone only for us to bend like a willow tree and wait for the bounce no matter how uncomfortable that felt and sure enough this issue bounced and when all said and done we lost $35.40 dollars on the trade.

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The Markets Are Promised New Highs

2013-04-28T11:15:00.002-07:00

Last week, I showed an interesting chart, that hinted that the markets were going to bounce pretty strongly and possibly continue to make new highs. So far the chart has held up pretty accurately. The Price Oscillator, another indicator that I follow, recently gave a bullish signal that the makets are promised higher highs (the Price Oscillator and its rule sets were invented by Tom McClellan).

The Price Oscillator (shown below) has a neat property: When it is above 0 and it is pushed downward, if it is able to point back up again, it conveys the messages that the market will make higher highs.

This is just recently happened, note the circled portion of the Price Oscillator in black on the chart below. The Price Oscillator started to turn downward in April, and has successfully rebounded upward, making a small fish hook like structure. When this occurs this promises the market will make higher highs (if this occurs the markets could be susceptible to a nasty correction), it is important to note that this is not a guarantee. I highlighted with red arrows where the Price Oscillator did correctly forecast higher highs in the markets (pointing down above 0 then back to pointing upward).

Where This Bounce Is Headed

2013-04-22T17:15:00.001-07:00

Last week was the worst week of the year for the bulls. On Wednesday, I talked about a short term bottom being near, and a day later we got the bounce the charts were hinting at. Now comes the tricky part: is this a continuation of an oversold bounce, or was last week just a healthy correction to go higher? The chart below is a very interesting chart that may offer clues to these questions. It is the S&P 500 with the Percentage Price Oscillator indicator; it measures the distance of the S&P 500 and its 13 EMA. Notice the indicator hit support the previous two times (highlighted red arrows); it ended up bouncing, and the market made higher highs. Right now, this level has again provided support. If history means anything, this bounce may have legs. Remember: the market isn't that easy...buying the dips ends up working until it doesn't (sage advice [/sarcasm])! I will leave it up to the readers on how to interpret the chart below.

Is This Really A Market In Correction?

2013-04-21T08:38:00.000-07:00

The following is an excerpt of All About Trends Premium newsletter, sent every day. If you would like to sign up for a free 15 day trial click here.

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We say that because of the charts below:

Friday we said:

"Keep in mind we are not out of the woods just yet BUT what we see isencouraging so far. Expect some backing and filling in here. By the same token there is an alternative count to what we said yesterday was a 5 waves down count (red) and that alternative count is shown in the blue numbers below."

If so? Then we could easily come back down to retest lows of yesterday for the 5th wave of the alternative count. Think testing testing testing back to the scene of the crime.

This is where we find ourselves going into next week. Waiting to see IF we retest the lows. So what could cause that? Who knows. Keep in mind AAPL reports on Tuesday AFTER the close. We say that because IF we rollover Monday and Tuesday per the alt count (Don't fear it) and retest the lows? AAPL could be a catalyst for popping the market off of that retest. Think "Better Than Expected" in that case? Market gaps up Wednesday morning and away we go. We'll see, we're just thinking out loud as to a potentiality so as to be prepared in advance just in case so as to be able to take action on that.

Our game plan for the week is:

Watch the 15-minute index charts for the potential of a retest of the recent lows per the Elliott Wave alt count in blue. After all look where we stopped going up Friday, see it? The pink POH downtrend resistance line that's where. This is also what makes us lean to a retest but as we all know it's all about the opening volley come Monday first.

Should we get a retest of the lows (don't rule out another undercut either) and we start to see names stabilizing? We'd consider buying names on the long side watch list and next week it's all about just that - the long side watch list.

Take SODA for example:

Here we have a stock in a confirmed uptrend above the 50-day moving average that has pulled back off of its highs to support at the blue line and the 50-day. A breakabove the pink line triggers a long side trade.

Last week, we issued a trade alert to our paying subscribers on a set-up similar to this and our subscribers are enjoying a nice profit thus far. Don't miss out on what SODA could do as well as the other 5 stocks on our long side watch list.

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Short Term Bottom Is Near

2013-04-17T17:46:00.004-07:00

Last week as the US Market made new highs, I made a post catering to the bears, in that post I pointed out that there was yet to be a new low in the $VIX as the S&P 500 made a higher high (a useful warning sign). Now with hindsight, we can see that the lack of $VIX confirmation was a warning sign. Since then the markets have indeed pulled back nicely.

There may be a temporary bottom that may be coming soon, if not today. The chart below shows the S&P 500 along with down/up volume ratio as well as the $TRIN indicator (Arms Index). The top indicator is the ratio of down/up volume, readings above 10 usually signal a temporary bottom. However, in this instance, there are two huge red bars (>=10) spaced a few days apart, which in the past usually signals a short term bottom (examples circled).

The bottom indicator on the chart is the Arms index which measures market internal pressure. Reading above 2 mark short term bottoms (usually), I highlighted black arrows when readings over 2 marked a short term bottom. As shown below, we have two signals that are hinting a bottom is near (remember its just probability, some unexpected news can negate the signals).

Two Arguments That Support The Bears

2013-04-10T14:24:00.001-07:00

First off, I am not bearish. The only reason why I am making this post is because bearish posts tend to get 2-3 times more traffic than the bullish posts that I make.

The chart below is the S&P 500 for the last 6 months on an hourly time frame. I have highlighted two observations. The first is the red trend line has not been broken through. The second point is the VIX has not made a lower low, as the S&P 500 has made a higher high. Look back in February as that had spelled trouble (shown on the chart).

Where The Market Stands Now

2013-04-09T15:17:00.001-07:00

Last week, there were plenty of warnings sign that the markets would pull back. I posted my Aussie/Yen chart to support my thesis. The markets did indeed pullback. However, since then, the printing press has turned on, and the Aussie/Yen as well as the Euro/Yen have now made new highs since Thursday. As the Yen collapses, this is very bullish for the markets. My longstanding prediction has been: long term bullish as long as there is money printing going on (i.e. QE3).

The chart below is the S&P 500 for the last 6 months on an hourly time frame. The markets have had a nasty drop since the job report, but have attempted to regain the highs. However, the market was stopped cold in today's continued bounce from Friday, right at the trend-line marked in red. It is somewhat of a concern that the market rebound was stopped there. The good news for the bull is that, the trend from the November lows are still intact, despite short term concerns. Feel free to analyze the chart below and tell me what you see (leave comments below). Bullish or bearish?

What AAPL Is Telling Us

2013-04-07T09:37:00.002-07:00

The following is an excerpt of All About Trends Premium newsletter, sent every day. If you would like to sign up for a free 15 day trial click here.

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Pullback Off Highs

What are they and why are they the only pattern you'll ever need to know?

In up-trending issues there is only one pattern you'll ever need to know and it's what we call a POH or Pullback Off Highs. There are all types but the best are those that are above the 50 day average and in an overall uptrend.

Just think the bunny hop dance because that's what they are doing. Two steps forward, one back (the POH), two steps forward and so on.

These patterns show up almost every week in our watch list, just another reason to pay attention to that watch list every day.

While we are in educational mode this weekend, let's throw up AAPL here as there is are few good education points to make with it when viewing a 60 minute time frequency. It's all about the RSI (Relative Strength Indicator). As you can see it's a tool that also helps you in identifying a turning point zone.

As stated, sure enough the break over the downtrend line ended up being a head fake and away we went to a retest of the lows. What we want you to key in on with these lows is the Relative Strength Indicator (RSI) above the chart. Notice how when the RSI pegs the the extreme oversold levels (Green Circles) it tends to mark an in the zone for a turn? In this case down to up.

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A Huge Warning Sign

2013-04-01T19:04:00.003-07:00

A few weeks ago, I discussed how the Aussie-Yen would be able to offer warnings signs for the S&P 500 before it would start to correct. It is quite impressive that both of them are highly correlated; it is a very useful phenomenon. What is even more special is that this correlation is still working in this QE3-driven market. Right now the Aussie-Yen is giving some huge warnings signs by making lower highs, while the US Markets are make higher highs. What usually happens is the US markets will likely correct (refer to the chart below to see past signals as well as the current divergence between the two). Despite a possible upcoming correction, I still believe the markets will make higher highs after this correction, as long as there is QE3.

Why Financials and Google Are Lagging

2013-03-31T09:50:00.004-07:00

The following is an excerpt of All About Trends Premium newsletter, sent every day. If you would like to sign up for a free 15 day trial click here.
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Well now that we've got that out of the way

Get what out of the way you ask?

Breakout into new all time highs in the S&P 500 that is. We're not really excited about this breakout errr eek into a new high rather as it took place into a holiday and into quarter end window dressing. But it is what it is. Don't forget to be on the lookout for a shake and bake shake out high here folks. If that's going to happen, it's going to happen soon.

We've spent a lot of time the past few days looking at tons of stocks and you know what? One would think with a breakout into new all time highs in the indexes we'd be seeing a lot of names set up on the long side but we aren't -- other than what we've already presented to you. What we do see are a lot of charts that look like this:

JNJ

GIS

This is where the bulk of the gains have came from last quarter. See the theme here? Consumer staples. These are DEFENSIVE ISSUES. Typically when defensive "people still gotta eat" issues start to lead it says something about what big mutual funds and money managers are thinking down the road.

Now a lot of you when you look at these may say these are great shorts coming soon. We get that BUT if the market sees bad times ahead the big "long only have to stay invested money" looks for a safe port. They may not be looking for returns out of these going forward, just a safe port. So we wouldn't think about shorting them anytime soon. It also may be saying batten down the hatches we might be in for some rough seas soon.

We've said it time and time again that we do not chase stocks. If we don't buy the extended stocks above then when do we buy? We buy stocks that are in uptrends that are pulling back off highs (POH) and you know what? We see very little of that outside of what's on our watch list for the time being. A healthy pullback though? We'll then see a lot set up so stay tuned. In the meantime these two are the best looking on our list currently.

GOOG

Look at JNJ and KRO etc. then compare those to GOOG and C . Big difference right? Call it a tale of two tapes. See any low risk entry points in JNJ, KRO, K and GIS? Us neither. That's what's been going on, the extended get more extended -- all right into quarter end.

If you subscribe to the theory that money stays in the markets but rotates around then what does that say about JNJ, KRO, K and anything else that's been on a tear and extended or has gotten marked up into quarter end? At the least it means you are late to the party. While these issues may just track sideways from here as big ocean tankers look for a safe port. Money is still going to rotate and look for a home.

So where is money going to rotate to? It's going to go somewhere. It always does,maybe the financials that have lagged of late? (Citigroup and the like?) Tech? (GOOG). Honestly? We don't know and neither does anyone else, all we know is from a technical perspective those two stocks look primed for a move higher.

Let's not forget about tape painting here either because as we've seen the market has a way of gravitating to names that are able to keep the drive alive on the surface, just look at the DOW's eeking into a new high Thursday. IBM was up 2.40 points which Thursday accounted for about 20 some points of the 52 points -- yep, almost half the indexes move came from one heavily weighted stock.

That's part of why we like GOOG here. It makes up 8% of NDX 100 index, it's in a clearly defined uptrend, it's pulling back off highs to trend channel support and lastquarter tech lagged. All of those are good reasons for why we are looking at it especially with it making up 8% of the NDX 100 index. What that part really means is if they want to keep the index afloat or make it move all they have to do is pop that stock, not to mention it has no topping pattern in place either which is another good thing. That goes for a lot of financials too by the way.

And finally...

There was a lot of talk last week about how Uncle Ben and his wild rice gang have got your back and we'll never go down again (be careful about forming an opinion on that folks because that's called complacency). We've touched upon that in the form of the markets can still go into corrections too you know so we'll spare you the repeat of that conversation. BUT we will say though that even if he does have your back the extended are still extended regardless. Much like the old adage of last cycles leaders are next cycles laggards the same can be applied to this past quarter -- last quarter's leaders next quarter's laggards? We'll find out in the next two weeks.

Let's also not forget about seasonality with the best time being November throughApril and the worst time April through October. So that's an issue that is going to be coming to the forefront too you know. No matter though as we are opportunists around here and that means both sides of the market. So you see we actually love corrections because it's an opportunity.

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Markets Are Promised Higher Highs Despite Possible Correction

2013-03-24T14:06:00.000-07:00

The Ratio Adjusted Summation Index is the best tool that I have found for measuring the amount of liquidity in the market. When there is a great deal of liquidity, that means prices go up, no matter what the underlying fundamental state the economy is in. The Ratio Adjusted Summation Index (shown below) is at incredibly high levels due to the effects of QE3. I have circled an odd pattern behavior on the chart where the $NYSI forms nearly a straight line; this is clearly the effects of the Fed pumping money into the markets.

The Ratio Adjusted Summation Index is well above the +500 threshold, meaning the long-term outlook of the market is very bullish. When the market does enter a correction phase (I am noticing some big warnings signs in the charts I look at), this indicator is guaranteeing higher highs after that correction. However, if QE3 ends, I would not trust this indicator. This indicator correctly forecasted the higher highs the NYSE made in December, after a nasty November. This indicator has been spot-on since the uptrend of June 4th. In summary, this indicator is saying that in the next few months the markets will be higher, but I would avoid its bullish message if QE3 ends.

OPEX Makes The Market Unpredictable

2013-03-15T14:40:00.000-07:00

The following is an excerpt of All About Trends Premium newsletter, sent every day. If you would like to sign up for a free 15 day trial click here.

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Yesterday the DOW was up about 83 points at the close. Care to guess where a big part of that came from? You got it, a name that makes up 13% of the index -- IBM. IBM was up to 5 points and that one name accounted for the bulk of the gains.

Back out IBM yesterday and the DOW wasn't up anywhere near 83 points (sorry CNBC to pop your balloon but that is the reality of it).

We've talked numerous times how Wall Street uses names that have the biggest percentage impact on the indexes to prop the market to give the impression everything is fine and the drive is alive. It's called PAINTING THE TAPE. Under the surface a lot of growth names were note moving and there was a lot of jello moving on the plate.

We bring this up today because the NASDAQ is down some 12 points as we post. Not all that big to downside BUT AAPL is up like 9 points and due to it's heavy weighting (13% of NASDAQ), it's masking the weakness making it less than what it really is.

Keep in mind on one hand Wall Street has a vested interest in keeping you in the game (it's called management fees). On the other hand under the surface it likes to mess with you while you are looking at just the headline numbers.

Sometimes this "painting the tape" (giving the impression everything is fine) is used to allow those with large positions to sell some peanuts without you noticing.

This is how negative RS divergence shows up on the charts -- move a few key names while under the surface distribution is taking place.

As far as AAPL goes? Let's take a look at it from a daily chart perspective and then below that from a weekly chart perspective.

As you can clearly see, on the weekly we've laid out a few blue lines that could act as support. For now, we'll watch this name. A retest of the blue line lows in the daily chart may spark our interest in going long this name for a trade.

ALWAYS ALLOW STOCKS TO COME TO YOU!

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Using Mental Support & Resistance to Trade $GOOG and $VMW

2013-03-14T15:18:00.000-07:00

By Investlite

Mental supports are almost always round numbers, $1, $5, $10, $50, and $100 increments depending on the price of the stock. When day trading, mental resistance/support can be a huge edge. When a stock breaks through a mental support it usually rallies. When it breaks mental support, it usually does so in a big way. This was particularly useful today in trading $VMW. In this 5 minute chart the mental resistance points of $84 and $85 are drawn. Notice the firm rejection on the first attempt to cross through $84. It then regrouped and shot through a couple of hours later, never looking back. At the time this was written $VMW had been thoroughly rejected at $85 as well, but was regrouping to spring through $85.

Another interesting way to look at mental support is in comparison with Fibonacci retracements. In this daily $GOOG chart we can see the Fibonacci retracements that worked as support and resistance, as they should have. But as you can also tell, mental supports overrode Fibonacci in a couple of areas. The first is the $750 area. When $GOOG broke down after a terrible earnings report the 38.2% fib line didn't act as support/resistance, the mental support of $650 did. This is also observed at $775. The Fibonacci sequence is found throughout the entire universe and exceptions are rare. Mental support and resistance areas are one of those rare exceptions.

This Chart May Tell Us When A Correction Is Coming

2013-03-12T18:23:00.003-07:00

The US Markets have been manipulated by the Fed with essentially endless amounts of money pumped in the market. As a result, a lot of warning signals and negative divergences that have mattered in the past when it came to the Market no longer matter. Fortunately, I believe the Aussie/Yen (shown below), is still a reliable indicator of what the US Markets will do in the future. As, others signals such as the Euro, and the US Dollar are not correlating as they used to with the US Market, the Aussie/Yen is continually working. For some reason, the Aussie/Yen is highly correlated with the S&P 500.

The chart below shows the Aussie/Yen and the S&P 500; the interesting thing about this chart is when the Aussie/Yen and S&P 500 trend in different directions, the Aussie/Yen direction almost always is the direction the US Market quickly correct to. I have highlighted countless times (shown with red lines), when there is a divergent top the S&P 500 ends up following the Aussie/Yen's direction. In the last 6 months, the Aussie/Yen has correctly called the price action in the US Market. During the Fiscal Cliff drama the Aussie/Yen continued to break to new highs, and soon after congress got its act together the US Market followed. In late February the Aussie/Yen was making a lower low, while the S&P 500 was making a higher high. The Aussie/Yen's direction was correct, and the S&P 500, in a hurry, quickly followed. Right now, both are making new highs, so the Aussie/Yen chart is not giving us any warning signs, if the last few years are true, I believe this chart will tell us when the US Markets will have a significant correction (minus the Fed pulling the plug on QE3). Remember, this one of the very fwe correlations/indicators still working, since QE3 has diluted the markets.

How To Profit From The Pullback Off Lows Pattern

2013-03-10T13:22:00.000-07:00

The following is an excerpt of All About Trends Free newsletter, sent every week. If you are interested in signing up, click here to fill out the form, to receive a special sign up link. If you previously signed up a while back, re-sign up using the form below, as Chart Learning members receive a few bonuses.

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What is the Pullback Off Lows pattern? Simple, it's when a stock has fallen and made a temporary low, then rises off that low and rallies back to an area of resistance (formerly support). Why does this matter? Because it allows you to short leading stocks at low-risk, alternative entry points vs. chasing a stock that may be starting a new downtrend.Why are we talking about shorting stocks when the indexes are at new all-time highs?

While the indexes just keep hugging trend channel resistance while being significantly overbought, at some point a time will come where two or three weeks ofgains will be wiped out from just three to four days of a pullback. We've seen it all too many times before and we'll see it again. When that occurs, we want to be well positioned to profit from it.

Trend Channel Resistance IS Resistance.

In addition, when looking at individual stocks, we see more short-sell set-ups than we do long side set-ups. Simple chart pattern recognition is how the market talks to us and how we create our trading plan each week and month.

The action in TRMB this week is a great example:

A classic Pullback Off Lows set-up -- after making a short-term low, TRMB has risen back to an area of resistance as shown by the red line. Notice too how it's short-term overbought as shown by the red circle in the stohcastics. A downside break below the pink line is what we need to see to initiate a short-sell trade.

In addition to TRMB, we have many other short-sell trades on the watch list for our paying subscribers. Sign up for our free or premium: stock market newsletter -- we have a two-month special for just $10/month.

Why Apple May Bounce

2013-03-04T16:05:00.002-08:00

Apple is down nearly 40% from its highs, as the stock is in a severe downtrend, that I think is due for a short term bounce. The left hand chart below, shows how oversold $AAPL currently is. In the chart I have attached Bollinger Bands; every time Apple traded below its lower Bollinger Band the stock bounced (as highlighted by the red arrows). When a stock is below the lower Bollinger Band it is an oversold signal (a pretty reliable indicator). Right now Apple is trading below its lower Bollinger Band, as history has shown, when this happens Apple usually bounces. On top of this oversold situation, Apple is finally reaching a good area of support highlighted by the chart on the right hand-side. Today, Apple finally filled in the gap it left over a year ago. Usually gap fills can lead to brief reversal. Based on these charts and some proprietary analysis I believe Apple will bounce soon, however as you can see from the right hand side chart there is still downside risk as Apple can go lower, as support isn't' exactly clear, due to Apple's parabolic move last year.