Long & Short Investment - Earn Money Manage Finance Using Technial Analysis

Video: Excellent Summary of Stock Market and Oil

2011-04-09T21:48:00.001-04:00

This is an excellent summary of technical analysis on the S&P500 and Crude Oil. I highly recommend all traders to watch this short video prior to trading the week of April 11, 2011. There should be a lot of opportunities for Option trading.

My Next Option Trading Idea - NFLX

2011-03-29T09:05:00.006-04:00

This is my next option trading strategy…

Align S&P500 1320 level with NFLX at $240 level. If NFLX is trading at or above $240 as S&P500 hits 1320 level today, then I plan to buy PUT Option for NFLX ($220 Target for May) and ride down towards $230. Sell once it reaches $230 level. When NFLX reached $240 range earlier this year, it tanked below $200. I think it will take a similar course again but this time it will not fall as steep as before. Maybe $220 level…

Keep in mind that you have to know when to exit your position if it does not work out the way you expected. I recommend selling immediately if S&P500 continues to go higher... Once it crosses $1325, I take it as a sign to exit your position even though it could be a "BULL TRAP".

UPDATED COB 3/29/11:
The way the stock market closed today near 1320 for S&P500, I think it will be a great time to short next couple of days. I was hoping that NFLX would close near $240 but it only made it to $237. I would buy PUT Option for NFLX tomorrow AM (wait until at least 9:50am or so) if the market opens slightly higher. If it opens much higher, then all bets are off... If it opens lower then I would wait for it to come back to 1320 level again before entering PUT position.

By the way, did anyone buy PUT Option for TM recently? It should continue to decline...

Video on Potential Direction of Market Last Week of March

2011-03-27T19:37:00.004-04:00

Last week, we experienced a great run higher after the disaster in Japan several weeks ago. Will the stock market run out of steam this week? Check out potential trading strategy in USO, as it may go down this week causing the stock market to continue to move higher... Would you consider PUT Option in USO this week? Check out this video and form your own opinion.

Here is my recommendation on trading Options for Monday, March 28:

Buy PUT Option for USO as there is potential for it to decline this week.
Buy CALL Options on high volume stocks such as GOOG, AAPL, NFLX.

For both of these trades, your exit strategy would be to sell Options as S&P500 reaches 1330 level.
If stock market heads lower instead of higher tomorrow, then wait to buy any Option until S&P500 reaches 1295-1300. Obviously you would buy CALLs at that level.

Two Stocks With Great Returns in 2011

2011-03-07T21:11:00.000-05:00

Two stocks that have the potential for great returns this year... Watch this video to find out which two stocks.

It also discusses target levels where you should be exiting the position. Let me know your thoughts on these two stocks and whether you have made profits later...

GOLD & SILVER are HOT Commodity

2011-03-02T20:00:00.001-05:00

MarcketClub has posted a new video on Gold today. It looks like Gold is header into $1700 per ounce by end of September. Good time to go long now... Also, check out Silver!

Video on Candlestick Pattern Stock Lesson

2011-01-27T17:15:00.000-05:00

Using MACD Indicator to Exit Stocks

2011-01-19T19:51:00.001-05:00

Can Nuance Communications Become the Next APPL?

2011-01-13T21:02:00.005-05:00

Here is an interesting company called Nuance Communications (NUAN). They provide dictation services or better known as speech recognition for automating information to other businesses and organizations such as hospitals and physicians. Their next target for Nuance Communications could possibly be mobile communications such as the iPhone and other smart phones. I would predict that NUAN could be a great long term investment.

In looking at three year chart, we can see that NUAN recently made a major breakout of its resistance level around $18.50. In nwxt year or two, I expect NUAN to continue its rally and should double or even triple current price. However in the first part of 2011, I expect this stock to be volatile with peaks and valleys. I recommend investors to do some research on NUAN. What is your price target range for NUAN by the end of 2012?

Six Month Positive Trend In BIDU, Will It Continue?

2011-01-06T21:20:00.001-05:00

Here is a quick update on BIDU. Below is a six month view of BIDU with a positive slope trend line. What do you think will happen next? Most likely scenario will be the failure in BIDU making a
breakout of this current resistance level crossing around $106 area. I would suspect that this will be the case and there will be a decline in BIDU towards below $95 once again by end of January. We will see if there will be a sell of in BIDU in upcoming weeks.

Will History Repeat for S&P 500?

2011-01-04T19:44:00.002-05:00

I noticed an interesting pattern forming in S&P 500 index. After a big gain on October 5, 2010 (point A), S&P 500 took next 21 trading days to slowly increase from about 1160 to 1200. Then,
another big gain occurred on the 22th trading day (point B). On December 1, 2010, another big gain occurred (point C) and once again it took next 21 trading days to slowly increase from 1206 to 1260. On the 22th trading day, we experienced another big gain on January 3, 2011 (point D). Point A to B is very similar in characteristics compared to point C to D. The only difference is the amount of gain (40 basis points versus 50 basis points).

If history does repeat itself, then we could see a selloff in the stock market starting late this week. What happened after point B? The stock market sold off and gave back about 40 basis points. Will same thing occur since we recently experienced point D? Will there be about 40-50 basis point decline remaining month? Only time will tell but I would guess that we could see at minimum 40-50 basis point decline in S&P 500. Expect S&P 500 to decline to 1220 range by early February.

Video Technical Analysis on S&P 500

2010-12-21T21:13:00.005-05:00

Today, we experienced a new YTD high in S&P 500 index at 1254. Where do you think the stock market is headed next especially as we start a new year? This video gives a decent scenario on one possible future direction of S&P 500.

Video on Technical Indicator: Williams %R

2010-12-08T19:30:00.001-05:00

I recently learned a new technical indicator called Williams %R. It is very interesting as it can give information on when to buy and when to sell securities. MarketClub released a video explaining how to use Williams %R to your advantage and uses Crude Oil historical chart as an example.

WATCH VIDEO HERE

From this video, it looks like it is time to sell Crude Oil as it recently reached $90 this week. It is currently between 0 and -20% level in Williams %R, which is sell zone. Conversely, -80% to -100% represents a buy zone. I would only apply Williams %R if you are short term investors.

Applying Williams %R technical indicator, I would say AAPL are in sell territory. Should we be selling AAPL for a short term gain? What are your experience in using Williams %R technical indicator?

Stock Market Rallies Again As Retails Profits

2010-12-02T21:12:00.002-05:00

As consumers spend more money after Thanksgiving, the stock market sharply rises this week expecting that the economy is getting better. Past two days, DOW jumped more than 300 points and should continue moving higher towards 11,450 range. Think about how long this rally will last and what would be a good exit strategy as you watch this video.

How to Strategize During Consolidation in the Stock Market

2010-11-29T18:36:00.010-05:00

When you take a look at past 9 or 10 trading days, the stock market has been moving up and down within 1-2% range. Right now, neither buyer nor sellers are stepping up to the plate and driving the stock market. In S&P 500 index this consolidation range is clearly set between 1175 and 1200. Within past 9 trading days, we saw S&P 500 reach 1200 range four time and 1175 four times. How long do you think this trend will continue? I’m sure there will be a breakout coming really soon. If you have been following my blog, you know I am predicting the stock market to break down below 1175. However, there is no guarantee so the best strategy would be to wait and make sure the breakout occurs before investing your money.

If S&P 500 breaks above 1200, then we will likely see 1230 range as it is the next strong resistance. Similarly, if S&P 500 breaks below 1175, then we will see 1150 or even 1130 as these are next support levels.

I found a short video on youtube on the technical analysis performed on S&P500 index. I would fast forward to 3:06 part of the video.

Lastly, as we get closer to Christmas, everyone should be aware of the “Santa Clause Rally”. Last year, there was a strong rally between December 21, 2009 – January 7, 2010. Will we experience a repeat of last year’s rally?

Other Posts:

Advanced Technical Indicators of Trend Lines

Learning Technical Analysis: Importance of Moving Averages
Importance of Support & Resistance Levels
Explaining Quantitative Easing QE2 - Must Watch Video!

Explaining Quantitative Easing QE2 - Must Watch Video!

2010-11-23T18:24:00.004-05:00

This is a nicely made video on QE2. It explains quantitative easing and how feds are using our money. Can you find any false information from this video? You won't because everything is accurate! It's very scary...

S&P 500 Between 20 and 50 Day EMA

2010-11-16T18:49:00.003-05:00

Today, I would like to take a closer look at what happened to the market specifically in S&P 500. When you apply technical analysis by examining Exponential Moving Average (EMA), there was a break in 20 day EMA and is heading quickly towards 50 EMA at 1168. My guess is that we will see S&P500 index reach 1168 sometime tomorrow. What I don’t know is whether it will make another break or lose steam and retrace back towards 20 day EMA. If S&P 500 were to break 50 day EMA as well, then look out for further sell off taking S&P 500 down all the way to 1130. I would get out of Long positions as soon as 50 day EMA is broken. However, if S&P 500 holds above 50 day EMA, then there most likely be a short rally towards 1190 range, a good opportunity to make quick short term trades (holding on to stock no more than 2-3 days).

I am looking to add more positions to FAZ at two conditions: if S&P 500 breaks 50 day EMA at 1160 range or if S&P 500 retraces to 20 day EMA at 1190 range. I am becoming more confident that there will be another sell off in the stock market where it takes S&P 500 to 1040 range once again. But if that were to happen, then it must first break 1130 and 1090 support levels.

Do you think we will see S&P 500 below 1100 mark or do you think S&P 500 will continue to rally above 1200? What is your trading strategy?

Other Posts:

Preparing For Long Opportunity in Gold

Using Downtrend Line to Trade Stock like CAGC

Advanced Technical Indicators of Trend Lines
Learning Technical Analysis: Importance of Moving Averages
Importance of Support & Resistance Levels

Preparing For Long Opportunity in Gold

2010-11-15T19:19:00.002-05:00

Have you sold your position in Gold when it was at its recent high? If you had known about “The Weekend Rule”, then you are probably out of Gold market last week after selling at its high. Since last week, we know Gold has been on decline and Adam from
MarketClub released another video on this topic. He is predicting more short-term sell off in Gold by looking at previous pattern. He points out there is also divergences in Gold, as price moves higher the MACD indicator moves the other direction.

For those who do not have position in Gold and are interested, it looks like there will be good opportunities to do so soon. I would look to take positions in GLD or GDX ETFs as the long term trend in Gold still is very strong.

Below is 3 month chart of GLD. Congratulations to those who exited at near $139. There seems to be a support just below $130 so a good entry point would be below $130. Also, the 50 day Simple Moving Average intersects this level.

There exists a similar support in GDX. Below is a 3 month chart with support at $56, which would be a nice target range for buyers. The 50 Day Simple Moving Average is near by as well.

What is your strategy in Gold both in short and long terms?

Other Posts:

Using Uptrend Line to Trade Stock like AAPL

Using Downtrend Line to Trade Stock like CAGC

Advanced Technical Indicators of Trend Lines
Learning Technical Analysis: Importance of Moving Averages
Importance of Support & Resistance Levels

How to Analyze Stocks Using Symmetrical Triangles

2010-11-10T18:27:00.003-05:00

There are three types of triangle patterns: symmetrical, ascending and descending. Symmetrical triangles are generally considered neutral, ascending triangles are bullish, and descending triangles are bearish. Today, symmetrical triangles will be discussed and will defer the other two types of triangles to future posts.

A symmetrical triangle shows two converging trend-lines: one is ascending and the other is descending. They are usually characterized by a series of higher lows and lower highs as the forces of supply and demand are nearly equally until a breaking point is reached. The best patterns are typically large and takes several months to form.

The best breakouts occur half way through the pattern, not waiting until the two trend-lines meet. Volume typically diminishes as the pattern develops because traders become more and more unsure as to the stock's future direction. Then, without warning, the stock explodes out of the pattern giving us a buy signal on the breakout.

Breakouts to the upside in general must be accompanied by a significant increase in the daily volume to confirm the breakout. Failure to accomplish this doesn't automatically render the trade as "bad," but it does raise a red flag because there is not a lot of support for higher price levels. Besides volume, I usually look for a close above the most recent high as a short term trend line break as well. If volume does not accompany the break, and if the stock fails to make a higher high within a reasonable amount of time, you should move up your stop orders to protect what profits are left.

A good example of symmetrical triangle can be seen in Packaging Corp of America (PKG). Below is a year to date chart containing the symmetrical triangle. In October, PKG was finally able to make a breakout of this symmetrical triangle. After reaching as high as $26, PKG now on the decline in an attempt to retrace back to the upper trend-line of the symmetrical triangle. My guess would be that PKG will start moving higher once the retracement is complete. A good entry point for those who are interested in investing PKG would be between $24 - $24.50 in my opinion.

Once you get the hang of these triangle patterns, you can start looking for them in stocks and invest accordingly. Has anyone have experience with triangle patterns? Feel free to share your personal lessons learned using comments below. V33GSGJWQQYG

Other Posts:

Using Uptrend Line to Trade Stock like AAPL

Using Downtrend Line to Trade Stock like CAGC

Advanced Technical Indicators of Trend Lines
Learning Technical Analysis: Importance of Moving Averages
Importance of Support & Resistance Levels

Long or Short?

2010-11-04T18:41:00.002-04:00

Now that S&P500 is near 1220 level, what should investors be expecting from the stock market? Back in Mid-October, I had posted “Follow S&P 500 Next Two Weeks” on Money Green Life as
a guest writer. I stated that S&P 500 will certainly reach as high as 1220 and there could be great opportunity for shorting the market.

If what we are currently experiencing is a repeat of past history, then the stock market could easily go through a sell off starting sometime next week. However, if this bullish market somehow continues above 1220 and bypass 1228 (this level represents 61.8% Fibonacci retracement), then we could potentially see 1400 and we could experience a true bull ride into 2011.

I predict that S&P 500 will fail to break 1228 level and thus start heading lower. Once the sell off occurs, then I expect S&P 500 to fall all the way to 1040 once again.

Next week will be pretty exciting as we will most likely find out which direction S&P 500 will be taking. I certainly hope to see a sell off so that we get another opportunity to take long positions for another ride up.

FAZ Offers Opportunity For Investors

2010-11-02T00:06:00.006-04:00

I hope everyone had a great Halloween! It was little chilly but it was fun. I was looking at several stocks yesterday while handing candies to trick or treaters and noticed something interesting in FAZ. Remember that FAZ is an investment fund that is inverse of financial index performance. As financial index moves higher, FAZ will move 300% in opposite direction.

Below is a 3 month chart of FAZ with support and resistance levels identified. For the past 2 month or so, FAZ has been in consolidation phase. I’m not completely sure when this consolidation will end but my guess is this week.

The reason why this consolidation is interesting is because I am expecting a sharp movement once the consolidation is complete. The problem is no one knows the direction of the movement. That’s is why it is important to keep an eye out on FAZ this week to see which direction it will break. Below is year to date chart. As you can see, there is a long term resistance level crossing near $16. If FAZ is to break upward, then I expect it to make a strong move towards $14-$16 area. However, if FAZ is to break downward, then I expect it to make strong move towards $11-$10 level.

I would recommend going long if and only if FAZ closes above $12.75 this week. Let’s wait and see if FAZ can break upward and start moving towards $16.

Will BIDU Produce Another 1000% Profit in Next 5 Years?

2010-10-29T00:44:00.004-04:00

Did anyone buy BIDU near $10 in early 2009 and still holding on to shares? Well, if you did then you know very well you have profited 1000% gain in less than 2 years. Long-term, I have full confidence that BIDU will continue to do extremely well as it will go much higher than today’s price level. But, how about short-term? Can it sustain its current rate of increase?

First, I would like to look at 3 month chart below. I have drawn a simple uptrend line. After some consolidation in October and retracing back to this uptrend line, BIDU jumped higher into $110 level. I have a feeling that we it may make a similar move again. There could be some more consolidation around $110 level as a center point and once it completes retracement back to the same uptrend line, BIDU could jump higher again (that is as long as BIDU does not break this uptrend line). What could happen if BIDU breaks its current uptrend line shown on the three month chart?

To answer this question, I would like to take a look at year to date chart below. I have drawn the same uptrend line from 3 month chart as well as a new uptrend line extending from beginning of this year. I would argue if BIDU was to break 3 month uptrend line, then it would fall towards this ytd uptrend line for a possible retracement (see red circle). Whether BIDU retraces to this level or not, I am confident that this company will continue to produce great results in the long run and could possible produce another 1000% in next 5 years or so. My plan is to constantly increase my shares as BIDU makes its retracements for long term investment.

Other Posts:

Using Uptrend Line to Trade Stock like AAPL

Using Downtrend Line to Trade Stock like CAGC
Importance of Support & Resistance Levels

Advanced Technical Indicators of Trend Lines

2010-10-26T00:09:00.005-04:00

Last week, I had discussed how traders can utilize even the simplest form of technical analysis to their advantage. I used examples as AAPL and CAGC to draw uptrend and downtrend lines and when to take positions in these stocks. Today, I will share two advanced technical indicators of trends to
help traders make valid trend lines.

Spacing

It is important to form any trend lines that forms suitable spacing between data points. An ideal trend line should not be too far apart or too close together. An ideal trend line is made up of evenly spaced lows or highs depending on the time frame of the chart you are looking at. Most long term trend lines touch between weeks or months, while short term trend lines touch within days of each other.

If the lows or highs are too close together, then the validity may be in question. If the lows or highs are too far apart, then the relationship between the two points may be in question. Both of these situations may not really indicate any real trend at all.

Angles & Steepness

When drawing trend lines, we must take angles and steepness into consideration. The rule of thumb is as the steepness or angle of a trend line increases, the validity of the support or resistance level decreases. A steep trend line results from a sharp advance or decline over a short period of time. The angle of a trend line created from such sharp moves is unlikely to offer a meaningful support or resistance level for very long even if it contains three valid data points. The ideal trend line angle or steepness is around 30-45 degrees.

By introducing proper spacing along with an ideal angle and steepness when creating trend lines, we can increase the validity of trend lines to our technical analysis. However, it is difficult to identify and create trend lines that meets many technical indicators of trend lines. Therefore, we must use our preference to get the most out of what presented to us.

As you will read in later posts, there are more indicators we can bring into our analysis to generate higher confidence. Volumes, Moving Averages, MACD, etc. are several other examples of technical indicators that will be discussed later.

Other Posts:

Using Uptrend Line to Trade Stock like AAPL

Using Downtrend Line to Trade Stock like CAGC

Video: Bears Take Control of Gold

2010-10-24T00:54:00.010-04:00

Adam from MarketClub has posted an excellent video on Gold and where it is headed. He discusses how you could have expected the sharp sell-off in gold by noticing the engulfing pattern several days prior to the sharp decline.

He also applies Fibonacci to predict how much gold will decline before making another possible rally. Lastly, he points out that MACD indicator has made a crossing, which is bearish for gold. I highly recommend this video if you are interested in gold.

Click Here To Watch Video

Other Posts:

Using Uptrend Line to Trade Stock like AAPL

Using Downtrend Line to Trade Stock like CAGC
Advanced Technical Indicators of Trend Lines

Using Downtrend Line to Trade Stock like CAGC

2010-10-21T18:39:00.004-04:00

Previously on Long & Short Investment, I discussed the importance of technical analysis and applied uptrend line on AAPL. Today, I will discuss another type of trend line and postpone sharing of several other advanced technical indicators of trends in the upcoming post.

A downtrend line is exactly same as an uptrend line but opposite. A downtrend line acts as resistance by connecting two or more major highs. The second high must be lower than the first one to get an downtrend line. As long as prices remain below the downtrend line, it is considered strong. An downtrend line is used to determine whether the trend will continue into future or will be broken.

Below is a YTD chart for China Agitech (CAGC) created on 10/21/10. In this example, I have drawn a downtrend line using three data points spanning almost seven months. In the general rule I pointed out in “Using Uptrend Line to Trade Stock like AAPL”, the third point is used to validate the trend. In this downtrend line, there is a third point for validity which means if this downtrend is broken, there is a higher probability that it will be significant. For long term traders, this piece of information is important. Until CAGC breaks this downtrend line, I would not recommend adding any position. However, when CAGC does break this resistance line, there will be some exciting opportunity for us to take position because there will be higher probability for CAGC could reach its previous high (see green oval).

Now let’s take a look at 3 month chart for CAGC. Notice this short term (a 2 month in duration) downtrend line also consists of three data points, which validates the trend. But what is interesting to me is today’s trading on 10/21/10. Marked by green oval, CAGC is attempting to break this two months downtrend by making a quick jump in the stock price. If CAGC closes above $12 today and stay above $12 tomorrow, then I would comfortably consider the break valid.

What would be a good trading strategy for CAGC? I would recommend to use both downtrend lines discussed in the YTD and 3 month charts. Although CAGC breaks this short term downtrend line, there will be a strong resistance line up above by 7 month downtrend line. If this break in the short term downtrend line is valid, then CAGC should reach 7 month downtrend line but should fail to break that resistance mainly due to the fact that it is a stronger resistance compared to the short term downtrend line.

Traders can make quick profit by taking position in CAGC possibly in the next 2 days and sell prior to reaching 7 month downtrend line. However, I would advise to be careful when first buying shares of CAGC because you need to make sure the break is clean before adding any position. In another words, do not buy too early because if the downtrend line does not break, then CAGC could continue its decline towards $10 level.

As you can see, it is not too difficult to apply simple technical analysis to any stock and all traders should be doing these types of analysis. I will continue to share different types of technical analysis as we move forward so make sure you make frequent visit to Long & Short Investment.

Other Posts:

Using Uptrend Line to Trade Stock like AAPL

Advanced Technical Indicators of Trend Lines

Using Uptrend Line to Trade Stocks Like AAPL

2010-10-19T18:01:00.009-04:00

I believe technical analysis is important for any trader out there and not understanding the basics could be detrimental to their success. Trend Lines are one of the most important tools used in technical analysis. It is also one of the simplest form of technical
analysis and is used for both trend identification and trend confirmation. By definition, a trend line is a straight line that connects two or more points on a stock chart. As trend line is drawn, it would be extended into the future to act as a line of support/resistance.

Obviously, there are two types of trend lines: an uptrend line and a downtrend line. An uptrend line acts as support by connecting two or more major lows. The second low must be higher than the first one to get an uptrend line. As long as prices remain above the trend line, the uptrend is considered strong. An uptrend line is used to determine whether the trend will continue into future or will be broken.

Below is a 3 month chart for AAPL created prior to the open on 10/19/10. I have drawn an uptrend line using the two points and have extended out into future by several days. I have also placed a red circle signifying potential retracement back to this uptrend line. In this example, it was easier for me to predict the retracement back to $300 level because I know in the premarket that AAPL has declined a lot. You can predict two possible direction for AAPL using this information. AAPL can either touch this uptrend line this week and possibly take off just like 11 days ago or it can break this uptrend line and continue to fall below $300.

I currently do not own AAPL shares but if I had shares, then I would use this information and place a STOP Limit order at $295 (see purple line).

Important note on Trend line: Now you know it takes two or more points to draw a trend line. However, do you know that the more points used to draw the trend line, the more valid the trend line becomes? Also, the longer the trend line in terms of time frame, the more significant a break can become. So here is the general rule in technical analysis: it takes two points to draw a trend line and the third point confirms the validity.

So, going back to our example above with AAPL, there is no strong validity to the upward trend because the third point does not exists yet and this trend is only 2 months long. Even if AAPL breaks the uptrend line, the price most likely will not fall too much below $300. This means there is potential for the STOP Limit order to execute and the price would immediately jump higher. All these information is important to consider in your strategy for trading AAPL.

My prediction for AAPL would be that it will retrace back to around $300 level and start going up again. By making this retracement, AAPL would have made the third point for validity and would extend the upward trend into 3^rd month.

Next time, I will discuss downtrend line and several other advanced technical indicators of trends.

Other Posts:
Follow S&P500 In Next Two Weeks
Using Downtrend Line to Trade Stock like CAGC
Advanced Technical Indicators of Trend Lines