Effective Video Technical Analysis Trade Plans Delivered Daily from AccendoTraders.com. Here is our Technical Analysis Weekend Wrap Up Trade Plan for Sunday, January 4th.
Happy New Year! As traders ride the Santa Claus rally into next week, will they receive the hard awakening of the traders coming back from their holiday. There is certainly reason to be optimistic about the short term prognosis for the major indices. For the first time since who know when, all three market have moved above the 50 Moving Average. In addition, the NASDAQ and the S&P 500 moved above the consolidation range they have been in for months. Yet, one key factor was missing from this move - Volume. We all know volume equals conviction.
So as we resume trading with the traders ready to enter the market, what will be the sentiment to start off 2009. We have the December Jobs reports looming on Friday. We also have the reality of the monthly charts reminding up we are still in a downtrend. How should we play Monday’s session?
Effective Video Technical Analysis Trade Plans Delivered Daily from AccendoTraders.com. Here is our Technical Analysis Weekend Wrap Up Trade Plan for Sunday, December 28th.
We have another holiday shortened trading week. The volume will continue to be light which can lead to volatile moves in the stock market. Still, a couple sectors did catch my eye as I prepare for tomorrow’s trading session.
Effective Video Technical Analysis Trade Plans Delivered Daily from AccendoTraders.com. Here is our Technical Analysis Weekend Wrap Up Trade Plan for Sunday, December 21st.
We have a holiday shortened trading week. The volume is sure to be light. One might take this time to refine their trading plans for 2009; however, do remember that the market was able to rise during the Thanksgiving session. There are a couple sectors that caught my eye. And a handful of stocks that I will be watching for tomorrow.
In part one in our series of learning how to trade market moving news, we learned what type of news can move the market. We shared why it was important to learn how to analyze news releases. To review - News Overrides Everything (Technical, Fundamentals, etc.) News has the ability to change the sentiment of your stock immediately. We also learned several website where we can find the news.
Now let’s look at how to gage the market’s sentiment regarding the news release. All news releases are different. Even the same report offering the same numbers back to back can bring about different reaction from the traders. Some reports offer no surprise and therefore no movement. While other reports have unexpected data and will produce a strong move. Although we have two different potential reactions to news releases, we have a common theme. The theme of the 3 R’s: Release, Reaction and Retracement. The news happens and then the market has the reaction. As a trader, you want to ride the momentum of the crowd.
This may be surprising coming from a strong advocate for technical analysis; however, I recommend that you don’t get initially caught up in the technicals. The key is to look at the pattern. Allow the market to demonstrate where sentiment is at. Before the news, the market may hesitate and form a consolidation pattern. When the news comes out, the let the market react. If there is a surprise, the movement will be strong. When the results are not surprising, usually the move may be very small.
Try and establish who is in control: buyers vs. sellers. Ask yourself:
· where is key resistance and support?
· What is happening at Resistance and Support?
· Is the price staying there, probing, or is it failing to go through it?
· Also focus on what is the prevailing trend.
· Is the weekly and daily trend in alignment with the current surge?
· Do we have a breakout?
· Was the breakout followed by a retracement?
Try to trade in the direction of trend. Has the news release changed the sentiment of the stock? We all know - The Trend is Your Friend! If the stock has made an initial move and retraced to an identified support and then resumes movement in the initial direction, the sentiment has not changed and we have a signal for a trade. If there is a short lived move and then retracement with no follow through, we have uncertainty and a trade here has a low probability for success. Do not get caught up at buying at the absolute bottom or being the first.
So for trading the news, let the move happen and trade the reaction. Let the market react and then form tradable patterns. As a part of your trade plan, you should have identified key candlestick patterns that you will use as entry signals. You may alter those signals a bit for news trades, but it is still important that you have identified what patterns you will use for news driven trades. In addition to chart patterns, you should also identify what time frame you will use for the chart patterns.
Will you use 1 minute, 5, minute, 15 minute intraday charts? I recommend you use whatever your normal time frame for regular trades. I am a firm proponent of be who you are at all times. If you use a 5 minute chart, then use it all the time. Many in the Forex world would suggest you use a 1 minute and 5 minute chart. I prefer a 5 minute and 15 minute chart. The 1 minute chart is too busy for my old eyes; however, that is a preference I have chosen. Again, these decisions should already be identified in your trade plan.
Let the news happen. I would not suggest you trade before the news trying to anticipate the more. Similarly, I would suggest that you do not trade immediately after the news have been released. To often traders fall into a pattern of chasing the trade. Let the market digest the news and form a sentiment. Then you’ll see the tradable pattern emerge.
Have you ever been in a long position that completely reversed after an earnings release?Or perhaps your trade’s bottom fell out after the FOMC Policy Statement?Or maybe you have seen your profits evaporate away after a scheduled economic data release?Finally, you anticipated a big move after a news release only to have the underlying stock make an initial surge and then fall back to the original levels or worse.Whether you are a short or long term investor, learning how market news will affect your open positions is a skill all traders should acquire.Entering or exiting a position or perhaps adjusting a stop based on news analysis is essential to maximizing your profits.
It is not only is important to have a system in place to analyze the possible future performance of a stock.However, one should also pay close attention to economic calendars, earnings calendars, etc.Any experienced trader will tell you that NEWS CHANGES EVERYTHING!News overrides even the best technicals.News will cripple the best trade plans if ignored.News trading involves the analysis of simple major economic indicators and timing positions or adjusting stops upon their release in the market.
In addition, it is also important to pay attention to the market sentiment leading up to the unveiling of the release/report.Analysts often provide “forecasted” figures and the previous released figures.Often times, it is not the actual release of the report that drives the market rather the speculation of a possible positive or negative effect. In most cases, speeches and news articles about a certain release may also drive the market more than the release; from my trading experience, the actual release has moderate impact on a certain stocks, but it is the speculation before the release is what the stock market moves the most. We’ve all heard the saying, “SELL THE NEWS!”
Since there are numerous indicators released everyday, not every release has a major impact. The following are the Top 8 market moving economic reports: Interest rate decision (speculation), Retail sales, Inflation (consumer price or producer price), Unemployment (Non-Farm Payrolls), Industrial production, Business sentiment surveys, Consumer confidence surveys, Trade balance, manufacturing sector surveys.These releases almost always have some immediate impact on a certain sectors, as they are known as the “market movers”.
In addition, you will find that analysts will release reports on a daily basis.The two that have the biggest impact are Upgrade/Downgrades and Target Raised/Cut.This is not the place to discuss the true intent of many of the upgrades/downgrades.It is just important to be aware that on any given day news may be released that can affect your trade.
Finally, you have a company’s earnings report.These reports are often loaded with a ton of data to be digested by traders.Did they meet their expectations?Did they earn enough money for the quarter?Have they raised or lowered their guidance for the remainder of the year.Were there any unknown charges that will affect future cashflow?For drug/biotech companies, you need to be aware the results of their experiments.Will the drug move on to the next stage or is it being cut.
So now that you have a foundation of what news to look for - trust me there are a lot more sector specific news releases that can affect your trade – let’s take a brief moment to talk about where to find this information.Here is a list of my favorite new sources:
Now that you know why every trader should know what news release are scheduled for release each week – New Overrides Everything – we can begin to focus on some rules for identifying trade opportunities based upon the market’s reaction to the news release.Check out Part 2 of our series on How to Trade the News to learn the rules professional use as a part of their trade plans.
