Mining for Winners in Any Market

Posts Tagged ‘200 day moving average’

, , , , , , , , , , ,

Using Oscillators To Time Stock Trades

In Market Analysis on July 15, 2010 at 5:45 pm

Get a FREE 30-Day Trial of my Members-Only Premium Stock Analysis Service NOW!

Fears of far-reaching government oversight in the financial industry and weak economic data coming out of Philadelphia are contributing to today’s modest decline in the market.  Many fear that this bill will hurt the financial sector as more government oversight is required.  The bank bill implies that the government can have access to control banks when they are in a vulnerable situation.

Weak economic data from Philadelphia also disappointed analysts.  I am concerned that the same people who termed “too big to fail” and bailed out these big banks causing huge amounts of debt for future generations are designing the legislation to “prevent” it in the future.

These last few weeks I have been warning subscribers about this decline and the possibility of a major drop following the very bearish death cross.  For timely updates and specific recommendation please subscribe to my free newsletter at my website at http://goldstocktrades.com.

After a six day rally U.S. equities became quite overbought.  I use oscillators to time market entry.  Oscillators are used to identify short term market extremes.  If the trend is moving lower, I will use the oscillator to tell me when the market is overbought for a short entry point.  The recent market bounce with six straight up days gave extremely overbought readings.  This means this recent rally went too far too fast.

The indexes now have downward sloping 50 day and a flattening 200 day moving average.  Poor price volume action continues to plague this market as the rally has been on low volume which shows a lack of support from institutional investors.  The slope of the 200 day moving average turning negative will confirm the death cross and a failure to break through the 200 day and continued weakness will be another bearish confirmation.

Yesterday, those overbought conditions were signaled and it coincided with the Dow reaching the 200 day moving average.  Today’s downward reversal from the 200 day is indicating that this counter-trend rally is completing.  Traders might want to think of going short at this point as most traders who were shorting when the index broke to new lows have covered.  It is also an opportunity to move to cash if you still have long positions.

, , , , , , , , , , ,

Shorting Stocks Explained: 50 Day Crossing 200 Day Moving Average Signals Major Market Drop

In Market Analysis on July 8, 2010 at 12:41 am

These past few days as the market indices broke through the head and shoulders neckline, I have had a barrage of emails asking if it was too late to buy inverse etf’s after my original short sell recommendation on June 21st 2010 .

My response to many readers is that if it is apparent to everyone to short that is the time to cover.  It is dangerous to short when stocks are going into new lows as often time there are powerful dead cat bounces where covering takes place.

No one knows how to sell at the top or buy at the bottom.  The only person who knows that is a liar. Often at tops every chart looks bullish, earnings are fantastic and every newsletter writer is bullish with new price objectives.  Similarly at market bottoms charts look awful, stocks are experiencing losses and every newsletter writer is telling you to run for the hills.  Be aware of the obvious because when it is evident to everyone that is when you have to be contrary to the market crowd.

Last week everyone was buying puts and shorting the market when it was an obvious head and shoulders pattern with a very bearish declining neckline.  The slope of the neckline determines the bearishness of the pattern.  It is important not to short when it is obvious and breaks the neckline.  I look at key areas to short on counter rallies.  Price volume action is very poor and I expect a few more days as it rallies to the resistance trendline and 50 day moving averages for additional short sale points.

The goal of a trader is to find key areas of support to buy when the stock is moving up and specific points of resistance to sell short.  Markets don’t top or bottom in a day.  Often there are several signals to show that a market trend is changing.  During those times there are often major counter trend rallies to shakeout the weak or inexperienced short  traders who bought as the index dropped into new lows.

The cross of the 50 day and 200 day is called the cross of death for a reason quite often there is a major break to the downside over the next few weeks.

This past week as many analysts and publishers recommended to go short as the index broke the neckline of the head and shoulders pattern.  I disagreed.  I would definitely not recommend shorting into new lows but shorting at the end of a counter trend rally or where there is overhead supply where many investors want to get out.

If you are looking for possible points to go short stay tuned over the next few days as I will be sending out an alert to free subscribers.