Technical Analysis | Stock Market Timing Signals | Top Stock Picks

Stocks moved sharply higher today as investors and traders sought to renew this rally.  In anticipation of IBM’s earnings announcement after the market close, stock prices rose almost 150 points on the broad market, or about 1.29%.  The last time this happened, traders were reacting to an Intel announcement of higher profits – which actually occurred.  The following day the market moved sharply lower.

However, IBM did report increased earnings after the market and in contrast with Intel, pointed to more confidence in future business levels.  So we’ll have to wait out the market reaction as trading resumes tomorrow.

A technical analysis of the daily chart shows a recovery in prices back to the highs for the year.  This move recovers the sharp loss of Friday’s trading.  Unfortunately, today’s trading volume was lower than last Friday’s and actually lower than every trading day last week with exception of the down days.  As a matter of fact, trading volume on the up-days has generally been trending lower since the year started with the rally on the first trading day of the year.  This is generally not a good sign for price growth strength.

The move up today put prices above the PSAR indicator, a good sign, but I’ll reserve judgment until prices break-out above the highs of this consolidation.  Just because prices have moved above the PSAR doesn’t guarantee they’ll continue in that direction.

On the 30 minute chart prices jumped up right from the opening bell.  Prices continued up with a small pullback before lunch.  Prices flattened a little during lunch then moved up some more with the last hour of trading creating a close at the highs of the day.  This is generally a good sign for carrying momentum into tomorrows trading.

Trading Strategy:

The market looks poised to renew this rally.  However, action has been extremely choppy.  You need to be extremely careful of whipsaw trades in this type of trading environment.  There is still a possibility that this consolidation may be creating a reversal area.

On the other hand, a solid break to the upside into new highs for the year and a strong close above the highs could renew the rally.

For tomorrow you should consider new long positions from our selection of top stock picks only if all three major market indexes are:

• Above the high made in the first 30 minutes of trading
• Moving up after 10am market time
• Above a price level of 11755 on our market charts

Technical Analysis, Market Timing, and Top Stock Pick posts are free on this blog but are delayed a few days. 

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View information on the model stock portfolio and how it grew by over 170% over the same time period that a buy-and-hold S&P 500 portfolio lost 14%.  No margin, options, penny stocks, commodities, or other high risk vehicles were used – just two well respected ETF stocks.

Get free, no obligation access to the real-time stock charts used in these posts.

View our free market timing signals ,  stock trading strategies , and stock trading forum at these links.

Stocks certainly took it on the chin today right from the opening bell.  Alcoa announced disappointing earnings after the close of the market yesterday.  Alcoa’s dismal news combined with Chevron’s profit warning and the fact that prices have increased for 6 days straight through last Friday, made a correction a high probability.

The question is will this current pullback remain a consolidation at the current price levels or will a deeper correction transpire?  Technical analysis of the stock charts is not encouraging.

Yesterday, we also mentioned that the weekly chart was having difficulty building upwards momentum from the lower trend line.  In fact, with today’s price drop, the weekly chart is in danger of dropping below this trend line.  Prices are getting perilously close to dropping below the PSAR indicator which would not be good news.  The three momentum indicators are looking weak also.

On the daily chart all three price momentum indicators dropped today.  The stochastic and CCI are close to dropping below zero.  Stock prices dropped below the PSAR indicator which is a prime reason to tighten stops and take profits.  Trading volume increased.

On the 30 minute chart prices dropped sharply in the morning, dropped more until after lunch, and then recovered slightly.  Trading finished the last hour of trading with a hammer candlestick – which may add some momentum to tomorrows opening.  But remember, even if it does, one day does not make a trend.  We’ll need to watch for strength to return to at least the daily chart before considering new long positions.  And this assumes the weekly chart remains positive, and that doesn’t look good right now.

Trading Strategy:

Technical Analysis, Market Timing, and Top Stock Pick posts are free on this blog but are delayed a few days. 

For a $1 trial of timely market timing updates and top stock picks emails sent to you after the close of the stock market on each trading day please visit our subscription page.

View information on the model stock portfolio and how it grew by over 170% over the same time period that a buy-and-hold S&P 500 portfolio lost 14%.  No margin, options, penny stocks, commodities, or other high risk vehicles were used – just two well respected ETF stocks.

Get free, no obligation access to the real-time stock charts used in these posts.

View our free market timing signals ,  stock trading strategies , and stock trading forum at these links.

Wall Street makes it 5 days in a row for positive price growth with the last hour of the weeks trading pushing broad market stock prices up over 300 points for the week. 

If you focus on the Dow Industrial 30 average or even the S&P 500 you’ll see slightly different results.  This is the main reason why we focus on the Wilshire 5000, it’s the broadest measure of the market widely available and is frequently the best indicator of market internals.

A surprisingly weak government jobs report early this morning kept traders on edge all day.  Just the reality that a disappointing jobs report didn’t result in the devastating loss is good sign for future stock price increases.  Although a consolidation or pullback is inevitable at some point, we’ll take all the gains we can get thank you.  With effective technical analysis and market timing we’ll be ready to jump off and pocket our gains when the time is right.

On the monthly chart prices are getting close to the overhead resistance level of 12,000, even though we have 500 points to go.  The monthly stochastic, CCI and MACD are still showing increasing upward momentum.  Although January is far from in the history books it can be useful to be aware of what is happening on the longer term.

On the weekly chart the CCI and the stochastic indicators are continuing their upward path.  The MACD looks comatose but if you reduce the chart length to anything less than 6 months it is clear that the MACD is gaining upward momentum. 

The stock price increase for the week created a solid bounce from the lower channel trend line and has moved the broad market solidly above the highs of the late 2009 consolidation period.  The upper channel trend line doesn’t really come into play until the 12,500 level.  But as mentioned above, we really should watch for some resistance as we approach 12,000.

Trading volume for the week was not as high as we would like to see for this much upward price action, so we’ll keep that in perspective for market timing and trading strategy suggestions.

On the daily chart this week’s price action is clear.  Wednesday was really the only indecision day.  Tuesday, Thursday, and today’s trading all created bottoming tails.

The 30 minute chart shows the initial fall during the opening of the market due to the concern over the jobs report.  Prices quickly recovered to just below yesterdays close, then spent most of the day below yesterdays close until the last hour of trading.

The last hour of trading was really where all the action was today.  Prices started breaking out late in the day and then the last 30 minutes was where all the gain for the day was made.  Prices finished at the high of the day, a good sign and may provide some more upward momentum for next week. 

Although I certainly wouldn’t expect another 5 days of gains, a consolidation or pullback at this level should not derail long positions taken in well chosen stocks.

Trading Strategy:

Traders should continue the strategy of new long positions in up trending stocks currently in a consolidation or pullback on decreasing volume.  The best market conditions to take on new long positions are in a rising market.

Technical Analysis, Market Timing, and Top Stock Pick posts are free on this blog but are delayed a few days. 

For a $1 trial of timely market timing updates and top stock picks emails sent to you after the close of the stock market on each trading day please visit our subscription page.

View information on the model stock portfolio and how it grew by over 170% over the same time period that a buy-and-hold S&P 500 portfolio lost 14%.  No margin, options, penny stocks, commodities, or other high risk vehicles were used – just two well respected ETF stocks.

Get free, no obligation access to the real-time stock charts used in these posts.

View our free market timing signals ,  stock trading strategies , and stock trading forum at these links.

This article is primarily for subscribers to the top stock picks email and will explain the criteria for the selection of stocks and how to trade them.

The list of stocks provided in the top stock picks email has been filtered for specific characteristics from the entire list of market traded stocks.  Besides the specific criteria, the top stock pick email always contains selections that are appropriate for the current market environment. 

The current market environment is established via technical analysis and market timing signals.  This information is also available on a daily basis via the Daily Market Update emails.  View subscription information (and get a 30 day trial for just $1) here: Subscriptions.

For example, if the market timing strategy is bullish then the top stock picks email will contain bullish selections.  If the market environment is bearish the top stock pick email will contain bearish selections.

The following paragraphs only address a bullish market environment.  For bearish market conditions change the strategy to opposite direction.  For example, use prior highs for stops vs. prior lows.

Here is the selection criteria for the stocks provided in the top stock pick email:

First, these stocks are currently in persistent uptrends.  This is primarily demonstrated by the 20 day moving average being above the 40 day moving average and they are moving up fairly close to parallel.  In some cases the moving averages are seperated by such a constant space that the two moving averages look like railroad tracks.

Second, these stocks are making higher highs and higher lows and have in fact made a recent new 30 day high.

Third, from their recent high these stocks have pulled back, frequently on lower volume, to either their support level of the prior high or the 20 or 40 day moving averages.

Fourth, the CCI (5) momentum indicator has recently been below the -100 level during the pullback period indicating that the stock can be considered undersold to a fairly high degree.

These stocks present a fairly high probability of creating a profit if purchased in the right market environment, at the right moment, and with the correct exit strategy. 

This selection criterion is designed for the more active trader and any positions taken in stocks from this list are usually held from 2 to 5 days.  Sometimes more than 5 days if the stock moves sharply in your favor.  Rarely less than 2 days. 

Being an active trader doesn’t mean that you will have to watch your position during market hours.  On the contrary, you will likely do better if your analysis is completed when the market is closed.  Then let your broker exercise your orders automatically. Follow the strategy below, place your orders after the market has closed and let the system work for you.

Here is a suggested trading strategy for these stocks:

The basic strategy is to purchase these stocks the moment they move above yesterday’s high price.  The smaller the trading range during yesterday’s market, the more profitable your trade has the potential to be.  I’ll explain why in a minute.

Here are some options on timing your trade, you can either

• For stocks that you would be interested in buying, create an alert for a move above yesterdays high that would be sent to you during market hours.   Place an order for your trade when you get the alert, followed immediately with a stop order at your exit price.
• Create an order before the market opens that will be triggered if the price moves above yesterdays high and will also place a stop at the required point if the purchase is made (talk to your broker if it is not clear to you how to set this up).

Determine your stop by subtracting 5 or 10 cents from yesterdays low or today’s low (the day you enter the trade) – whichever is lower.  This is why the size of yesterdays trading range can improve the profitability of a trade.  If yesterdays range is small then your position exit stop will be much closer to your purchase price than if the trading range is large.  If you do get stopped out your loss will be smaller.

Leave the first stop in place for two trading days including the day you place your order.  So the first time you modify your stop would be on the third day of the position – unless stopped out before then.

Every day after the second day you have been in the postion, move your stop up to 5 or 10 cents below the prior day’s low until the position is stopped out automatically for you.

One last suggestion, but this could be the most important one.  Do not watch your positions during market hours.  Watching a position during market hours turns you into a day-trader.  That can be ok if you have an education and training in day trading, but for most of us – including me – watching a position will lead to emotional decisions that will usually end up costing profits, losses, or both.

If this strategy is new to you then please trade on paper before risking real funds to the market.  Visit the links on the technical analysis web-site for a great paper-trading application that uses real market data.

The stock market achieved another modest gain today, making today the fifth straight session of price increases – although all of them on lower volume due to the holidays.

This is also the time of year when a lot of effort is expended on advertising predictions on where the market will be this time next year, what the interest rate will be, who will be employed & who won’t, 10 stocks you just have to own, 10 stocks you should sell now, etc, etc.  After a while – like 5 or 10 seconds – it gets kind of tiresome.  

The truth is that very few predictions will be right or even right enough for you to profit from.  Most of their predictions will be as off the mark as our government prognosticators when they predicted a globally catastrophic swine flu pandemic.  

That prediction was only designed – from what I’ve observed – to create sufficient panic to ensure the transfer of the most amount of money from our pockets to the drug companies’ pockets.  The phrase “just follow the money”  certainly comes to mind here doesn’t it?

So be careful about who you listen to.  In the meantime, we’ll continue to react to what the market “does” rather than what the talking heads “think” it will do, or “should” do. 

 It’s turning out to be a much better strategy.  Check out the results of the model portfolio which we will close out this year and start tracking each year separately starting in 2010.

From 8/16/06 through the last sell transaction on 11/13/09, the market timing portfolio is up 170% while a buy & hold portfolio during the same time period was down 14%.  Not bad for trading just two stocks!

Let’s open the stock charts for some technical analysis and market timing insights.

As mentioned above the market eked out a small gain today.  On the weekly chart barely anything moved so there isn’t much to conclude from this time frame.

On the daily chart the story is about the same.  However, the daily chart is starting to look a little top-heavy to me.  The CCI and the stochastic indicator is starting to roll over which could point to some rough days ahead. 

No-one can know ahead of time how high the MACD will go into bullish territory, but once it moves across the zero line it frequently indicates that about ½ of the current move may be over.  So caution is certainly warranted for new positions.  At this point a return of prices to test the break-out at around the 11,250 level cannot be ruled out and may be fairly likely.

On the 30 minute chart prices once again bolted out of the gate at the open but left a bearish topping tail candlestick.  The bearishness of that topping tail lasted most of the trading day except for the last hour of trading when prices managed to move modestly above yesterdays close.

This last hour of trading also moved prices above the PSAR indicator and the CCI, MACD, and stochastic indicators to a bullish looking position.

Trading Strategy:

If the last hour of today’s trading can help influence tomorrow, then tomorrow may be fairly strong.  But nothing is certain and caution is still the watchword in this market.

Prudent investors should consider new long positions in markets that are going up.  Prudent investors should stay on the sidelines in markets that remain flat.

Aggressive investors should consider playing the market to the upside.

See our top stock picks email for bullish candidates.

Santa Claus certainly seems to have visited Wall Street this week as the market delivered a steady stream of higher prices and continued to gain upward momentum during this shortened trading week. The weekly gain for the week was 266 points or almost 2.5%.  For the month so far the market has gained almost 4% in value.

Durable goods orders rose by a scant 0.2% in November, with a massive drop in aircraft sales as the major reason why the increase was so low.  Without transportation, durable goods orders would have risen 2%.  The National Association of Realtors reported that November existing sales rose while new home sales fell.  Personal spending & income rose in November along with consumer sentiment.  Jobless claims fell in the most recent report.

Can this rally continue? 

Next week is also a shortened trading week so caution is still advised.  But traders should be considering new long positions in leading equities which we provide every day in our top stock picks email.  Let’s review the stock charts for more technical analysis and market timing insights.

As mentioned above for the month – even though there are still a few days trading left in December – the broad market has added almost 4% to the value of stock prices.  The CCI indicator is kind of flat, but is in bullish territory of over 100.  Both the MACD and stochastic are showing increasing upward momentum.  Prices appear headed towards the next overhead resistance level of 12,000, but there may be some bumps along the way that we’ll need to navigate around.

On the weekly chart, stock prices have added 2.37% as the market moved up as expected from the support level between the 11,000 and 11,250 mark.  The MACD is still flat, but if this flat period turns out to be a consolidation then more price increases can be expected.  The stochastic and CCI indicators are both heading up, indicating a good possibility of prices continuing up in the weeks ahead.  Trading volume is down although this would be expected for the shortened holiday hours this week.

The price increases for each day during the week is clearly shown on the daily price chart.  All three of the momentum indicators, the CCI, MACD, and stochastic are reflecting increasing upward momentum.  As with the weekly chart, trading volume was extremely low for each day of the week which may be adding increased upward volatility, so trade with caution.

The 30 minute chart for Thursday was extremely bullish.  Prices jumped out of the gate for the 4^th day in a row, continued up at 10am (which is normally a reversal time for morning action), remained flat for the majority of the day, then the last hour of trading saw another increase in prices.

Trading Strategy:

Stocks moved higher again today for the fourth day in a row, shrugging off conflicting economic reports.  The Dow was flat, but the broader market showed a solid gain of almost 40 points by the close of trading.

Stocks slid mid-morning as news regarding sales of new homes fell in November.  A separate report showed personal incomes and spending both rose, but not as much as expected.  A survey of consumer sentiment hit a 3-month high.

The market regained lost ground in the afternoon as a rally in the oil market boosted share prices of industrial companies and energy producers.

Let’s examine the stock charts for additional technical analysis and market timing insights.

The weekly stock chart is moving up nicely from 3 areas of support.  Prices are bouncing off the 11,250 support level, the lower channel trend line, and the 20 week moving average.  This bullish aspect is of course tempered somewhat by the slow trade of this holiday shortened week of trading.

The MACD indicator is still comatose, while the CCI and the stochastic indicators are showing some increasing momentum.  Frequently the MACD is delayed somewhat from showing an increase in momentum when an up move starts.  Let’s hope this is the case with the weekly MACD.

On the daily chart prices have created a new high at the 11,451 price level, 200 points above the 11,250 support level.  The CCI and the stochastic turned positive earlier in the week while the MACD is playing catch-up.

On the 30 minute chart you can clearly see the pullback when the new housing report was issued at about 10 am market time.  The market pulled back to below even and looked like a bearish move was going to take over.  But prices moved back up through the day and then consolidated during the afternoon.

The only bullish indicator on the 30 minute chart appears to be the stochastic.  The CCI and the MACD are looking a little weak.  So it wouldn’t surprise me to see prices under pressure a little bit tomorrow in a shortened trading day.

Trading Strategy:

Caution is still the watchword in this market.

Prudent investors should consider new long positions in markets that are going up.  Prudent investors should stay on the sidelines in markets that remain flat.

Aggressive investors should consider playing the market to the upside.

See our top stock picks email for bullish candidates.  

The quadruple witching day – a quarterly event in which stock index futures and options, as well as individual stock future and options, all expire simultaneously – created increased volatility today.  In addition to the volatility, trading volume increased because of the contract unwinding taking place.

The broad market finished just about flat for the week but up approximately 70 points for the day.

So the squeeze continues.  Just when you think the market is breaking out up or down, it goes the other way.  Our cautious strategy will continue until this type of market action results in a clear direction with some momentum behind it.   

If you want more evidence of this market volatility, just check the market timing signals chart at the bottom.  In the last 3 weeks of trading the indicator have changed direction 6 times, a highly unusual event.  

Let’s take a look at the stock charts for a more detailed technical analysis and market timing insights.

On the weekly time frame, this weeks trading created a clear indecision type candlestick.  Prices finished just about where they started the week.  Because they started and finished flat, the lower channel trend line just keeps getting closer and closer to the market price levels.  This trend line also traces the direction of the 20 week moving average, the support area between 11,200 and 11,250, and the price break in late September of 2008.

The CCI indicator was up a little for the week, the MACD was flat – nothing new there – and the stochastic is flat.  What is noticeable about the weekly indicators is that prices are maintaining their level while the indicators decrease – not a great sign.  Trading volume for the week was higher than last week but that was mostly due to the increased trading volume due to the quadruple witching day mentioned above.

On the daily stock chart, the increase in trading volume is even more apparent.  Stock prices finished the day right at the upper end of the support/resistance level of 11,250.  The MACD and stochastic indicator finished up for the day but the MACD finished lower.   Prices on the daily chart also moved below the PSAR indicator so a tightening of stops and some profit taking on profitable positions may be prudent at this time.  This will protect your portfolio should the market break sharply to the downside.

The markets volatility is even clearer on the 30 minute chart.  Prices jumped out of the gate at the opening, fell back at the 10am reversal time until about lunchtime.  Late morning trading created a hammer candlestick at the lows for the day with prices climbing back into positive territory.  The last hour of trading created the bullish move to the 11,245 price level for the broad market.

Trading Strategy:

Prudent investors may want to sit this market out until a clear uptrend or downtrend develops.  If you want to take new positions use caution.

Aggressive investors and traders should play the market up or down as it develops. 

Use the expanded week-end edition of the top stock picks email for a large selection of stock picks for a variety of strategies.  

Weak global markets, a rising dollar, falling oil and gold prices, and some disappointing profit news from 3M, McDonalds, and Kroger, all contributed to a sharp drop in stock prices today.  Also in the background is a drop in consumer optimism regarding the future of the economy and President Obama’s lowest approval rating so far in his presidency.

I’ve discussed the weak technicals many times during the last 2 or 3 weeks, are we seeing the start of a meaningful trend reversal? 

Let’s take a look at the charts for an in-depth technical analysis and market timing strategy.

On the weekly stock chart I mentioned yesterday that the upward momentum was continuing to decrease.  That trend continued today.  All three indicators are moving to the bearish side with the Stochastic already significantly bearish, the MACD just starting to roll over, and the CCI dropping well below the 100 level.

My favorite indicator though, the price of the broad market itself, is still above the 11,000 level and in reality has not shown the type of downward move I would like to see on the weekly time-frame to call a solid reversal at this point.  Still, the week is young yet with only 2/5 of the trading week in the history books, stock prices could easily fall at a faster rate.  I’d expect a close below the 11,000 level will really get the bears to come out from hibernation though.

The daily chart is where you can really start to see the damage accumulating.  Prices dropped almost 110 points on the day; most of the drop came at the opening which we’ll see on the hourly chart.  Stock prices dropped below the PSAR indicator today which would normally be a sign to consider new short positions IF the weekly chart was confirming the same weakness.  So until the weekly chart and the daily chart agree, shorting this market should be left to aggressive or very active traders.  Prudent investors should remain on the sidelines.

The daily chart clearly shows the drop in stock prices from the opening bell.  Prices tried to recover through the morning hours, but gave up the ghost right before lunch, and then fell throughout the day.  Prices firmed a little in the last hour of trading which might create a bounce in tomorrow’s action.  But don’t expect any bounce to last long.

Trading Strategy:

Prudent investors should not take any new long positions.  Until the weekly trend and the daily trend agree it would be wise to sit and watch from the sidelines.  Don’t worry about missing a downward move, this market appears to be sufficiently overbought that safe profits will be made on the way down.

Aggressive and active traders should consider shorting the market with the Contra-ETF’s that are sent to subscribers of the stock picks email.  Only consider new short positions if the market is lower than the low made in the first 30 minutes of trading, moving lower, and prior to 1pm market time. 

Remember – Contra ETF’s are purchased long to take advantage of a downward move.  Prices on Contra ETF’s go up when the market goes down.