Ever since I finished my little piece of VB.net code that searches for stocks that are near their TD Sequential buy or sell points I’ve been amazed by its effectiveness. The chart below is just another example of it giving the absolute perfect entry point, this time for the Gold ETF (GLD). I must admit, it would have taken some guts to buy it on the exact completion of the countdown.
I’m a buyer here and plan on picking up both IBD type growth/momentum stocks and stocks that are at low risk entry points. For the later, I use TD Sequential.
The three chart below are all Nasdaq 100 members that are at or very near their TD Sequential buy points. I would only buy these as a trade.
On an interesting note, Credit Suisse issued an “outperform” rating on 9/19/07. I wonder if the analyst uses TD Sequential signals also?
Looks like it was a “throw a dart” type of day, but my longs did pretty well. Sorry for the lack of posts recently but I had my friends in town for my bachelor party. (I’m still trying to recover.)
The retailers have been getting hammered. Stocks like Chicos and the like can’t seem to find a bottom, which is why I’m amazed that Buckle Inc is still doing ok. I hate this store. They used to sell some cool stuff, but now it seems they only want to sell to the clubbing disco-biscuit taking type. It looks to me that BKE is near the top here and would present a low-risk short. It also seems to be forming the right side of a head and shoulders pattern. Notice how there is resistance at 36.50, a breakout above it, and then a failure. The stock is trying to get back above that same resistance level but seems to be losing steam.
I’m going to short it on the next bounce.
Something I think that is interesting is that the S&P looks like a retest of the lows would coincide with a completion of the TD Sequential countdown. We will have to watch this closely. If it fails, look for a move down to the lows of last summer.
Sometimes it can be easy to forget about the time component of basing patterns. A good example was the sharp pullback of SNCR last month. Naively, one might assume that because the price pattern of SNCR resembled a cup with handle, its basing pattern must also be considered a cup with handle. In reality, however, SNCR met none of the strict criteria defined by William O’Neil, most notably of which was that its basing time frame was much too short.
While I understand that many people seem to have many different definitions of the cup with handle, if we are to use the definition of the pattern’s discoverer, William O’Neil, there can be little argument about whether or not SNCR was actually forming a cup with handle. Here are some of the cup with handle requirements from O’Neil’s “How to Make Money in Stocks”.
1. The cup pattern can be as long as 65 weeks, but must be a minimum of 7 weeks.
In the weekly chart (shown above), SNCR has only a 3 week cup formation.
2. The bottom of the cup should be rounded and give the appearance of a “U” rather than a very narrow “V”. The reason given is that “this characteristic allows the stock time to proceed through a needed natural correction with two or three final little weak spells around the lows of the cup. The “U” area is important because it scares out or wears out the remaining weak holders and takes other speculators’ attention away from the stock.” I think it is pretty obvious that SNCR is more V-like than U-like.
3. Volume should dry up at the lows of the pattern. The lowest point of the V pattern in the daily chart of SNCR corresponds to the highest volume spike of the entire pattern, so the criterion fails as well.
I have been watching SNCR myself, but given that the recovery was much too quick, I have been waiting for another pullback to retest the lows on lighter volume. Such price action would undoubtedly form a double-bottom formation, which is another excellent basing pattern.
While reading some old interviews I came across the following quote from Paul Tudor Jones that made me smile and feel that I wasn’t alone.
“I think the financial community, particularly Wall Street, was dealt a life-threatening blow on October 19, but they are in shock and don’t realize it.
Everything gets destroyed a hundred times faster than it is built up. It takes one day to tear down something that might have taken ten years to build. If the economy starts to go with the kind of leverage that is in it, it will deteriorate so fast that people’s heads will spin. I hate to believe it, but in my gut that is what I think is going to happen.
I know from study history that credit eventually kills all great societies. We have essentially taken out our American Express card and said we are going to have a great time. Reagan made sure that the economy would be great during his term in office by borrowing our way into prosperity. We borrowed against the future, and soon we will have to pay.”
The moral of the story is that the USA did face a recession but we made it through without another great depression. Our great society wasn’t killed by its excesses.
I find it interesting that Jones was worried about the use of leverage in 1987. Given the huge amounts of leverage used in today’s markets, I wonder what he thinks now? He probably is quite bearish, but as he learned then, times will get tough but somehow we make it through.
Wow, NCI made a nice showing on an ugly day. A couple of days ago I posted NCI as a TD Sequential play. I didn’t buy any because of the underlying fundamental story about commercial construction and also because earnings were out today.
It just goes to show that technicals can trump fundamentals on the short time scale.
I was at Wrigley tonight watching the Dodgers beat the Cubs. It was my first visit since I moved to Chicago. Great place to see a game, but I was less than impressed with the baseball knowledge of the fans.
Here is a TD Sequential countdown, with perfection, that I will step into tomorrow. The price is near a TDST support line and the upper line gives me my price target.
Although bearish, I just keep getting the feeling that everyone is a bear right now and I’m not feeling very comfortable with that. What is it that they say?
“The market tries to take the most money from the greatest number of people in the shortest amount of time.”
My blog is worth $10,726.26.
How much is your blog worth?
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