| Technical Analysis Day Trade Setups Weekend Updates 1 |
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| Saturday, January 20, 2007 |
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Weekend Update - Day Trade Bull Flag Setups AGE, GLDN, GSTL, ICE
During a typical 5 day trading week at Trending123, I will normally come up with a handful of short term trades to enter for sudden profits. This is week 2 of our day trade setups. This week, I want to give you a handful of some stock charts to study in advance. Which will be great, because I really enjoy playing a handful of short term trades for "sudden profits". These are charts of some possible some short term trades that we will enter and play over the next two weeks. The stock market returns to its normal 5 day trading week starting January 22nd. Please read the section that defines Bull flags at the top of the page above the charts.
What defines a short term trade?
A short term trade is one that is held for less than two weeks with a possible price gain of 10%, 15% to 20%. You may use an equity or an option for these trades.
Patterns used for short term trades :
- upside breakout pattern
- bull flag pattern
This is what you need to know about each stock in order to prepare for the trade diligently before each buy trigger / entry:
1. What is the stock's ticker symbol
2. What is the stock's average daily volume
3. How far is the stock above it's EMA moving averages (i.e.: 13 EMA, 34 EMA)
4. What' is the stock's short ratio
5. How far is the stock off from it's recent highs (i.e.: -1%, -10%,-20%, etc)
6. What pattern is the stock in on the daily chart
7. What Type of Tend is the stock in (i.e.: bullish or bearish )
8. What direction is the stock in up or down?
Trading Journals - Use these to keep track and monitor your Trades
- The original Trading journal sheet: http://www.trending123.com/short-term-trades/trading_journal.htm
- If you want another trading journal format to use other than the one I issued, you can right click on the image found below and copy/paste it to your documents and print it out and use it instead.
- Long live the Organization for the Organized!
Day Trade Bull Flag Setups AGE, GLDN, GSTL, and ICE
AGEdwards, Inc. - Optionable- but not recommended
- Ticker symbol: AGE
- John's favorite Bull Flag Setup , #1 pick
- Average Daily Volume : 385,432, notice the decline in volume as it hits the 13 EMA
- price holding the 13 day EMA on the pullback
- triple moving average crossover and moving averages trading in a bullish fan
- Short Ratio = 6.6, 2nd highest short ratio out of all these picks, possible short squeeze play
- Percentage off recent high's = 2.70%
- Daily Chart Pattern = Bull flag
- Trend = Bullish
- Wave = still in a bullish wave 2 to wave 3 move upwards
- Direction = upwards
- PPO, and RSI making new highs along with price = Bullish action
- all indicators and oscillators are in a 123 bullish trend reversal
- enter trade on break of $67.37, stop $66.37, target $70.00 / +4%
- Pivot = $66.94
Golden Telecom Inc - Optionable- but not recommended
- Ticker symbol: GLDN
- Average Daily Volume : 247,179, notice the decline in volume as it hits the 13 EMA
- price pulling back off of 52 week highs to the 13 day EMA on light volume
- triple moving average crossover and moving averages trading in a bullish fan
- Short Ratio = 3.8
- Percentage off recent high's = 4.34%
- Daily Chart Pattern = Bull flag
- Trend = Bullish
- Wave = still in a bullish wave 2 to wave 3 move upwards
- Direction = upwards
- PPO has bearish divergence
- not a favorite pick due to negative divergence in PPO
- Stochastic's are bull flagging
- all indicators and oscillators are in a 123 bullish trend reversal
- enter trade once GLD takes out the previous day's highs = $51.45 or higher
- stop at a penny or 2 below the lows of previous day = $50.04 or thereabouts
- pivot = $50.64
Genco Shipping and Trading Ltd, Inc. - Not Optionable
- Ticker symbol: GSTL
- John's # 2 pick for a Bull Flag Setup ,
- Average Daily Volume : 144,708, notice the decline in volume as it hits the 13 EMA
- price pulling back off of 52 week highs to the 13 day EMA on light volume
- triple moving average crossover and moving averages trading in a bullish fan
- Short Ratio = 12.2, highest short ratio out of all these picks, possible short squeeze play
- Percentage off recent high's = 3.81%
- Daily Chart Pattern = Bull flag
- Trend = Bullish
- Wave = still in a bullish wave 2 to wave 3 move upwards
- Direction = upwards
- PPO, and RSI making new highs along with price = Bullish action
- all indicators and oscillators are in a 123 bullish trend reversal
- enter trade once GSTL takes out the previous day's highs = $30.52 or higher
- stop at a penny or 2 below the lows of previous day = $30.12 or thereabouts
- pivot = $30.32
Intercontinental Exchange Inc. - Optionable
- Ticker symbol: ICE
- John's # 3 pick for a Bull Flag Setup ,
- Average Daily Volume : 3,073,130, very liquid stock / notice the decline in volume as it hits the 13 EMA
- price pulling back off of 52 week highs to the 13 day EMA on light volume
- triple moving average crossover and moving averages trading in a bullish fan
- Short Ratio = 1.1
- Percentage off recent high's = 7.87%
- Daily Chart Pattern = Bull flag
- Trend = Bullish
- Wave = still in a bullish wave 2 to wave 3 move upwards
- Direction = upwards
- PPO, and RSI making new highs along with price = Bullish action
- all indicators and oscillators are in a 123 bullish trend reversal
- Higher prices erase bearish divergence, I think this stock could get a 10 point move in a single day
- enter trade once ICE takes out the previous day's highs = $129.00 or higher
- stop at a penny or 2 below the lows of previous day = $124.05 or thereabouts
- pivot = $126.65
See you on 1/21/2007 - Sunday Afternoon at 2pm EST for the live Seminar in the trading room regarding these setups.
Edited by Daisy
Andrea Victoria Friend aka Daisy
Editorial Assistant for Trending123.com
daisy@trending123.com
Flag (Bullish) Classic Pattern
Implication
A Flag (Bullish) is considered a bullish signal, indicating that the current uptrend may continue.
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Description
A Flag (Bullish) follows a steep, or nearly vertical rise in price, and consists of two parallel trendlines that form a rectangular flag shape. The Flag can be horizontal (as though the wind is blowing it), however it often has a slight downtrend.
The vertical uptrend, that precedes a Flag, may occur because of buyers' reactions to a favorable company earnings announcement, or a new product launch. The sharp price increase is sometimes referred to as the "flagpole" or "mast".
The rectangular flag shape is the product of what technical analysts refer to as consolidation. Consolidation occurs when the price seems to bounce between an upper and lower price limit. This might occur, for example, in the days following a positive product announcement, when the excitement is starting to subside, and fewer buyers are willing to pay the high price that was commanded just a few days before. But, at the same time, sellers are unwilling to sell below a lower support limit.
A bullish signal occurs when the price rebounds beyond the upper trendline of the Flag formation, and continues the original upward price movement. This is considered a pattern confirmation.
When speaking about Flags, technical analysts may use jargon and refer to the flag as "flying at half-mast". Visually, this reference is nothing like a flag at half-mast, such as on a day of national mourning. Instead, this term refers to the location of the flag - at the mid-point of what would otherwise be a continuous uptrend.
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Important Characteristics
Following are important characteristics for this pattern.
Trendlines
Flags are very similar to Pennants. However, with a Flag, the price trendlines tend to run parallel, whereas with a Pennant, the price trendlines tend to converge.
Volume
As the Flag develops, the volume tends to decrease. Following a positive product announcement, the price may have reached an unexpected high, and fewer buyers will be willing to buy. Interest in the stock may resume, however, as prices drop, and sellers begin to lower their price. The increased activity explains why you will often notice a sharp spike in volume at the end of a Flag.
Duration of the Pattern
Martin Pring notes in his book, Technical Analysis Explained that "Flags can form in a period as short as 5 days or as longs as 3 to 5 weeks." John J. Murphy identifies that Flags "often last no longer than one or two weeks."
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Trading Considerations
Possibility of Price Reversal
In some rare cases, the price will break against the original price movement, and create a reversal trend. The pattern reversal may be signaled during the Flag formation by a sharp increase in volume, as opposed to the more typical decrease.
Duration of the Pattern
The duration of the pattern depends on the extent of the price fluctuations (consolidation). The greater the fluctuations, the longer a pattern will take to develop.
Target Price
It is commonly held that the length of the flagpole indicates the potential price increase. When the Flag completes, the price typically jumps to replicate the height of the original flagpole, while continuing in the direction of the inbound trend.
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Criteria that Supports
Volume
Volume should diminish noticeably as the pattern forms.
A strong volume spike on the day of the pattern confirmation is a strong indicator in support of the potential for this pattern. The volume spike should be significantly above the average of the volume for the duration of the pattern. In addition, the volume over the course of the pattern should be declining on average.
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Criteria that Refutes
Duration of the Pattern
According to Martin Pring, a pattern that exceeds "4 weeks to develop should ... be treated with caution". After 4 weeks, interest in the stock is likely to decrease to point that it is unlikely to continue in a strong uptrend.
No Volume Spike on Breakout
The lack of a volume spike on the day of the pattern confirmation is an indication that this pattern may not be reliable. In addition, if the volume has remained constant, or was increasing, over the duration of the pattern, then this pattern should be considered less reliable and may actually reverse.
Long Inbound Trend
Shabacker writes that, "When a mast is long ... and it's Flag relatively small, we should naturally expect the movement to be pretty well exhausted when its indicated objective is reached." He suggests that when you observe this formation, and a price continuation occurs, it is best to use the flagpole as a "yard-stick" to indicate the level at which to "take profits, step aside, and watch for further chart developments."
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Underlying Behavior
This pattern is effectively a pause in an uptrend. The price has gotten ahead of itself with a steep rise; therefore market activity takes a break before continuing the uptrend. This pause is reflected in the decreasing trading volume. Similarly, a spike in volume marks the resumption of the uptrend.
FLAGS, PENNANTS, RECTANGLES
Stats
AGE--Favorite Bull Flag Setup (Does trade options but do not suggest it)
GLDN--(Bull flag setup and does trade options but do not suggest it)
GSTL (Bull flag setup and does not trade options this is my 2nd favorite play)
ICE (Bull flag and does trade options this is a possible option play)
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