Professor’s Comments March 6, 2014
Posted by OMS at March 6th, 2014
The Dow fell 36 points yesterday, closing at 16,360. The SPX was flat, closing at 1873.81. Volume on the NYSE was light, coming in at 95 percent of its 10 day average. There were 197 new highs and only 8 new lows.
Not much changed in the markets yesterday as they appeared to be taking a breather to support a move higher. I would not be surprised if today was another flat trading day as the BLS will be releasing its February payroll data tomorrow. This could have a significant impact on tomorrow’s market.
Yesterday, private payroll processor ADP reported that only 139,000 new jobs were created in February, adding to concerns that the labor market continues to struggle. Most analysts expected ADP to report 158,000 additional private-sector jobs. So IF tomorrows BLS report is also weak, it would conform the ADP results and be another indication that the economy is slowing. This could cause the Fed to re-think its plans with respect to tapering. I don’t believe the Fed will change anything at the next meeting which is scheduled for 18-19 March, but you never know. BTW, the March Fed meeting is smack in the middle of the month….just about the time where some Major market reversals have occurred in the past.
With the markets drifting sideways to down yesterday, I had some time to answer a few email questions from students that have been piling up. And because several new students have joined us recently, I thought I would share my reply so everybody can learn.
Several of the emails I received had to do with my recent trade in Halliburton, HAL. Many students wanted to know how I identified the trade. I think I spent enough time talking about on HAL in my previous Comments, so today I’m going to focus on Tesla, TSLA. What I did with HAL was very similar to what I would have done with TSLA. The reason I chose HAL was because I wanted to have an energy related stock going into March-April.
I’m really not a big fan of Tesla, but the stock has been attracting a lot your attention as it steadily moved up the Member’s Watch List. One student said, “Yesterday (Monday 3/3) I was looking at a rifle trade on TSLA. The RSI dropped below 20 on the 60’s but the three indicators on the 60’s were not positive. I did not make the trade because the PT indicators were not positive and when I look at TSLA’s chart I see that it may need to come down to 200 before it can go any higher. If I took this trade and then sold when the 2-period RSI became overbought, I would have realized a 10 point gain. When making a rifle trade on the 60’s do I need to have all indicators positive on the 60 to have confidence in the trade?
Hmmm? There appears to be a lot of confusion here. Here’s what I said in my reply:
When I look for a Rifle Trade, I always begin by looking for a stock that is in a well established Uptrend on the Daily Chart that has an oversold 2-period RSI. After looking at TSLA’s chart, the 2-period RSI has not reached oversold levels since 19 February. So IF I were to Rifle Trade TSLA after seeing the oversold condition on 19 February, I would have bought it when the 60s turned Green on 20 February near the open, somewhere between 209 and 212. Then when the stock pulled back last Monday (3/3), I would have been selling my shares near the 240 level, when the PT indicators turned Red.
This the exact trade that I teach in my Position Trading Course at UNF and in the Rifle Trading webinar I did for AIQ.
I usually don’t use oversold conditions on the 60s to identify trades, but sometimes when I’m looking for a quick trade, I use the 60s to identify ‘Pistol Trades’ . A ‘Pistol Trade’ is similar to a Rifle Trade, only with shorter time periods. In other words, when I see an oversold RSI on the 60s, I move down to the 5s to execute the trade. Pistol Trades using the 60s/5s are just like Rifle Trades using the Daily’s/60s, only with a shorter time period.
BTW, IF you did take a Pistol Trade in TSLA using 60s/5s on 3 February, you would have entered the trade at 11:40 near 242, and then exited the trade later that day near 250. Pistol Trades on the 5s are NEVER held overnight.
Also, make sure that the stock you are trading is in an Uptrend on the Daily Chart.
Hope this helps.
Waiting for the Jobs Report.
That’s what I’m doing,
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