Professor’s Comments June 6, 2016

Posted by OMS  at June 6th, 2016

After Friday’s horrible Jobs Report that caused several changes to the Dean’s List, I’m going to trade a special kind of pattern today.

Even though both UUP and DIG have fallen off the Dean’s List, replaced by UDN and DUG, I still have a market with a positive Tide, Dean’s List, and Money Flow indicators.  Also, the VTI on the Dow has a positive bias with an overall positive pattern.

In other words, I can’t be sure what will happen in the markets today.  The overall market could start to move higher, but some sectors could start to turn lower.  In situations like this, I usually let the market tell me what to do.

I do this with a three-day decision pattern that consists long bar followed by two inside days. The idea behind the pattern is very similar to that of a Hockey Stick, only instead of pulling back for a week or so after a run-up, the stock just sits there for 2 days going nowhere while it makes up its mind about what to do.

If the stock decides to head higher after the consolidation, it will move above its 3-day high.  If not and it wants to reverse, it will move below its 3-day low.

And because DUG is now on the Dean’s List, I want to pay particular attention to energy to see if it will start to trade lower. 

The two energy stocks I will be looking at today are Rowan (RDC) and Chevron (CVX).  RDC has the two inside day pattern on its Daily Chart; CVX has the same pattern on its Weekly Chart.

So if RDC moves above 17.08, it will likely continue to move higher.  If it moves below 15.98, it will likely head lower. 

Same for CVX.  A move above 102.6 will likely push the stock higher; a drop below 98.52 will likely cause the stock to start a down trend.

The reason I’m focusing on both of these stocks today is because both have developed narrow Bollinger Bands.  So IF a breakout does occur in one direction or the other, it will likely cause a Band Squeeze.

Also, IF RDC and CVX move higher, it will likely cause DIG to re-appear on the Dean’s List.

Another stock I’ll be watching today is AAON.  It has a double inside day pattern on both the Daily and Weekly charts.  But for now, I’m only going to trade the Daily chart.  It too has tight Bands.  So If AAON moves above 28.17, it should continue to push higher.  If it moves below 27.23, it should start to move lower. 

BTW, the Weekly triggers for AAON are 28.57 (H) and 26.58 (L).

All of the above stocks can be bought or sold-short using either buy or sell-short stops.  I enter these stops one cent above or below the High or Low.  Just make sure you manage the risk if the trade gets triggered.

Today, I’m just letting the market tell me what to do.

That’s what I’m doing,

h

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Not sure of the terminology we use? Check out these articles

The Hockey Stick Pattern
The Creation of Waves and Trends
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