Professor’s Comments May 20, 2015
Posted by OMS at May 20th, 2015
The Dow rose 26 points, closing at 18,312. Volume was moderate, coming in at 100 percent of its 10-day average. There were 124 new highs and 43 new lows.
The Dow traded in a very narrow range yesterday which sets-up the possibility of a Big Move happening today from Monday’s small change signal in the A-D oscillator. The markets will likely be focused the minutes of last months Fed meeting which are scheduled to be released later today. The minutes could provide a clue about the timing of the next move in interest rates . If perceived as negative, they could trigger the Big Move.
Yesterday the Dow hit a high of 18,326 which is right in the middle of my target zone for a top. The pattern suggests a top somewhere between 18,300-18,350 so we need to be extremely cautious with our trading.
All I’m doing now is scalping. Yesterday I scalped UA and CNI to the short side. Again, all I’m doing as this markets waddles to a top is taking stocks from the Honor Roll, putting them into my trading platform, and watching for the indicators to line up. I’m out at the end of the day. It’s been a winning strategy.
Another winning strategy has been in the Bond trade. Yesterday, TBT which has been near the top of the Dean’s List for weeks, popped over a point just after the open. It closed up 88 cents at 49.82.
I mention TBT today because it moved above the 200 yesterday reaching its target from both a TLB Pattern AND a Hockey Stick perspective. So now that this has happened, I need to start managing money.
Remember what I always say in Class about stocks going to the moon. NO! They don’t go to the moon; they go to targets. And right now by crossing the 200, TBT has reached its target for the current move.
Once a stock reaches its target, something has to happen. It either changes direction, or it pauses to form a new pattern, perhaps another Hockey Stick. But the odds that it will continue to move higher are slim. All of the energy that enabled the stock to get to the 200 is now spent. So if you’re a short term trader, be especially mindful of the release of the Fed minutes today. TBT has done what was expected of it. The odds of going higher at this point over the short term are barely 50-50. I never like even money bets. So if you’re long TBT now, with the Fed minutes looming, you might want to think about doing some money management and protecting your profit.
At times like this, I never hesitate to spend the 6 bucks and head for the sidelines. I never like to bet how the market will react to a particular news event, because the odds are always poor. You NEVER know how the market will interpret news. It seems that whenever I try to predict how the market will react to news, it turns out just the opposite. So I ALWAYS prefer to pay the 6 bucks to exit the trade, wait for the market to react to the news, and then trade. The trade isn’t going away. TBT and TMF will always be there. But your profits might not.
In The Professor’s Methodology, we trade patterns, indicators and Lists. And even though a stock or ETF is high on a List, it doesn’t mean that it will stay there. That’s why I ALWAYS pay attention to the pattern and the target predicted by the pattern. This is why Hockey Sticks and the TLB Pattern are such an important parts of the Methodology. They tell us when a stock is getting close to a target so we can start to manage our money.
When we purchase a stock, we buy it because it is on one of the Lists, the indicators are lined up, AND it has a PATTERN. If we don’t see a pattern, we don’t enter the trade. Then we use the pattern to project the target. And then once a stock reaches it’s target, we don’t just sit there and hope it will go higher. It might, but the odds are slim that it will go higher once the move projected by the pattern has been accomplished. So we manage money.
This is what the Professor’s Methodology is all about. Indicators, Lists, and Patterns.
The markets (equities, bonds, currencies, and gold) are very close to tops (or bottoms) predicted by their individual patterns. Trade cautiously.
That’s what I’m doing,
h
Market Signals for 05-20-2015 |
|
---|---|
DMI (DIA) | POS |
DMI (QQQ) | NEG |
COACH (DIA) | POS |
COACH (QQQ) | POS |
A/D OSC | |
DEANs LIST | POS |
THE TIDE | NEU |
SUM IND | POS |
Not sure of the terminology we use? Check out these articles
The Hockey Stick Pattern
The Creation of Waves and Trends
FAQ
All of the commentary expressed in this site and any attachments are opinions of the author, subject to change, and provided for educational purposes only. Nothing in this commentary or any attachments should be considered as trading advice. Trading any financial instrument is RISKY and may result in loss of capital including loss of principal. Past performance is not indicative of future results. Always understand the RISK before you trade.
Category: Professor's Comments