6-14-2015 Comments

Watch lists are updated.

Contrary to the drum beat of only acting short term in today's market I have expanded my trading horizon. For me not being a short term trader the choice is going to the beach or noticing that the market just can't seem to correct and changing my stock selection and buying techniques.

In the chart below I show the S&P500 with a 120-day ema. I have chosen the 120ema as a "Magiic" line that contains all but one of the pullbacks on the chart. The chart was created three days ago. Notice that seldom does the S&P go below the 120ema for more than 3 days and it usually just bounces without penetration. October 2014 is the only exception and even then the market bounced right back.

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So my approach is to find stocks that I can be in for many months. This means I want stocks with great fundamentals. It also means that I want the lowest risk entry that I can find and turning away from others. Breaking out of bases has been met with too much selling for my taste. I tend to find entries close to the 50-day moving average and use that average as the line in the sand for when I determine the trade is not working. I have also modified by trading after a study accomplished by Pascal that suggests that buying below 2.3% above a 5-day simple moving average tends to work and that buying above that zone would be better off being shorted over an ensuing 10 day period. I run a 5-day with 2.3% envelope indicator on my daily charts which draws a 5 day moving average with lines 2.3% above and below. Envelope indicators can be found on stockcharts.com and eSignal. Shown in the image below is one of my volume trigger alert entries.

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The effort I go through each weekend is toward finding stocks with great fundamentals (great EPS growth, great pre-tax margin, great ROE, good demand/supply traits, good liquidity, institutional sponsorship by great funds) and a chart pattern that might possibly give us a buy point that is near the 50-day moving average and within a 2.3% envelope.

Good Trading!