Tag "trading setups"

Why Copper May Deserve A Place In Your Portfolio

Since the beginning of 2011, copper has been a lousy market aside from the occasional position trade. But that tide could be ready to change. This could create an investment opportunity in iPath DJ-UBS Copper Trust Sub-Index ETN (JJC). COMEX copper futures have dipped beneath 3.000 three times since May 2013 and recovered each time. That appears to be a psychological floor. What particularly jumps out at me is a

The Importance Of Trend Lines In Price Confirmation

As a technical analyst I rely on price to lead my bias. To help find interesting setups in price I use various indicators and second derivative data sets to accompany price action. These types of indicators, whether they be measures of breadth, momentum, or trend strength, all require price confirmation. One way we can see if price is confirming a bearish or bullish signal in an indicator like momentum, specifically the Relative

When A Trade Turns Into An Investment…

It almost always ends poorly. Every day active investors scan the market for setups they like. Whether it’s stocks, bonds, ETFs, futures, commodities, or currencies there are a multitude of sectors and asset classes to scan and rank. And as we maintain, build, and invest in our running list of candidates, we constantly think about risk-reward and time frames.  And it is within this context that we make decisions. The Trade If you

Did SPY’s Close Over It’s Upper Bollinger Band Just Give a Short Signal?

The SPDR S&P 500 ETF Trust (SPY) installed it’s 3rd consecutive daily close above it’s upper Bollinger Band (20,2) with Thursday’s low-volume drift further into the ether of new all-time highs. Over the last 10 years, this technical event has occurred just 9 times.  Despite the rarity of it’s extended bullish orientation and possessing the indelible aura of a market getting ahead of itself in the short-term, this is by

Market Masters: How Standing On Your Head Can Reduce Investor Bias

by Chris Kimble       Warren Buffett famously said he’s not a fan of technical analysis because he got the same answer when he turned the charts upside down. Yet as a technical analyst, I’ve found that inverting a chart can sometimes give a valuable fresh perspective and help overcome any preconceived notions, also known as investor bias. The interesting field of behavioral finance has documented the often-harmful biases that we

Market Masters: Identifying Strong Bases For Explosive Trades

by J.C. Parets     Today I want to talk about bases. This is something that rarely gets discussed for whatever the reason, but I think they can provide some of the most explosive opportunities in the market. The old saying goes, “the bigger the base, the higher in space”. But what exactly constitutes a base? What are some of the characteristics that we should look for as market participants?

Chartology: XLB, XLV, IBB, ISIS, GILD, BAC, SCTY, MSFT, EUR/USD

Here’s a small slice of those charts I’m looking at as another trading week wraps up. Market Cap Relative Strength Relative strength across market capitalization remains “bottom-up” (i.e. market cap leadership is arrayed from small cap to mega cap), but the spike the Russell 2000 (IWM) saw with it’s huge pop on 03/04 (it’s biggest up day in almost 2 years) has largely dissipated.  Though at all-time highs, the small

Real Life Trading Lessons: Rules vs Conviction

I have tried to share real life trading lessons in previous columns, and this week’s entire Ukraine-Crimea-Russia quick roller-coaster provided for another entry in my series: When and how do you trade Conviction vs. Rules? More or less, this would qualify as one of those trading lessons on discipline. You can find some of my prior columns here: Insights Into a Rough Month of Trading: Like a Botched Football Game

Using Weekly Charts To Gain A Tactical Advantage

During stock market corrections / pullbacks in a mature bull market I tend to gravitate to stocks that are displaying constructive price action around key moving averages, specifically the 10-week and 40-week simple moving averages. How a stock’s price reacts around its moving averages provides valuable insight into the underlying demand in the stock, particularly institutional demand. A stock may bounce one day or two days off a daily moving

RSI Divergence Patterns: Spotting Trading Tops and Bottoms

One of my favorite patterns to watch for near market bottoms and tops is the RSI divergence pattern. But, I must caution that it is a bit trickier than it appears. And, furthermore, I don’t recommend front-running the pattern. I tend to think of the RSI divergence pattern like a “backtest” of sorts, but in slow motion. In short, this pattern requires investor patience and discipline. In this post, I’ll