Midweek: The Dow 4

The Dow almost broke out today, ultimately though it turned down and I believe it is now headed for the 13,750 level. Hourly chart below.

www.freestockcharts.com

The movement today provides a good example as to why you should always wait for the closing price rather than jumping in trying to catch a move.
I circled the pseudo-break. As you can see it reacted fairly violently to the break. It might catch on the mess of MAs just underneath it but I think it will end up falling below them. Right now I'm calling 13,750 as the bottom for this move down, assuming it doesn't breakout to the downside. If we're lucky it'll bounce off the 100 hour and break through the top for real. Until then it's a waiting game.

Midweek: The Dow 3

Nice day in the market. Hourly chart below.

www.freestockcharts.com

I'm expecting a down day tomorrow. Then again, maybe we'll break the broadening formation and start moving up for real. Still, I think it's best to wait. That last candle doesn't look too good. Usually dojis like that are signs of trend reversal, in this case bullish to bearish. I'm still waiting for the market to settle down before looking for more trades. Current support is at 13,775. Watch that point.

Midweek: The Dow 2

Looks like a broadening formation in the Dow. 4 hour chart below.

www.freestockcharts.com

Broadening formations are no good for trading. They tend to be unpredictable, the only somewhat predictable thing about them is that they foreshadow volatility. Don't let a big up day fool you into thinking that the market is stabilizing, it's going to be best to stay away for a bit. Expect some big swings in the days ahead.

Goodyear

Goodyear, GT, traded down today 0.45 to 13.00. Daily chart below.

www.freestockcharts.com

GT is coming up on its 100 day, might bounce off of that. I think the more powerful resistance is that bottom trend line though; somewhere around 12.15. I've always liked GT but they never seemed to have a good entry point. If they fall down to the low 12s they would look pretty nice. This definitely isn't a buy right now, don't try to catch a falling knife, but it's setting up nicely. Fairly boring trade, just buying at the bottom of the trend channel, sometimes boring is nice though. Some hypothetical trading points, since these are projected into the future a bit they're probably not very precise. I might revisit GT if it hits 12.15 or so.

Entry: 12.15 (bottom of the trend channel, moving up might be closer to 12.30 by the time it hits)
TP: 14.75 (under the top of the channel, moving up might be closer to 15.00 by the time it hits)
SL: 11.70 (under the bottom of the channel, moving up but I don't think going higher than 11.70 is going to be necessary.)

The market is looking bearish so buying anything now has some risk added to it. Bearish markets set up some nice buys though. Wait for a good turnaround before buying anything.

If you have a stock you want analyzed leave it in the comments. 

Do your own research before taking any position. I don't have a position in GT nor will I be taking one in the next 72 hours. 

Going into next week: The Dow 5

Friday saw a pretty nice up move; 100 points. This does not invalidate my predicted pullback. Not much to add to what I said last week. A move below 13,800 would probably trigger a fast move down. Maybe if the Dow breaks 14,075 or so the pullback won't come. In any case I wouldn't act too aggressively until we revisit the mid 13,000s or so. Some stocks are starting to look undervalued so there might be some decent buys next week. Time will tell on that.

Information Management

Well the pullback seems to be starting so buying into anything right now probably isn't the best. Instead I'll talk about a basic principle of charting; information management. There is a limit to the amount of information that you can take in. Putting too many indicators onto your chart is just going to make noise that distracts you from the important stuff. Personally, I like to use the 34 period MA river and the 100 period MA. I think that provides a good balance of information and noise. Some people like to use indicators like the MACD or stochs or whatever, that's fine too. What I don't like to see is people using multiple MAs, an ichimoku cloud, MACD, and stochs. See the chart below for what that looks like.

www.freestockcharts.com

Personally, that chart is painful to read. I can barely see the price action and the MAs are all obscuring each other. On top of all of that I need to pay attention to the indicators on the bottom. The amount of information being portrayed is excessive and a waste of time. MACD and stochs go well together if you like using those but they don't need an ichimoku cloud or five MAs. The ichimoku cloud is a stand-alone indicator, it shouldn't be used with other MAs. I see people using, and I'm not exaggerating, 10+ MAs and more than three indicators (usually RSI, MACD, and stochs). It simply isn't legible.
The best thing to do is find some indicators that work well together, I already mentioned MACD and stochs, and get well versed in reading those. It might help if you imagine each indicator as its own language. Get good at reading one or two and stick with those.

Midweek: The Dow

The Dow traded down 100 points today. Daily chart below.

www.freestockcharts.com

As you can see there is a bit of overhead resistance, looks like it's been forming since July 2011. Recent price action validated that resistance so it's now something to watch out for. I don't think we'll break it on this move, I'm looking for a pullback. Currently 14,060 seems to be the point we need to close above to break out. For support I'm seeing the river, 13,800-13,700, the 100 day, 13,360, and maybe the bottom trend line, 12,700. I think we'll catch on the river or the 100 day, my price target is 13,600 but I'm not so sure on that that I'd trade it. In any case, expect further weakness in the market until the pullback completes. Now looks like a good time to take some profit.

If you have a stock you want analyzed leave it in the comments. 

Do your own research before taking any position. I don't have a position in the DJ-30 nor will I be taking one in the next 72 hours.

Dean Foods

Dean Foods, DF, traded down today a bit. Daily chart below.

www.freestockcharts.com

I'll talk about the Fibonacci levels first. They have a history, on this chart at least, of being sloppy with their levels. Because of that I'm going to say that they are currently at their Fib resistance rather than underneath it. I labeled all the Fib points sequentially on the chart. The current is labeled "10?" because it is yet to be seen if it will catch on that resistance.
Next, the current peaks. Both of them are around 19.00 with the more current one being a bit lower. I suppose you could interpret this as a bearish sign but I think it's a bit early to be calling it. Current lows, look at "9" and "10?", are rising. This could change if the price action goes below the "10?" area.
Finally we have the channel I drew. This channel is weak, there are only two touches on the bottom and two, maybe three, to the top. I like channels to have more hits and less black space (space with no price action). You probably noticed that there are two lines on the bottom. These lines have the same angle. The higher line gets broken twice but also holds twice, the bottom line gets hit twice but the last hit "10?" might turn into a break if the price continues to fall. If those lines are going to act as support then DF is currently at the bottom of it's range.
No trading points for this one. I think it's worth watching but right now it's too risky to try to trade, in my opinion of course.

This stock is risky. The current setup does not show bullish pressure, the trend lines have only two touches each, and the stock is trading below a Fib level. I know I said they seem sloppy when it comes to hitting Fibs but it still doesn't sit too well with me. The thing that interests me is the amount of gap ups they've had. This stock is volatile, they could hit 19.00 or so by the end of the week. Then again, they could hit 14.00 by the end of the week. One last thing, I didn't include the weekly chart but there is one interesting thing on it. The price action seems to be bouncing off the 38.2% Fib level to the downside. If you own DF you might want to set a SL around 16.00 so you don't get burned too bad if they continue their fall.

If you have a stock you want analyzed leave it in the comments. 

Do your own research before taking any position. I don't have a position in DF nor will I be taking one in the next 72 hours.

Going into next week: The Dow 4

Last week was disappointing for the Dow. Chart below is the 4 hour, I'm using the 4 hour because it shows the price action in a little more detail.

www.freestockcharts.com

As you can see the price action has made a top of sorts above the 14,000 mark. I don't think this top will hold for too long but for next week and maybe the week after I'm expecting a pullback. Fib levels drawn on the top chart are more optimistic than the ones on the chart below. The above Fib levels show 13,600 as the probable pullback low. I say 13,600 instead of 13,750 because the last high was around 13,600. The chart below shows a more pessimistic view, counting the move up as starting a bit earlier. I don't think it's as relevant since the pullback from that move has already happened (it ended where the Fib levels above started).

www.freestockcharts.com

13,600 remains as a point to watch, a little bit higher in this one though; 13,675. Next major point is 13,440. I don't think that the 50% retrace, 13,250, will get hit. It's a possibility of course but I'm thinking that the market will be mostly bullish this year and the pullback coming will be light. Because I'm a little biased you may want to take a slightly more pessimistic view than I am, I try not to be too biased though.

So, what happens if the pullback turns ugly? I have the daily chart below to show some possibilities. Note that I am not expecting this to happen and show it only for the sake of completeness.

www.freestockcharts.com

There are two movements that I find to be likely. First, a continuation of the previous trend, this brings a possible support level of 12,800 or so. The other is a continuation of the new trend, this brings a possible support level of 13,450 or so. That second number is fairly close to the 100 day so I think it's a better level to expect in the case of a larger downturn.

My expectations for next week are negative. I think we'll see the Dow move down a few hundred points to 13,600 or so. This pullback could take three to four weeks though I'm expecting it to take only two. If the pullback is more severe than I am anticipating that it could take three to five weeks; the last large pullback took 27 trading days to complete. You can see that pullback in the daily chart above as the start of the newer trend line on the bottom. I don't have any specific trading plan for next week, the potential pullback offers a good time to take some profits. I would be adverse to transitioning over to cash but lowering your percentage invested might be a good idea. I don't think too many good buying opportunities will present themselves next week but I could be wrong. In any case, I'm looking at next week and perhaps the week after as being bearish

If you have a stock you want analyzed leave it in the comments. 

Do your own research before taking any position. I don't have a position in the DJ-30 nor will I be taking one in the next 72 hours.

Why you shouldn't play with your exit points

Here's a trade I made Wednesday, this is the EUR/USD 15 minute chart. Note that this is forex and not the stock market, I'm not going to talk about forex except for looking at trades like this one.

www.freestockcharts.com

I shorted the EUR/USD at the red arrow and bought back, at a loss, at the green arrow (right at the top). I shorted as a preemptive move on what looked like a head and shoulders pattern. It turned out I was right, if I had held onto my short I would have made 100 pips, about a 45% return.
Where did I mess up? Two places, mainly. First, I shorted before the head and shoulders confirmed (I marked that with a line and a "1"). Second, I closed the trade from panic because of what was, at the time, a strong up move that looked like it was going to break the 100 period MA.
What should I have done? I should have waited for confirmation, I got in too early and wasted time holding a sideways position. The biggest thing though was that I shouldn't have touched the trade after I placed it. If I hadn't touched it my SL ("2") never would have triggered and my TP ("3") would have ended the trade at a rather nice profit.
I think bad trades are more important that good ones. They teach you how to be a better trader. In this case it wasn't that my targets were wrong but my mentality. I was worried that the position was going to go in a bad direction so I closed it early. When you trade you need to be able to ignore your nerves and follow your analysis. Every trade you place should have a defined TP and SL, you should go into the trade thinking "I could lose my SL or gain my TP and either result is fine" rather than thinking "I can gain my TP but I'll close before losing my SL". If you close every trade that makes you a little nervous you'll end up with no money left.

As I said, I won't be talking about forex too often here. I wouldn't recommend that anyone trade forex without a large amount of trading experience, it's far too risky for the possible reward. Still, it makes for a good way to test trading strategies due to it being open 24/5 and moving fast.

If you have a stock you want analyzed leave it in the comments. 

Do not trade forex you will lose everything; probably. I almost always have some sort of position in EUR/USD.

Cemex

Cemex, CX, looks like it's coming up on some resistance. Weekly chart below.

www.freestockcharts.com

Currently CX is trading at 10.95, resistance looks to be around 11.15. If CX can break the 11.15 mark they might have a shot at 14.50 or so. The bottoms labeled "1" and "2" also lend some strength to the bull argument, sequentially higher bottoms are usually good things. On top of that the price is above the 34 week river and the 100 week MA. The daily chart below shows some interesting things as well.

www.freestockcharts.com

The circled area is a window, also known as a gap, windows make for good support/resistance points. In this case it will be support; the level is about 10.20 to 9.90. The daily chart also shows a more in depth look at the interaction with the resistance at 11.15. Price tried to break it, failed, and then retreated to the bottom of the river before bouncing back. Looks like price will try to break 11.15 tomorrow or maybe early next week. Here are some hypothetical trading points.

Entry: 11.25 (A close above 11.15)
TP: 14.25 (Below the 14.50 high)
SL: 10.20, 9.90, 9.70 (In the window support area or just below it)

Not much else to say about this one. Holding past 14.50 could be risky, I would expect a pullback somewhere in there. If the price stalls or begins the pullback before 14.50 selling early would be the best course of action. I would expect that to happen around 12.50 if it decides to do that.

If you have a stock you want analyzed leave it in the comments. 

Do your own research before taking any position. I do not currently own any CX but I might pick some up in the next 72 hours. 

Apple

Apple, AAPL, has fallen quite a bit from its highs. Weekly chart below.

www.freestockcharts.com

The Fib retrace is drawn from the lowest point on the chart to the highest rather than from the start of the up move to the end. I did this because it fit better this way than the other way. There are lots of interactions with the Fib levels, I went ahead and labeled them sequentially. Currently the price is being interacted with by the 38.2% Fib level (point "7") and the 100 week MA. I wouldn't say that a breech of the 100 week is a definite buy signal but it wouldn't hurt the bullish case. A breech of the 38.2% would make the next major resistance point be the 50% or about 360.00.

There isn't really a trade here, maybe a buy will pop up if price action can break the 100 week but even if it does that it has the 23.6% retrace and the 34 week river to fight against. I think the safest thing to do right now is stay out of AAPL and wait. Just because it's fallen a lot doesn't mean it's cheap.

The point I circled is a doji, a candlestick with no body. This means it opened and closed at roughly the same price. Dojis can be a sign of reversal. It isn't an important point in this chart but it struck me as a good example of a reversal doji; so there it is for what it's worth.

If you have a stock you want analyzed leave it in the comments. 

Do your own research before taking any position. I do not currently own any AAPL and do not plan on buying any within the next 72 hours. 

Barclays

Barclays, BCS, was up quite a bit today. Weekly chart below.

www.freestockcharts.com

Looks like a double bottom of sorts. These are easy to trade, buy on a break of the left lip (the top horizontal line. Price target is obtained by taking the distance from the lip to the bottom of the formation and adding that to the lip price; in this case it's 31.75. There will probably be some resistance at 25.80 or so, that's the last major high (I marked that with text "RES"). Probably won't need to worry about that but if price stalls there it makes for a good TP. I went ahead and threw a Fib retrace on the chart to see if anything popped out. The 25.80 point is right on a Fib level and 31.75 price target is as well. That's interesting, it reinforces those two as good TP points. Not much else to say about this one, here's some hypothetical trading points.

Entry: Now, 21.00 (Either works, 21.00 make be a slightly more secure entry but I don't think this breakout is a false one)
TP: 25.50, 31.25 (A little bit of leeway here, basically you want to get out underneath the Fib level, wait for a break of the 38.2% (25.80) but not for a break of the 50% (32.80))
SL: 19.30, 18.00 (Over or under the circled area)

If you have a stock you want analyzed leave it in the comments. 

Do your own research before taking any position. I do not currently own any BCS and do not plan on buying any within the next 72 hours. 

Pfizer

Pfizer, PFE, has been trading in a bull channel for a while and closed today at 27.14. Daily chart below.

www.freestockcharts.com

The bull channel started back in July of 2010 which isn't on the above chart. Recently they've broken to the upside and then fell back down to the top of the 34 day river. The bounce off the top of the river today, and the close above the top of the channel, makes for a nice buy opportunity. I'm not sure that right now is the best time to get in though, I would want to wait and make sure that the break is going to hold. The big number on the daily chart is 27.84, the old high, this will need to be broken for real confirmation of a bullish channel break. Other than that and the river the only other thing worth mentioning on the daily chart is the 100 day, currently at 25.46. It has shown strength in the past so in the event of a dip that is the place to watch. Next we have the weekly chart.

www.freestockcharts.com

The channel lines are the same as on the daily chart. The horizontal line marks the high I mentioned above, 27.84. You can see that back in June 2006 it held the price down a bit after an unsuccessful break. That the resistance line is so old makes it rather important. A successful break could see PFE move back up to 39.00,  I wouldn't bet on that move happening anytime soon though. Below are some hypothetical trading points.

Entry: 28.00, 29.00 (A break and hold above the 27.84 mark or a break above the failed 2006 break)
TP: 32.50, 34.00, 38.50, higher (Lots of room here, all time high is 50 so a very optimistic TP could be 45.00)
SL: 26.30, 25.25, 23.50 (under the daily river, 100 day, and under the last major dip)

This is not a short term trade, hold time could be over a year for the 34.00 target. The thing I like about Pfizer is that its chart looks nice and it pays a good dividend (3.60%). This is about as close to investing as I like to get. If the price falls to the channel bottom and bounces it could make for a good buy, I'll give another write-up if that happens rather than try to predict what that would look like now.
     
If you have a stock you want analyzed leave it in the comments. 

Do your own research before taking any position. I do not currently own any PFE and do not plan on buying any within the next 72 hours.    

Going into next week: The Dow 3

Last week saw the Dow stagnate and ultimately close under 14,000 at 13,992. Daily chart below.

www.freestockcharts.com

Price is holding above the top of the formation I identified two weeks ago. It looks like there is some resistance to the 14,000 mark. If the Dow can break that then it might be able to hit 14,200, which is the next major resistance point. Price action could still fall below the top of the formation; currently 13,850. A fall below that point could lead to a fall down to 13,330 (above the 100 day) or 12,900ish (bottom of the formation). A fall below the top wouldn't necessarily mean a move back down to the bottom however, price could get caught in the river, 13,600, and bounce back
I think the most likely outcome is a bounce off the top of the formation and a test of the 14,200 mark. That probably won't happen next week however. Next week I'm looking for the Dow to bounce and possibly break its high of 14,027. A failure to break that high could signal coming weakness in the market but would not be a major sell signal in itself. As always I'm going into next week with cautious optimism.

Trading with Fibonacci Numbers

Fibonacci numbers have a variety of use in charting. They can be used to find price targets and time targets. I personally use them to find price targets and that's what I'll be talking about in this post.

The Fibonacci retracements are 23.6%, 38.2%, 50%, 61.8%, and 100%. I find that the 50 and 61.8 are the most useful. Below is the daily chart of AT&T, T, with the Fibs drawn.

www.freestockcharts.com

I drew the Fibonacci retracement from the lowest low to the highest high. I prefer to draw them like that than the more common method of drawing from the start of a move to the current top. I find that my method is more accurate but on a larger time frame you'll want to draw it from the bottom of a move to the top of the move rather than my way. If the stock was in a downtrend then the Fib levels would be drawn from top to bottom; an easier way to think of it is just going left to right.

You can see that the dotted lines act as support and resistance. I have labeled all of the major interactions between the price and the Fib levels. Something interesting about this is point "1" and "2". These interactions happened before the Fib levels were established. I'm not sure that you could trade that information but it is kind of neat that it happens. I would also like to point out that Fib retraces work on most but not all charts. This happened to be the first one that I looked at when I was trying to find an example so I went with it.
There isn't really a way to trade solely on Fib levels, instead they are used to find support and resistance zones. Here is the same daily chart of T with the price action removed and some of the interaction with the Fibs plotted.

www.freestockcharts.com

Notice the bounces off the the Fib levels. The microbreaks can be ignored, even with Fibs it's best to think of support and resistance as being thick lines.

What useful information can we obtain from this? First, the 50% mark, 32.92, is offering strong support. It has been tested three times and has yet to truly break. Second, the 23.6%, 35.93, mark is giving strong resistance. Finally, price seems to not want to fall more than 50% from the top, when price falls more than 50% it can be a signal of price reversal. This information can be combined together with the MAs or other indicators to get a good picture of how to trade this stock. In this case we can use the 100 day MA, which is at 34.99, coupled with the Fib levels to obtain some buy and sell points. A buy would look good at a bounce from the 50%, a break of the 100 day, and at a break of the 23.6%. Since the 23.6% gives the highest buy in point it's the safest. Therefore a buy above 35.93 looks good. For a stop-loss we can use the 100 day, a break of the 38.2% or a break of the 50%, so setting a SL at 34.80, 34.10, or 32.80 could be decent.

It is important to remember that Fib levels are simply support and resistance. They can be broken just like normal support and resistance levels. They are not magic or stronger than normal S/R levels. Fibs are situational, they work on most charts but not all. Don't try to make a Fib retrace fit a chart if it doesn't want to.


If you have a stock you want analyzed leave it in the comments. 

Do your own research before taking any position. I do not currently own any T and do not plan on buying any within the next 72 hours.    

Delta Airlines

Delta Airlines, DAL, seems to have broken out of a triangle a few weeks ago. Weekly chart below.

www.freestockcharts.com

It isn't the best triangle I've ever seen, really only two touches on the bottom and three on the top, but all that really matters is the end result. This one would have been a good buy around 11.22 and the price target would have been around 20.20 with a good TP of maybe 18.50 or so. So why am I mentioning this? I think seeing the end result of patterns is useful, also the market is closed for the weekend so a trade recommendation would be kind of useless. Triangles are the bread and butter of charting, they come in various flavors; pennants, ascending, descending, symmetrical (that's what this one is). Traditionally symmetrical triangles are considered to be continuation signals, I disagree with this. In my experience they can be reversal or continuation signals, the best way to trade them being on the breakout. This one happened to act as a reversal, bringing the price from a low of 3.60 up to the current 14.61. Of course it didn't offer a buy signal until 11.22 so the move isn't quite as impressive. Still, a 23% gain in eight weeks is pretty nice. There's probably a bit of a move left, about 4.00 or so, but I wouldn't recommend buying. Anyway, I wanted to provide an example of what a triangle can do and here one is.
If you look at the black space in the triangle, the area with no price action, you can see three main areas labeled "1", "2", and "3". As the triangle progresses the black areas should (but might not) get smaller. This is because the price action gets more and more constricted. Most chart patterns can be thought of as a buildup of pressure and a subsequent release of the pressure. An easy way to measure pressure is to look at the black space in a pattern.
One final note, the area labeled "False Break" is important. Many times you may be tempted to buy an apparent break of a pattern before a close. This is risky behavior. As you can see a buy there would have seen an almost 33% decline and would have definitely triggered a (good) stop-loss. There are some areas early on in the chart where price broke to the upside, these were too early to know that a triangle was forming but if they had happened later on would they have been a buy? No. Those breaks were only just barely above the pattern. A good break will close well above the top or bottom of the pattern; like the actual break on this one. I think 5% above the top or bottom is a good rule of thumb; i.e. if the top is 10.00 then wait for a close at or above 10.50 for an upside break.

If you have a stock you want analyzed leave it in the comments. 

Do your own research before taking any position. I do not currently own any DAL and do not plan on buying any within the next 72 hours.    

Micron

Micron, MU, traded down by a bit today. Below is the weekly chart.

www.freestockcharts.com

A base seems to be forming at about 5.10. You can also see three successively lower peaks, no real trend to it other than just down. I would like to point out the area label "Triple Top?". It isn't really a traditional triple top but it does superficially resemble one. Note the three highs that went lower each time. From there MU went down to what would become a base. Notice the one candle that broke and went down to 3.97, since the price never returned to that low I think we can disregard it. MU traded flat for the last two days and then today ended up lower. That makes me think that they have peaked and will begin to trade down; probably down to 5.10 or so. I think MU is one to watch, if they return to 5.10 they could be a decent looking buy. Buying there wouldn't be the safest thing however, the trade would need to be watched closely. The reason for the lack of safety is that the peaks are going lower and lower (11.95,  9.16, 8.08), could be a sign of long term negative movement. Still, buying for a small bounce could be profitable. Some hypothetical trading points below.

Entry: 5.15 (a bounce off of 5.10, if the price goes lower than 5.00 consider this trade invalidated)
TP: 7.00, 6.50, 6.00 (Below the 100 week, the middle of the river, and under the river)
SL: 5.00 (under the base)

Because of how tight the trade is, a 0.15 difference from entry and SL, this one will be easy to get stopped out of. The main way to mitigate that is to make sure to buy on a bounce rather than buying as soon as the price hits 5.15. Holding for a higher price, say 8.00, may look tempting but I don't think the reward makes the risk worthwhile. I consider this one to be a long term bear case, keep this in mind before entering. Normally you would not want to buy something with a negative looking chart like this but the potential for almost 40% gain looks worth the risk. Make sure to keep the stop loss at 5.00, if they break below their base they could fall to 1.90 or worse. Don't be afraid to modify the TP lower if they stall out on their way back up, for this one it will be better to lock in gains as soon as possible.

One last thing to mention. You probably noticed the dotted lines on the chart. Those are Fibonacci retracement marks. The triple top was at the 61.8% and the current price is at 38.2%. This makes the long term bear case stronger. I would not consider MU as a long term buy unless they formed a strong reversal pattern or broke the 61.8% mark. I'll discuss Fibonacci numbers on Saturday if you want a more in depth look at how to trade with them.

If you have a stock you want analyzed leave it in the comments. 

Do your own research before taking any position. I do not currently own any MU and do not plan on buying any within the next 72 hours.    

Xerox

Xerox, XRX, is currently trading at 7.99. Below is the daily chart.

www.freestockcharts.com

A small triangle has been drawn on the current price action. That triangle looks like it could be a pennant, time will tell on that. A pennant is small formation that appears after a large and fast up move. The up move should be almost vertical and resemble a pole. This happened with XRX. The pennant represents the halfway point, the price target has been marked by the vertical line; 8.75. The thick yellow line at the top of the pennant roughly represents the 100 week moving average's current location. This appears to be offering resistance to the price action. It is interesting that it is at the top of the pennant, the combination of  the pennant top and the 100 week MA make for a nice entry location. Things to watch are the interaction of the price with the 100 week and with the bottom of the pennant. Failure to break the 100 week or a break below the bottom of the pennant would make the buy signal less powerful or invalidate it entirely. The line labeled "Support?" may act as support if the pennant temporarily fails, it is mostly untested however so its strength is unknown. Here are some hypothetical trading points.

Entry: 7.99 (right now)
TP: 8.50, 8.80, 9.50 (The 8.50 is the safest and fastest, a longer hold could see the price move up to old highs however)
SL: 7.80, 7.65 (Below the pennant bottom and on the "Support?" line)

An entry could be made at a break of the pennant or 100 week but with how close the SLs on the listed entry are I don't think it's worth doing. This trade is quick, it will probably take less than a month for the first TP or SL to hit. 

If you have a stock you want analyzed leave it in the comments. 

Do your own research before taking any position. I do not currently own any XRX but I might buy some in the next 72 hours.

Revlon

Decent move on Revlon, REV, today. Weekly chart below.

www.freestockcharts.com

You may notice a rather large triangle starting in late October 2009. It looks fairly solid, three touches on the bottom and three on top, not counting the recent break of course. The really nice thing about this triangle is the almost vertical start and the massive height. Price targets for triangles can be obtained by taking the height and adding it to the current top. This gives us 32.00, subtract a bit for safety and you get a range from 29.00-30.00. Not too bad. Things to watch for are limited; this is a nice, simple trade. All that really matters is the interaction of the price with the top of the triangle. For a time range on the price target I like to take half the length on the triangle, that gives us about 2 years. I think the bulk of the move up will probably happen this year however. There may be some resistance near the 20.00 mark and maybe some at the 24.00 mark as well. Time will tell on those. Here are some hypothetical trading points.

Entry: Now (18.31)
TP: 19.20, 23.50, 29.00, 30.00 (Lots of leeway here, if the price snags on the way up selling would be the safest course of action, maybe sell half at 19.20 and the rest at a higher price if possible.)
SL: 17.00, 15.50, 12.50 (Harder to give a good range here, the price shouldn't break under the top of the triangle but it is possible. 15.50 and 12.50 mark points where the triangle would appear to have failed.)

Triangles don't work all the time; just like any other chart pattern. This trade will need to be monitored closely because I see a potential for it to snag on the way up. If it begins to fall while it's near the mentioned points selling would be the best thing to do.

If you have a stock you want analyzed leave it in the comments. 

Do your own research before taking any position. I do not currently own any REV and do not plan on buying any within the next 72 hours.    

Officemax

Officemax, OMX, looks like it's in the final stages of a rounded bottom. Weekly chart below.

www.freestockcharts.com

Between May and December 2010 a double top (labeled Double Top) seems to have formed. This led to the drop down to about 4.10 starting in February of 2011. This drop stagnated for a while between October 2011 and August 2012. This stagnation appears to be a rounded bottom, you can see the bump (labeled Bump) at the mid point. There was some resistance breaking the 100 week for the first time and then further resistance breaking the trend line I drew. That trend line might not be important but it seems to have had some influence from 2006 to present so I think it's worth looking at.
So, what are we looking for now? Major resistance is at 19.50 or so, that's the double top, some support at 10.40 and then some more at 9.30 (that trend line). Resistance coming up is at 14.50, that's the first thing that needs to be overcome. If the double top resistance is broken OMX could see 25.00, that's a little ways off though. OMX could be a good buy now but there is some risk to that, they could drop back down to their trend line. Below are some hypothetical trading points.

Entry1: 11.00 (Now)
TP: 14.20, 19.00, 24.00 (Under the current resistance, double top resistance, and under long term projections)
SL: 10.20, 9.20, 9.00 (There aren't any great SLs. My favorite is the 9.20 or the 9.00 but they are far from perfect)

Entry2: 9.50 (Bounce off the trend line, this might not happen)
TP: 14.20, 19.00, 24.00
SL: 9.20, 9.00, 8.30 (Because of the lower entry point the SL can be moved down to the middle of the river if desired, I still favor the 9.20 or 9.00 SL however)

Other than the lack of decent SLs this looks like a decent opportunity. Perhaps a more cautious approach would see an entry at 18.00, the break of the top of the rounded bottom, but the loss of potential profit makes that less attractive to me.

If you have a stock you want analyzed leave it in the comments. 

Do your own research before taking any position. I do not currently own any OMX and do not plan on buying any within the next 72 hours.

Going into next week: The Dow 2

The Dow managed to break, and hold, 14,000 last week. This is inline with my more optimistic prediction from last Sunday. So, what about this coming week? Below is the daily chart of the Dow.

www.freestockcharts.com

The trend lines are the same that were on the weekly chart. Notice the circled area, the price broke and then bounced off the top line. The bounce is important, it shows that the trend line is now acting as support, though how strong it is is hard to say. Friday's candle was larger than the two before it combined, this is a good sign. What needs to be watched for this coming week? First, the price action should not break below the top line. If it does, and closes under it, this could be a sign of a minor correction down to the 100 day or maybe the bottom line. Next, the price should reach a new high. If it doesn't manage to break the 14,009 mark it could be a sign of coming weakness. I wouldn't consider it to be an actual bear signal until it breaks and closes under the top line. That top line is currently at 13,843. This is about 150 points under the current price.
I see three likely outcomes for next week. First, we move to 14,200, the current major ceiling. Second, we move back to the top line and then bounce off it ending the week slightly positive/negative. Lastly, we could move back to the top line and break through it moving down to probably 13,700 or so, depending on when we break to the downside. Like last week I'm going into this one with cautious optimism. I think we'll probably do one of the first two likely outcomes but anything is possible.

If you have a stock you want analyzed leave it in the comments. 

Do your own research before taking any position. I do not currently own any DJ-30 and do not plan on buying any within the next 72 hours.

Entries and Exits

Entries and exits are the most important component of a trade. An entry at the wrong time can ruin a trade just as well as an exit placed too high or low.

Entries need to be carefully picked. If you are buying on a break of a pattern you need to be sure that the break is not going to fail. The first thing to do is make sure to buy on a close of the confirmation. Just because the price action rises beyond a line of the pattern does not mean it will stay there, always wait for the closing price to confirm. Once the closing price has confirmed a break an entry into the stock may look good but it is still best to wait. The price action should not close under the line it broke, fake breaks are common and mostly short-lived. Because of this it is best to wait for a while after a break, I like to wait at least three days unless the break is especially violent. Remember, the broken resistance will usually turn into support. It is not uncommon for a pattern to break and for the price action to bounce along the top of the broken pattern for a while before moving up.

Exits are just as important as entries. They cap both your maximum loss and gain. The first type of exit is the stop-loss. A stop-loss represents the maximum risk you are willing to take. Note that a stop-loss that is too close to the entry can be more risky than a further out stop-loss. Good places for a stop-loss are underneath moving averages, underneath old lows, underneath trend lines, and underneath patterns. It is important to place a stop-loss and leave it where it is. If you get into the habit of moving stop-losses as the price gets close to them you will quickly find yourself broke. The other type of exit is the take-profit. Take-profit points tell you how much money you stand to gain from a trade. If your maximum profit is lower than your maximum loss (1.00 profit to 2.00 loss for example) you should reevaluate your trade. Take-profits are usually placed under moving averages, old highs, and trend lines. Some trades may try to profit from the movement of the price within a pattern, in this case the take-profit should be underneath the current high point of the pattern.
A good rule of thumb to use is 10%, for example if you expect the stock to move to 30.00 and you buy in at 25.00 a good place to sell is ((30-25)*0.9)) 29.50. This captures 90% of the move that you are expecting. A less profitable way to do it is taking 10% of the expected final price, 10% of 30.00 being 3 you would place your take-profit at (30-3) 27.00. Of course 10% won't work in all situations, its simply a good baseline to work off of. For stop-losses you can do the same thing but I prefer to place stops just a little under the expected low point. Some people like to cap losses at 10%, meaning if they buy at 20.00 they have a stop-loss at 18.00, this is a good thing to do. If you are unsure of where to place a stop simply place it at a 10% loss.

Sometimes a move doesn't go the way you want. Maybe you placed your take-profit at 30.00 and the stock hit 29.00 and then began to go down. Should you end the trade? Maybe. You should definitely look at the chart and ask yourself "Would I buy this right now?" If the answer is no then sell. A small profit is better than a loss. At the same time you shouldn't get trigger happy and sell as soon as you see a profit. As they say, "Cut your losses short and let your gains run", just don't let your gains run into the ground.
 

Sprint

Sprint, S, appears to be in the handle phase of a cup and handle pattern.  Weekly chart below.

www.freestockcharts.com

You can see a fairly well defined top at about 6.00, this is the key area that needs to be overcome to confirm the cup and handle. A cup and handle is essentially a rounded bottom with a period of horizontal or slightly negative movement before the break out. Once S breaks out through the top the next resistance point would be around 9.50. Big thing to watch on this trade is a fake breakout, label "Spike, 6.50" shows what I'm talking about. A way to mitigate risk from this is to consider only a break above 6.50 as a confirmation of the pattern. Remember that a break is based on closing price and not high/low price. If S does not break out the top it could fall a bit, major support at the 34 day river, the 100 day, and the bottom of the cup (2.10-2.20). If S falls down to this area it could be an attractive buy so long as it doesn't go lower than 2.00. I would consider it to be in a rectangle if it returns to those lows. The rectangle would most likely act as a bottom rather than a continuation of the previous downtrend.
One thing I want to talk about before the trading points is the cup and handle that S is in. Cup and handle is a variation of the rounded bottom. I talked about rounded bottoms a bit in my RIMM post. The bump, labeled as "Bump", is a semi-common feature of this type of bottom. Price action will begin to move up and appear to invalidate the rounded bottom, it usually won't move too high up, and will then come back down and continue the bottom. There isn't really a good way to trade them; you can't predict when they'll happen or how high they'll go. There is probably some potential to short the bump but the risk level wouldn't be worth the potential gain. Anyway, here are some hypothetical trading points.

Entry1: 6.10, 6.50 (a break of the cup, 6.50 is the safer entry)
TP: 9.50 (Holding longer could see 11.10 or 15.50 as good TPs but the time involved makes prediction a little messy)
SL: 5.25, 4.80, 4.50 (5.25 is the best of those but the lower ones would help prevent getting stopped out on a false failure)

If you have a stock you want analyzed leave it in the comments. 

Do your own research before taking any position. I do not currently own any S and do not plan on buying any within the next 72 hours.