The indexes have rallied back up through some important short-term levels, but still face some overhead in the days ahead before the bulls can expect smooth sailing again.

In preparation for the trading week ahead, let’s examine some important levels to keep an eye on for the indexes. That will have the greatest influence on how individual stocks are going to move, so it’s part of our weekend process.  Put these levels on your charts or tape them to your screen, as they may be respected in the days ahead.

Overall, trading ranges still exist for the intermediate-term timeframe.  For that reason, selectivity remains the key for new plays, which I’ve been noting within the member area.

Why I Use TC2000

Why I Use TC2000

Why I Use TC2000

Why I Use TC2000

Trade Like a Bandit!

Jeff White
Producer of The Bandit Broadcast

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I keep it simple.

Confirmation of those patterns is what I require before taking entries on 99% of my trades, which means price crossing through a trend line.  The way I view it, until that line in the sand is crossed, nothing has changed. The rest phase or pullback must not be done until then.  I may detect price perking up or volume percolating, but until the trend line breaks, the setup cannot be fully embraced as a positive change of character.

Right now there’s an excellent example in the chart of AMGN of why waiting for that trend line break can mean preserving both capital and clarity.  The stock is bullish, no doubt about it, as the intermediate uptrend remains intact since it began last August.  Since then, we have a series of higher highs and higher lows.

In recent weeks, the stock has been pulling back quietly with some minor profit-taking leaving price drifting lower since the early-February peak.  The prior breakout was around $65 (January) so it could be the stock is in for a test of that zone, who is to say otherwise?  And until a break occurs to suggest the stock is back on the move, who cares?

Currently, the stock is floundering around beneath a very valid trend line, but no less a trend line which has yet to be crossed.

Why I Use TeleChart

XOM is another example here as just recently the widely-anticipated push through the $88 level as recently as last week never happened. The stock has since fallen out of its channel to the downside. Waiting was the best option.

Why I Use TeleChart

F is one more on the list with $13.05 resistance never being crossed, despite approaching it multiple times of late. Those who bought early in hopes of getting in “cheaper” ahead of the breakout actually paid up. The stock has exited its trading range to the downside, leaving premature buyers in what I’d call the “hurtin for certain” department.

Why I Use TeleChart

Traders by and large love to predict what’s coming, and often will take anticipatory trades as such.  Doing so can be an expensive way to get caught in a stagnant name.

Carefully consider whether a stock is truly getting on the move before committing capital to entries.  Could be that waiting a little longer provides you with not only better prices, but better defined exits as well.

Trade Like a Bandit!

Jeff White
Producer of The Bandit Broadcast

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On both Friday & Saturday (Mar. 9 & 10) at the Worden TC2000 workshop, I’ll be teaching live. It’s at the Marriott Perimeter Center (246 Perimeter Center Parkway NE, Atlanta, GA 30346). The workshop starts at 10am and ends at 4pm, and I’d love to see you there either day.

Specifically, I’ll be discussing Finding the Best Charts Now (Friday 2:45 – 4:00 and Saturday 11:15 – 12:30).  I’ll show you what’s been working best in the market lately, what looks best going forward (so you’ll leave with some actionable ideas), and we’ll build a watch list together of your stocks and read the charts together.

I have a lot of good stuff planned, plus you’ll see the new version 12 of TC2000.  I’m excited about being there and giving you some insights for better trading.  Make plans to be there by pre-registering or just show up (it’s free) – but get there early for a good seat!

Trade Like a Bandit!

Jeff White
Producer of The Bandit Broadcast

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Question:
Jeff, I’m new to trading (since Christmas). I’m wondering how important long term resistance levels are. I suppose it depends really on the market conditions. A skittish market probably respects them more. This market seems to be plowing on through them regardless. The NASDAQ now, is free and clear of them with its breaking through the eleven year high, unless it goes down again.

The reason I am asking is that I’m sticking to a 4 1/2 month chart and ignoring any information older than that. It simplifies things and I wonder how far back people really remember. I also am thinking the older the resistance/support level, the less significant it is. Do you think I will be ignoring less recent history at my peril? I also find that the more information I bombard myself with the less clarity I have.
Thanks

Answer:
Great question and this really deserves its own blog post so I’m glad you asked. To answer you though, here’s my take on it.

I’ll begin by saying as long as a level is being respected, it’s worth taking note of.  That pertains to an individual stock which keeps knocking on the door over the past few weeks, or to an index chart like the NAZ which has just recently pushed through multi-year resistance.

So, they’re worth taking note of.  As far as how important they are, let’s consider the psychology at work here, which is what it really comes down to.

Technical levels are representations of buyers and sellers, which often times base their decisions on emotions. The older the level, the less emotional significance I’d attach to it. More recent levels are fresher in terms of emotion, and therefore tend to get respected to a greater degree.

I’d say anything inside 18 months or so is game, whereas I place lower significance on multi-year levels. They may be noticed by technicians, but anyone who has held for 11yrs in the case of the NAZ isn’t likely to bail out now that they’ve finally gotten their money back – I think they’re the “invested” crowd who never truly intends to sell.

What do you guys think?  What would you tell this new trader?

Trade Like a Bandit!

Jeff White
Producer of The Bandit Broadcast

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Specifically, I’ll be discussing Unique Traits of High-Performance Traders. I have a lot of good stuff planned, plus I’ll share the setups which have been working well for me recently as well as the best setups I see in the market right now. I’m excited about being there and giving you some insights for better trading.

Make plans to be there by pre-registering or just show up (it’s free)!

Trade Like a Bandit!

Jeff White
Producer of The Bandit Broadcast

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Follow @TheStockBandit

On both Friday & Saturday (Feb. 10 & 11) at the Worden TC2000 workshop, I’ll be teaching live. It’s at The Woodlands Waterway Marriott (1601 Lake Robbins Drive, The Woodlands, TX 77380). The workshop starts at 10am and ends at 4pm, and I’d love to see you there either day.

Specifically, I’ll be discussing Formulating Your Trading Plan (Friday 1:30 – 2:45) and Locating Trades & Evaluating Risk (Saturday 11:15 – 12:30). I have a lot of good stuff planned, plus you’ll see the new version 12 of TC2000.  I’m in the rotation with Michael Thompson and Peter Worden, so I’m excited about being there and giving you some insights for better trading.

Make plans to be there by pre-registering or just show up (it’s free) – but get there early, it’ll be a full house!

Trade Like a Bandit!

Jeff White
Producer of The Bandit Broadcast

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Follow @TheStockBandit

Here’s an example from this week…

AGP is sitting in a bullish consolidation pattern here within an existing uptrend.  This is a quality pattern – but it has yet to confirm.  A breakout would happen beyond the upper channel trend line, currently at $70.  Check out the setup, then down below let’s discuss trading it.

Why I Use TeleChart

This is a setup which would have delivered some frustration for those anticipating a breakout – at least for those who entered early.  Wednesday saw a move back up toward the upper channel line, suggesting a breakout was perhaps coming soon, only to have a decisive turn lower on Thursday bring it right back into the center of the channel.  The stock is again lower this morning.

There’s a huge difference between how pro’s and amateurs make anticipatory trades, let’s see what they are and what those choices lead to.

How Amateur Traders Anticipate

Many amateur traders make anticipatory trades.  They receive a tip, or they have a hunch, or they just want to see their predictions proven, and they get in before any bit of a move has started.  They load up, then wait to get paid.  A failure of the stock to deliver the move results in the max loss possible under this circumstance, all because of how the amateur entered the trade.

How Professional Traders Anticipate

Many professional traders make anticipatory trades as well.  Their experience provides them with market feel, and when watching the tape and eyeing the charts, they’ll run across trades they like too – maybe even the exact same setups as the amateur finds.  However, their execution methods are worlds apart.

Rather than piling into the trade and sitting back and hoping the market proves them correct, the professional enters a feeler position – a starter.  A trade small enough to watch but not big enough to hurt them or really help them.  It’s a marker.  As the trade begins to prove itself and the pattern starts to confirm, they add to the trade.  They build a position as it works, allowing them to get paid nicely when their hunch proves correct.  A failure of the stock to deliver the expected move results initially simply leaves them stopping out of their starter position for the bare minimum loss.

See the difference between the two?

There’s a big argument to be made for just waiting for confirmation in a pattern to take place before entering a trade, but anticipatory trading can still produce profits, so long as you’re doing it carefully.

For those of you anticipatory traders, the example above is a great example of how to finesse your entry.  Scale in, make the setup confirm before adding, and know you’re covered either way – whether a tiny loss you can easily survive or a winning trade you can build on.

(For more on anticipatory trading, read When to Make Anticipatory Trades.)

Trade Like a Bandit!

Jeff White
Producer of The Bandit Broadcast

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Why I Use TeleChart

Last week, the stock broke to a new correction low by undercutting the December lows on heavy volume.  What followed, however, was obviously both shocking and painful for the shorts.

Wednesday’s arrival delivered upbeat news for Weight Watchers as U.S. News & World Report put it at the top of the list for best weight loss diets in 2012.  Consequently, Wednesday’s bar was a bullish engulfing bar as Tuesday’s low was undercut before a close above Tuesday’s high on even heavier volume with a 7% pop.  Then we saw near-record volume Thursday on an 8% advance, and further upside continuation Friday with nearly a 9% gain.

Why I Use TeleChart

Change of character? Absolutely.  Value-buyer accumulation? Hardly.  This is the portrait of a short squeeze, and it’s one reason shorts require absolute stop losses.  The sudden shift can rip the faces off of shorts who panic and rush for the exits while opportunistic bulls get long.  The combination can be explosive, as seen here in WTW.

The lesson?  Watch your shorts and don’t give them more leeway than they deserve.  Keep stops in place and be mindful of what’s possible when the tide shifts.  This is one kind of move you don’t ever want to experience from the wrong side of the trade!

Trade Like a Bandit!

Jeff White
Producer of The Bandit Broadcast

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Today I want to point you toward 6 stocks which look to have some promise in the months ahead.  This is not a prediction of where they’re headed, just a list of setups which look to have some potential.

I published the post over at MarketWatch, so here’s the link (complete with charts).

Trade Like a Bandit!

Jeff White
Producer of The Bandit Broadcast

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But can it stick?

That’s always the million-dollar question, but with a solid uptrend in place and prices now pushing to new highs, I certainly wouldn’t bet against it.  In fact, I like it for a push to the $425 area, which is the projection of this pattern (add widest portion of triangle to breakout zone).

Here’s a closer look at the chart:

Why I Use TeleChart

 An aggressive stop would be a gap fill to the 12/30 close of $337.  Nice setup.

Trade Like a Bandit!

Jeff White
Producer of The Bandit Broadcast

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