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).

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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.

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Jeff White
Producer of The Bandit Broadcast

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Take for instance CXO.  Right now the stock is sitting in a short-term bearish formation.  The stock recently declined for a couple of weeks, then has attempted to bounce – without success.  That has created a small rising channel, or bear flag, which is quite likely to be resolved to the downside when taken at face value.

Why I Use TeleChart

So am I going aggressively short here?  No, and here’s why:

Short-term, this looks like it wants lower.  But by looking to the left, I see more than just the selloff and feeble bounce attempt.  I see that just about $3 lower is a major level which has served as both support and resistance in recent months.  That could again provide buyers with a spot to take a stand, and it poses a threat to this setup as a bearish play – a roadblock for the trade.

Here’s a closer look at the chart:

Why I Use TeleChart

Always take the short-term pattern you’re seeing in context.  With that in mind, this bear flag isn’t a high-probability trade given support isn’t far below.  Furthermore, the overall trend in recent months hasn’t changed, as this is really just a range-bound stock heading back toward key support.  It might not hold, but trading is about probabilities, and they aren’t real favorable in this case for a move of more than about 3%.

In other words, always look to the left.

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Jeff White
Producer of The Bandit Broadcast

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Checking out the recent price action, the stock is a bit range-bound, but a closer examination reveals an often misunderstood pattern: the cup & handle pattern.  The look of the pattern is easily identifiable to even novice chart readers, but they usually fail to take it in context.  Here, it’s right where it should be found – within an uptrend.

Here’s a closer look at the chart:

Why I Use TeleChart

A confirmation of this pattern with an upside exit would put this one in the mid-60′s in short order, so it’s worth keeping on the radar even though it’s far from a momentum name. If anything, this is simply an example worth pointing out. The handle may need a bit more work and it needs to threaten the upper trend line to indicate a move is imminent, but it belongs on the radar no less.

Trade Like a Bandit!

Jeff White
Producer of The Bandit Broadcast

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Some suggest GLD has topped, and in the near term, they have technical reasons which back that up (lower highs).  But a closer look at the chart reveals a pair of important levels to keep on watch, so that’s what’s covered in this video.

(Direct video link is here for those interested in sharing).

Be sure to view in HD (720P) and full-screen mode for best quality in the video.

Trade Like a Bandit!

Jeff White
Producer of The Bandit Broadcast

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That might sound exciting to some, but any veteran trader like me would tell you that surprises are not what a trading career is built on.  Surprises spook us, and full-time traders like me want only to avoid them.

Take the buyout news in VRUS, for example, which sent the stock higher on Monday to the tune of 85%.  Catching a pop like that doesn’t sound so bad, right?

Well, considering that technically the stock was set up better for a short than a long, the technical play wasn’t to be long over the weekend.  The daily chart had shown both lower highs and lower lows in recent weeks.  Those short would have effectively lost their entire position. Ouch!

Among other (more important) things this week, I’m thankful I had no position to begin with, but I just couldn’t help but notice the outsized gap on Monday morning.

Risk in market is required to profit, but great traders identify ways to reduce risk.  Buyouts aren’t easy to see coming, but drug stocks just have too much other stuff going on anyway.

Bottom line:  drug stocks are very tricky when it comes to overnight trades, so be consider the VRUS move another reason to be careful if you’re trading them (and consider options instead of common).

Here’s a closer look at the chart:

Chart courtesy of TeleChart

Trade Like a Bandit!

Jeff White
Producer of The Bandit Broadcast

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Take for example those imminent move alerts.  A sudden perk in volume as a stock turns to challenge a key level can sometimes be an indication that a breach of that zone is about to take place.  Someone’s accumulating shares ahead of the break, and technical traders will take note of the volume expansion ahead of a possible break, placing that stock on the radar of many.

Deteriorating Demeanor

Potential pattern failures can also come to light sooner by taking note of variations in how the stock is moving.  With that in mind, let’s examine a stock which may be giving off some of these subtle suggestions like I’ve been discussing.

ARUN has a multi-month uptrend line (higher lows) which has provided support on numerous occasions, letting dip-buyers use it as support to play short-term bounces.  It’s still intact, but something else is of concern.

Specifically, the stock had been establishing higher highs along the way up, with each bounce attaining new recovery highs – until recently.  Over the past couple of weeks, we’ve seen bounces carry to lower levels, and one could even consider drawing a rounded top around the peaks of the past month.  This suggests waning strength in the stock, so I’d avoid a support-based buy at this point.  ARUN may rally again from this area, but I’m not betting on it.

A New Plan

My inclination would be to give this one a bit more time and see if another descending trend line can be drawn at some point from the 10/27 peak along the recent highs and wait for an upside break.  This stock has a history of clearing such trend lines (including the 3 drawn below), so that’s likely a better approach for getting long than a support buy after the establishment of lower highs.

Here’s a closer look at the chart:

Chart courtesy of TeleChart

Again, detecting these subtle variations in the price action is not a guarantee for better entries and exits.  What it does is alert us to potential changes of character so we can make better decisions based on probabilities – and trading is all about probabilities.

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Jeff White
Producer of The Bandit Broadcast

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I believe that still holds true, but I was questioned about some common moving averages on the heels of that post.

So in this video, I want to discuss moving averages, and more specifically, two moving averages which are commonly accepted by traders as important: the 50-day and the 200-day moving averages.

We’ll look at some big-name stocks and let the charts speak for themselves on whether it’s appropriate or not to leave these MA’s on the chart all the time.

Be sure to view in HD (720P) and full-screen mode for best quality in the video.

Trade Like a Bandit!

Jeff White
Producer of The Bandit Broadcast

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They’re way off.

Personally, I don’t rely on indicators.  I am price & volume based when making decisions on trades, and although I might occasionally glance at a moving average or something, I like to keep my charts clean and put my focus at the roots of all indicators – price and volume.

Does that make me better?  Maybe.
Does it make me more decisive?  Absolutely.

Back when I first went full-time as a trader (remember I already had over 2 years of part-time experience trading), there was a guy in our trading office who suffered from indicatoritis.  His monitor was the most colorful thing in the office, but also the most confusing.  It looked like a child had taken the entire spectrum of dry-erase markers and drawn all over his screens – a complete mess from which no sense (or cents) could be made.

This was a man grasping for some kind of a signal, but what he actually got was 50 different signals which contradicted each other.  His search for clarity resulted in confusion.

That’s not a technician at work, it’s a futile (and wasted) attempt at adding an ounce of consistency to his results.  He was looking in the wrong place.

A few years later, I saw a presentation by a guy (who still maintains a pretty large following in the technical analysis community) who “sees” his plays develop from charts with so many indicators that price itself is virtually obscured.  Are you kidding?  Suffice it to say, I think he derives zero value from those charts in terms of actual trade signals, but rather makes a really good living off confused traders seeking a magic bullet.

Indicators:  Use Sparingly

Traders by and large rely too heavily on indicators, when it’s far better to use those indicators for confirmation.  The price chart should tell you everything you need to know, but if you want some secondary assurance, then an indicator can provide that – so long as you’re using the right ones and at the right time.

Remember this when it comes to indicators:  more does not equal better!  Simple is ideal.

The hard part of trading is getting out of losing trades and staying in good trades.  The hard part is not locating the magic bullet.  Don’t waste your time expecting to find the secret to 99% profitability, because it isn’t out there.

A better use of your time and effort is to focus on improving your methods.  Even better, improve your mentality, because that’s where the real game of trading is won or lost.

Trade Like a Bandit!

Jeff White
Producer of The Bandit Broadcast

Follow TheStockBandit on Twitter or get our free newsletter to keep up!

Day trading gaps can be quite lucrative, particularly when it happens early in the session.  However, there’s a flip side to it which must be considered – and it costs many traders money to ignore the warnings.

Check out the video for more on this topic, and be sure you’re on the email list so you’re always notified of new updates like this one.

Be sure to view in HD (720P) and full-screen mode for best quality in the video.

Trade Like a Bandit!

Jeff White
Producer of The Bandit Broadcast

Follow TheStockBandit on Twitter or get our free newsletter to keep up!