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Trend lines are a key element of chart patterns and technical analysis. While the most common use of trend lines is to connect consecutive highs or lows, the extensions of trend lines can often prove to be valid. Read more »

Short selling can generate some nice profits….quickly. Maybe that’s why the word short is used – because it can be such a quick trade.

I noticed OPMR this afternoon and cringed for those traders caught on the wrong side of a short squeeze. Read more »

“Look away, I’m hideous!”

Back on December 6th, I gave a chart review of MOVI, which was a downtrending stock. The point of the article was to avoid downtrending stocks.

Although MOVI appeared “cheap” at that time, lower highs and lower lows were in place and there was no reason to believe that was about to change. Here’s a look at the chart I showed back in December:

MOVI continues to trend lower, and buying a “cheap” stock would have been costly!

MOVI put in some horizontal price action following my post, but that was merely a pause in the poor action. Trends followed by horizontal price movement are often followed by more trending in the original direction, which is what MOVI is still doing.

MOVI is down another 40% since I reviewed it within its downtrend, which certainly counts as hideous!

This stock is once again moving lower (down 40% since my review of it - ouchie!) and getting “cheaper” for those who believe in the stock’s fundamentals. Imagine their pain!

The moral of the story is still the same: stick with the technicals and avoid buying stocks in downtrends. Make sure that a stock you’re considering buying has some potential to rise in price and make a higher low and a higher high. Don’t let today’s prices compared to historical prices be your basis for buying a stock, because cheap stocks only seem to get cheaper. You’ll save yourself a lot of money and be able to focus on good opportunities instead of babysitting trades resulting from poor decisions.

Jeff White
President, The Stock Bandit, Inc.
www.TheStockBandit.com

Recently one of my subscribers emailed me a few charts for review. This particular trader wanted to know which stocks I would trade of the handful that he inquired about. I told him that although each of the stocks looked good in the short term, I didn’t like them all for trades.

One thing I always try to consider when scanning stocks for chart patterns is to take a longer term look at the chart to review that stock’s trading history and personality. Is it prone to gaps? Does it seem to trend well? Does it follow through and make continuation moves or does it reverse out of nowhere? While a stock might have a very clean bull flag pattern or double top in place, it may have a history of ignoring such developments. Looking at factors like that helps me to decide if I think the most recent pattern is likely to develop into a good trade or not. Some stocks will set up good patterns but just might not have a history of really confirming them well, which will cause me to move on to the next setup on my list.

Even if you have no personality, make sure you understand your stock’s personality!

Chart reading isn’t a crystal ball, but it can sure give us a glimpse of how a stock usually moves. Taking a stock’s personality into account when contemplating a trade can sure help us determine more accurately how it may behave going forward. In the end, good trading is all about putting the best odds for success on our side, so trade the stocks with consistent personalities!

Jeff White
President, The Stock Bandit, Inc.
www.TheStockBandit.com

Some trades are profitable while still offering us clues as to just how well they are working. While our primary objective is to turn a profit with our trades, it is certainly important to monitor the behavior of our trades to do our best to determine what we should expect going forward.

I highlighted SNDK in my stock newsletter on Wednesday night with lower highs in place and a bear flag pattern which had subsequently formed. The short selling entry point was a downside break of $66.00 at the lower line.

The following day, SNDK triggered and showed us $0.98 in profits. On Friday, it dropped another $0.97 for us, showing us a total profit per share of $1.95 from our short entry.

While I do like the fact that this short sale trade is working, I am a bit concerned by HOW it is working. Although beggars can’t be choosers, I would much prefer to have seen volume kick in with higher levels on Thursday or Friday to indicate intense selling in SNDK as it confirmed the bear flag. So far, we’ve gotten profits but it looks a bit iffy to me. As a result, I’ll plan to take partial profits to lighten up on shares in case this stock bounces. Doing so will prevent me from giving back full profits, while at the same time allowing me to stay in the trade if a larger move develops. Perhaps soon SNDK can find greater downside volume, but it’s important to operate with the facts we are given as traders, so I’m turning slightly cautious on this trade which is working but not technically sound.

Jeff White
President, The Stock Bandit, Inc.
thestockbandit@thestockbandit.com