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Strategies & Market Trends : Market Gems:Stocks w/Strong Earnings and High Tech. Rank -- Ignore unavailable to you. Want to Upgrade?

To: Rose K who wrote (33934)	4/14/1999 7:17:00 PM
From: Jenna	Read Replies (1) \| Respond to of 120523

Getting into a stock, "buying the dip" and historical price patterns. Rose you question can easily have a 500 page answer. Look at some of the charts in today's List. 209.238.58.46 In fact my favorite book AFTER your've read your Elder and Bernstein is Technical Analysis of Stock Trends' by Edwards and Magee. It is a very fat book but surprisingly readable and interesting. What you have to recognize are historical price patterns that are INDIVIDUAL for each and every stock. What I do with the charts on the watch list are draw trendlines and in most cases support and resistance lines. These are the individual 'blueprints' that characterize the price patterns of the particular stock. Usually I track short term resistance but also have the long term resistance lines as well although so as not to confuse I leave those out. Support and resistance lines are one of about 7 or 9 reversals I can find when entering a long position. You can have also 1) Cup & Handle breakouts 2) Breakouts from Right Angle Triangles. 3) Breakouts from double or triple top chart formations 4) Clear penetrations of well defined support or resistance 5) breakaway gaps (lots of our stocks this week were that especially IONA, TDFX, TSCN,CYCH) Once you are close to resistance (or even bouncing off support if the stock has been down more) and early breakout you can bet it is the best time to get into the stock.. Then you of course need confirming indicators like OBV (rising preferrably) and and oscillator or two (stochastics). You don't even have to repeat the trendlines on your own just use the stock prices and chart your own trading 'channels' either with envelopes or bollinger bands in the morning. yesterday I posted the chart of FLEX it was a 5 day chart and although I usually do a 3-6 month chart FLEX's pullbacks are so miniscule that I had to put them under a more 'refined microscope'. As a result of FLEX's momentum breakout yesterday FLEX contnued its upward trend and were it not for the generally dismal NASDAQ finish, could conceivably have gone higher. So if you see my chart you could have derived your own entry target based on the fact that it had in fact ended the session with a momentum breakout on Tuesday. Now we come to NEON chart. NEON was a not-so-attractive chart so why then was it on the watch list? Historical price pattern and the fact that NEON fell badly below support of 59 so close to earnings was an important factor. Also the big picture here was a relatively small pullback withint a much larger strong upward trend. Most of our stocks are high relative strength and high technical rank so we are looking for the pullbacks to buy. Resistance and Support help to define the boundaries of the pullbacks. (ie. the difference between freefall in a stock like BMCS or CTXS and a natural pullback like NEON).. NEON was in fact a buy yesterday (for more aggressive traders) but it could have gone both ways this morning, the fact that it continued up was a good sign Actually what happened with NEON was what they call "BUYING ON THE DIP". To know when a dip is a dip and not a freefall you have to be in familiar with the market trends in general and in the stocks trends in particular. When a stock like NEON trends strongly for 4 or 5 days you can expect some profit taking every week or so. Of cours you should get into the stock when the dip is over and not in the midst of the dip which is why I set my buy limit nearly 1 full point above the low point yesterday.. If NEON would drop more there is no danger I'd get swept in but if it rises I will be caught up in the rise. NEON was good yesterday because the general market trend was up yesterday and enabled entry. You usually look to the 'belwhether' of your sector to see if they too begin to rise. Its these belwhethers that are usually the first to rise. Remember since we are looking at very strong stocks that are winners the best entry signal would be a resumpiton of the upward motion (you can see that with your charts).. This is just a 'thumbnail' of a major trading strategy, but you could really do a lot more witht he charts of both the watch list and newsletter and utilize them in helping you enter and exit the stocks.