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Copyrights 2008 © Technical Analysis, Inc. All rights reserved. page 4 20 16 15 14 14 12 12 10 Traders.com Copyright ©2007 TechnicalAnalysis,Inc.Allrights reserved.Informationinthis publication mustnotbestoredor reproduced TABLE OFCONTENTS CHART PATTERNS INDEXES breaks throughthehurdlesandcreatesgoodtradingconditions. M atmosphere inthemarket. sizable M should beonguardfora bounceandapotentialdoublebottom. T Hill by Arthur Another day, anotherlookatasetupgoneawry. by DavidPenn A confirmedB by DavidPenn market. between gettingwhipsawedandrewardedinthe Waiting foraconfirmingclosecanmakeallthedifference by DavidPenn N by ChaitaliMohile After longvolatilesessionsinearliermonths,E by ChaitaliMohile hourly Dowindustrials. A classicJapanesecandlestickpatternrevealsabottominthe by DavidPenn any numberofvariations. This toolisareliableandtraditionaltechnicalindicatorwith by ChaitaliMohile And Away? In The December T-Note Rally A Support A Support Test For THQI Rate Breakdown: 10-Year Yields Get Whacked 10-Year Treasury Yields: Up, Up, W NASDAQ CompositeBreaksOut Clouds OfUncertainty Austria I-ShareLeavesBehind Star A Morning Wakes Up The Dow Chasing The Trend With Moving Averages •Traders HQ ASDAQ ACD atching The Divergences: Point Picking AShort Inc.istestingsupportfrom itspriorlow, andtraders ™ is published by Technical Analysis, Inc., 4757 California Ave. S.W., Seattle, WA 98116-4499. 1 206 938-0570 or 1 800 832-4642. Printedinthe U.S.A. ispublishedby Technical Analysis,Inc.,4757California Ave.S.W.,Seattle,WA98116-4499. 1206938-0570or 1800832-4642. histogrampositivedivergence anda Compositesurged onpositivedivergence inabullish .com ACD Traders histogrampeak. OSO THE MAGAZINE FORINSTITUTIONALANDPROFESSIONAL TRADERS

breakout followsbotha WO finally 21 26 26 23 22 30 29 28 METALS ANDENERGY really afunctionoftheweakUScurrency. the looniestartedtradinghigherthanUSdollar, whichis the firsttime(currentlyat14,332vs.Dow13,888). Inaddition, support potentialforcorrection intheyellowmetal. October. stochastic anticipatedamovehigherinnaturalgasfutures Bollinger Bandspointtoabreakoutsoonerratherthanlater. Safeway movedintoatighttradingrange,andcontracting Hill by Arthur suggesting atradablemove. Staples isatacrucialpointhere,withpatternanalysis by GaryGrosschadl of thelong-termuptrend. to threemonths,andabreakoutwouldsignalcontinuation Intel formedabullishcontinuationpatternoverthelasttwo Hill by Arthur sales. The patternwascompletedonnewsofhigherSeptember by PaoloPezzutti Negative divergences inthe M by DavidPenn two mainevents.First,thisyeartheT The year2007willberememberedbyCanadian tradersfor by GaryGrosschadl Positive divergences inboththeM by DavidPenn verge ofreversingatwo-monthuptrend. Ann Taylor formedanisland reversal,andthestockison Hill by Arthur Send DecemberNatural GasHigher W An IslandReversal For Ann Taylor A Squeeze Play For Safeway Staples Inc. Tests ADouble Top A Cup-With-HandleFor Intel Aw Evening StarInDecemberGold The TSX EnergyIndex StillGushingHigher Bounding IntoResistance: Positive Divergences al-Mart: ABullishReversal IslandPattern aits Bearish Confirmation aits Bearish JANUARY/FEBRUARY 2008•VOLUME6NUMBER1

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Copyrights 2008 © Technical Analysis, Inc. All rights reserved. January/February 2008 5 4 3 2 1 levels. trading all for is pricing Ameritrade TD year. per 120+ or trades quarter per trades household 30+ making on based pricing Schwab rat commission lower in result may trading More quarter. per trades options or 149 to 30 stock making on based E*Tradepricing vary at highervary to tradin Margin entail trading Fidelity Fidelity Market shar Available to households that place 120+ stock, bond, or options trades in a rolling twelve-month period and maintain $25K in as in $25K eligibleacross Fideli maintain and period twelve-month arolling in trades options or bond, 120+ stock, place that households to Available System availa System Brokerage Serv g on margin. Margin credit is extended by National Financial Services, Member NYSE, SIPC. Competitor rates and eligibi and rates Competitor SIPC. NYSE, Member Services, Financial National by extended is credit Margin margin. g on Rates Rates RtRat Dedicated Servic Portfolio-Leve Research Third-Party Independent The MostFree Margin Rate and Li Onli Trades: of $500K visit Fidelity.com/switch2 Call 800.396.9289or Ask aboutourexpeditedaccounttransferprocess. See why Fidelity is growing isgrowing See whyFidelity e growth is based on cumulative Daily Average Revenue Trades from 1/03–7/07. from Trades Revenue Average Daily cumulative on based is e growth sver es margin balances, but rates are not less than 7.24%. than less not are rates but balances, margin verifi its trading business faster its tradingbusinessfaster mit ifi bility and respon bility

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Copyrights 2008 © Technical Analysis, Inc. All rights reserved. SECTORS page 6 TABLE OFCONTENTS 33 32 31 31 30 36 36 35 34 33 Financials SelectSector S by ChaitaliMohile and thispointstoacontinuation oftheJulyÐAugustdecline. Merrill Lynch continuestounderperform thebroadermarket, Hill by Arthur X by ChaitaliMohile view. two andahalfyears,butnowseriouschallengecomesinto Boeing Co.hasgiveninvestorsanicedoubleinstockprice by GaryGrosschadl omen asweheadintoOctober. the Septemberrally, andrelativeweaknessisabad The SemiconductorIndexdidnotparticipatein Hill by Arthur X by ChaitaliMohile frames, andtheseshouldbewatchedforthenextsignal. Alcoa formedtwocompetingwedgesindifferent time Hill by Arthur not seensince August 2006.Isittimeforcrudetocome in? A strongbullmarketin2007tookDecembercrudetolevels by DavidPenn tested abottomthreetimes.Isthisthirdtimecharmed? Over thelastfourmonthsthisalternativeenergy playhas by GaryGrosschadl relative strengthbreakoutpointstohigherpricesforthestock. Steel Dynamicsformedabigoutsidereversalatsupportand Hill by Arthur leading toabullishrally. long-term moving averageresistance. New HighsAndNegative Divergences Consolidating AtNew Levels T Dueling Wedges For Alcoa Crosses December Crude The Line: Ballard Power SystemsStruggles With Bottom Steel DynamicsShowsRelativeStrength W LaysMerrill Low Surges To Previous High Consumer StaplesSelectSector Are Boeing’s High-FlyingDays Topped Out? Semis AreLagging •Traders echnology SelectSector LP LK eak XLF Turns Weaker

isundergoing healthyconsolidationatall-timehighs, is headingtowardnewhighs. .com Traders THE MAGAZINE FORINSTITUTIONALANDPROFESSIONAL TRADERS PDR makesaU-turnfrom 40 39 39 38 37 46 45 42 41 41 46 CURRENCIES A Advertisers’ Index Glossary How muchfarther? for theworldhasbeenafallingUSdollar. The darkestscenarioofthepastfewyears by KoosvanderMerwe A breakbelowsupportatthe50-dayE by DavidPenn implement anewtechnologytoaccesstheInternet. The communicationscompanyplansahugeinvestmentto by PaoloPezzutti winding evertighteraheadofanimpendingbreakout. Eli LillyhasbeenconsolidatingsinceearlyJuneandthecoilis Hill by Arthur so youcantradesuccessfully. time, Iwilldiscusshowtoidentifytrendsandapply indicators Previously, Idiscussedvarioustypesofmovingaverages. This by ChaitaliMohile sellers tooktheU A fewdaysafteranascendingtrianglehintedathigherprices, by DavidPenn get tooexcited,though. pattern, theUSDollarIndexlookspoisedforabounce.Don’t After becomingoversoldandformingabullishengulfing Hill by Arthur higher pricesforthegreenbackagainstyen. An ascendingtrianglebottomin August andSeptemberhintsat by DavidPenn close makeforalower U The Greenback/Swissy Down USD/JPY: Breakout AndPullback Off The Bottom The Falling USDollar mMmPatternBearish Breaks Sprint: New Technology NotPaying OffSoFar Lilly Winds UpFor The Pitch Chasing TheTrendIndicators With The Ascending Triangle InUSD/JPY Dollar Down Against The Yen: Revisiting US DollarIndex Tries To Firm uthors AndArtist SD /J PY .com downhard.Here’s howithappened. SD /C HF . MA TM

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help indicator with any number of variations. of number any with indicator This tool is a reliable and traditional technical traditional and reliable a is tool This by ChaitaliMohile trading volumes. market trends,movingaveragescanbeappliedto Besides applyingthemtostockpricesidentifythe ing averagewillbemoresensitivethana10-dayone. averages willbemoresensitive.Soafive-daymov- longer, ittendstobecomesmoother.Shortermoving generates accurateandreliableresults.How? spans, marketmomentum,andstocks(securityprices) that areoftenjagged.Applyingthemtospecifictime are usedtosmooththerawmomentumindicators let’s trytounderstanditindetail.Movingaverages Most ofyouareprobablyfamiliarwiththistool,but T ent terms,andmore. momentum oscillators,movingaveragesofdiffer- follow particulartechniquesliketrendindicators, every marketscenario,it’salwaysnecessaryto type oftrendandtheprevailingpricemomentumin stated thatpricesmoveintrends.Torecognizethe analysis. RobertEdwardsandJohnMageecorrectly sideways ortrending. techniques toidentifywhetheramarketistrading do havefaithinthemostreliableandtraditional ity islikeextractingapearlfromshell.Yetpeople perfect combinationfromthisvastoceanofpossibil- technical analystortraderrequires.Butselectingthe tors, lines,channels,andjustabouteverythinga lent scanners/filtersforstocks,updatedwithindica- various tradingsoftwareavailabletoday,withexcel- different forstockmarketparticipants.Thereis figures (likeafluctuatingmarket),moreclearly.” value inshowingthetrendofanirregularseries moving averageisafascinatingtool,andithasreal Technical AnalysisOnStockMarketTrends in theexistingmarket.Ashenotedhiswork along withmovingaveragesandtheirinterpretation Pring analyzedvariousmomentum-basedindicators THE CHARTIST ■ ■ YPES Different typesofmovingaverages: As thetimespanofmovingaveragegets In hisbook Both theseaspectsformthebasisoftechnical In In Simple movingaverages(S Exponential movingaverages (E Chasing TheTrend With

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Copyrights 2008 © Technical Analysis, Inc. All rights reserved. following conditionswhenthe price: expect ashort-termrebound. the pricedeclinesfarbelowMAline,andyoucan is placedonthosedaysthathadhighervolume. ume isthemostimportantvariableandmoreweight January/February 2008 oscillator canbecombinedwiththeS averages of12,25,andninedays.TheM default parametersbeingtheexponentialmoving verge witheachother.MAsareexponential,the two movingaveragesconstantlyconvergeanddi- divergence (M deviation andthemovingaverageconvergence/ confirmation afterthecrossover. so tradersshouldkeepaneyeonfurtherprice average. Thesecrossoverscanleadtowhipsaws, average crossesbelowthelonger-termmoving downtrend issignalediftheshort-termmoving from below,itindicatesadevelopinguptrend.A average crossesthelong-termmoving nificant signals.Whentheshort-termmoving Moving averagecrossoversprovidethemostsig- I Equivolume charting,developedV term onesuchasthe200-dayMA. day, onemedium-termMA,say50days,andalong- ages, youcanplotoneshort-termMA,say10or20- moving averages.Whileinterpretingaver- have understoodtheimportanceoftimespanin commonly usedmovingaverages.Bynowyoumust correlations generatebuypositionswhentheprice: hold greatvalueandgeneratebuyorsellsignals. support andresistancelevels.Support an additionalexponent. expand thetimeperiodorsmoothaveragewith reliable signals,thenthatmeansyoueitherhaveto strength ofthetrendline.Butiftoolfailstogive gets testedbymovingaverages,thegreater nificant tradesignalsoccur.Themorethetrendline averages. Whentheselinesareviolated,moresig- be constructedjoiningpeaksortroughsonmoving tum-trend reversal.”Incertaincases,trendlinescan providing reliableandtimelysignalsformomen- direction changeoffersapromisingapproachfor ous whipsawsignals,notingthat“movingaverage average crossoverofrawoscillatorsduetonumer- an indicatorinisolationismorereliablethanmoving a pricechart. NTERPRETATION ■ ■ ■ ■ ■ In adowntrend,sellsignalsaregeneratedinthe There isthepossibilityofwhipsawsoccurringif Among thesix,S The crossoverfeatureformsthebasisfortrend In anuptrend,thefollowingprice/movingaverage Besides crossovers,movingaveragesalsoactas Martin Pringfindsthatusingmovingaveragesas average retraces backwithoutpenetration of MAandbreaks downagain. Travels frombottomtotheupper resistance Remains belowthelongterm moving average lineisstillrising. Falls belowtheMAlinewhilemoving Moves abovethe200-periodMAand Moves aheadwithsupportoftheMA ACD ) indicator.Itissonamedbecause MA

and E MA AMA MA

are themost . Here,vol-

or E MA ACD

on are frequentlyusedtoidentifytradingsignals. article, Iwilldiscussafewoftheotherindicatorsthat while youaretrading.Inmynext market consolidationsorsidewaysmovements. signal. Movingaveragescanalsobeusedtoidentify line willdeterminewhetheritbeabuyorsell direction ofthetrendlineandmovingaverage conjunction withthepenetrationofatrendline.The This articleoriginallyappearedon8/29/2007. There aremoretradingsignalsthatcanoccur The penetrationoftheMAlinewilloccurinclose found onlineatwww.working-money.com. This article — and articles like it—canbe —andarticles This article Starter Kit T Professional of Your Trading T Starter Kit T Professional of Your Trading T

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OMMODITIES — 65issues value — • page11 , butyou’ll Technical . Value ™ , , Copyrights 2008 © Technical Analysis, Inc. All rights reserved. Japanese candlesticks,IfoundtheD But forsomeonewithaworkingknowledgeof and excellent books, range consolidation wasaclueforfurtherdown- (E creates good trading conditions. trading good creates trials. the D candlestick linesandpatterns.Isthereanythingin evaluate myunderstandinganduseofJapanese EWO finally breaks through the hurdles and hurdles the through breaks finally EWO indus- Dow hourly the in bottom a reveals page 12 T months, earlier in sessions volatile long After by ChaitaliMohile Uncertainty Behind CloudsOf A SUPPORT&RESISTANCE I pattern candlestick Japanese classic A by DavidPenn W A MorningStar CANDLESTICKCHARTING merely exit—atthe13346.19level(13365for shooting starpatternlettradersgetshort—or futures at13174).Inthesecond,aconfirmed trading around13150(SeptemberDowmini- allowing traderstogetlongwhentheDowwas instance, amorningstarpatternwasconfirmed, a pairofJapanesecandlestickpatterns.Inthefirst end lateonSeptember4waswell-telegraphedby rally thatbeganlateonAugust28andappearedto August intheDowindustrials.Tomyeye, patterns havehadtosayaboutthefinaldaysof lyze andtrademarketsbasedonthesepatterns. subject neededinordertomoreconfidentlyana- just thesortof“continuingeducation”on WO That said,let’slookatwhatthecandlestick Tradable: Tradable: ustria I-ShareLeaves akes Up The Dow Beyond Candlesticks?Maybe,maybenot. Next Move In Forex:UsingCandlesticksToCatchThe credit SteveNison’sfour-D VD ). Moreover,thegapdown fromawide- selling pressureintheAustria i-share in Figure1showthehighvolatility and he largenumberofredcandles inthechart ¥Traders

set thatisn’tcoveredinoneofNison’s I NDEXS I NDEXS I NDEXS $INDU EWO , forhelpingmecompletelyre- Japanese CandlestickPatterns .com VD

set, VD Profiting

set tobe take apositionfortheanticipatedridehigher. their exposuretodoso,andforlong-sidetraders short-side traderswhohadn’tcompletelyreduced points. Thiswasalltheconfirmationneededfor closed abovethepatternbyagoodsixorseven second houroftradingonAugust29asthemarket ows aswell.Thatispreciselywhathappenedinthe more comfortablewhenthecloseexceedsanyshad- exceeds therealbodiesofpattern,Iammuch pattern. Whilesomearecontentifanhourlyclose when therewasanhourlycloseabovethehighof actually reversingandheadinghigher. meant therewasthepossibilityofmarket tum waswaningquickly.Moreambitiously,this tern meant,ataminimum,thatdownsidemomen- bility ofabullishmorningstarpattern.Thispat- double bottomformedonthe R to alowerlowfrom36.5 33.84.Atthistimea bring backtraderconfidence. tance. Thebreakoutfromthisareawasimportantto the 50-dayMAsupportand200-dayresis- the clusterofdojis.Therallywastrappedbetween cooled offabit. crossovers weakenthestockfurther,sopullback 35.64 wasformed.Thebearishmovingaverage towards theseresistancesfailedandthehigherlowat the 200-daymovingaverage.Thefirstpullbackrally the bullshadtwostrongresistances,50-dayand ging downthestocktolowestlevelof33.84.Now another gapdownencouragedbears,graduallydrag- Nison, Steve,andKenCalhoun[2007].“ R same level).TheR E fall. Withthesupportofa200-daymovingaverage, above 50levels. and gainedthebullishstrength steadilyasitmoved divergence (M stochastic andthemovingaverageconvergence/ for thepastfewdaysandwasoversoldinboth the factthatmarkethadbeeninadowntrend combined withtheprevioustwocandlesticksand Wednesday beganwithastronguphour.This, no upperorlowershadowatalltocloseoutTuesday. There isadownhour,followedbyhalfhourwith we canseetheDowmovingdownlateonAugust28. Wednesday, August29.Lookingatthehourlychart, closed onTuesday,August28,andopened the morningstar. contract. that five-dayadvancewasworthatleast$955per the Septembermini-Dow).Formini-Dowtraders, WO Confirmation ofthemorningstarpatterncame If youlookatthechart see thatpricemoved The upsidemovelostitssteamascanbeseenby The morningstarpatterndevelopedasthemarket In Figure1,Iwilllookjustatthefirstinstance, EFERENCES Next Move,” In Forex:UsingCandlesticksToCatchThe

tried toconsolidateandrushupward.But ACD ) histogram,createdthepossi- SI

(14) beganitsupwardrally four-D VD SI

(14) (oversoldat set, http:// Profiting ■ to 38levels. Both indicatorssuggestthe successful on theweeklychart,as50-day MAsupportisclose support asbefore.Thestop-loss givesahigherweight MA support.Thepresentrally alsobeganwiththesame the Julyturbulencedrifted stockbelowthe50-day been ashieldduringvolatile sessioninthepast.Only prevent whipsaws. for alow-risktrade,keepingtightstop-losswill and candragthepricebackto50-dayMAsupport.So important, asthevolumestillstandsbelowsatisfaction 39.53 withastop-lossat38.Here,theisvery therefore, tradersgotafreshbuyingopportunityabove breakout. Theprevioushighof38.95wasviolated,and positive indicators,thepricemadeahighof39.53on the support/resistancearea. pressure wasseenincreasingasthepricemovedoutof territory, forminganewhigh.Therefore,thebuying gence (M _____ [1994]. Nison, Steve[1991]. confirmed andtheDowsettomovehigher. Wednesday. Onehourlater,themorningstarpatternis Tuesday andcompletesinthefirsthouroftradingon ing starpatternbeginsinthefinalhoursoftradingon FIGURE 1:DOWJONESINDUSTRIALAVERAGE,HOURLY. On theweeklychart(Figure2),50-dayMAhas With thenewlyformed200-dayMAsupportandon Meanwhile, themovingaverageconvergence/diver- Simon &Schuster. ing Techniques www.stocktradingsuccess.com. Sons. ACD ) (12,26,9)alsoclimbedintopositive Beyond Candlesticks , NewYorkInstituteofFinance/ Japanese CandlestickChart- See www.Traders.comformore. This articlewasfirstpublishedon9/5/2007. January/February 2008 , JohnWiley& A morn-

eSIGNAL Copyrights 2008 © Technical Analysis, Inc. All rights reserved. January/February 2008 breakout astheR this trade. resistance andisheadedtowardprevioushighs.Thestop-lossof38necessaryduring FIGURE 1:EWO,DAILY. support atthe50levelandM experience, andriskappetite. You shouldbeaware ofalltherisksassociated withforeign exchange tradingandseekadvicefr W How DoesFXCM Lower Offer Spreads? FO ARNING: Trading foreign exchange onmargincarriesahighlevel ofriskandmay not besuitablefor allinvestors. Before decidingto tradeforeign exchange, you objectives, shouldcarefullyconsider your level monetary of REX CAPITAL FINANCIALSQUARE MARKETS, 32OLDSLIP, 10TH FLOOR, NEWYORK, 1-888-503-6739 NY10005 USA. SI The Austriai-Sharehasviolateda200-daymovingaverage

(14) hasgood Providing You withLO ACD Learn How withaFREE$50,000PracticeAccount ritory withabullishcrossover. (12,26,9) isonitswaytopositiveter- EUR/USD 1.36 o:1300Low: 1.37100 Low: 1.36050 Sell For moreinformation, visittheS&Cadindexat 21 100 Fr 1 actional PipPricing following astrictstop-lossat38. rally. FIGURE 2:EWO,WEEKLY. 1.36 Traders cangolongabove39.53, 14:31:10 om anindependentadvisorifyou have any doubts.Past returnsarenot indicative offuture results. WER SPREADS! Traders.com/reader/ 22 The 50-daymovingaverageofferedstrongsupporttothebullish Buy x

■ 8 WWW.FXCM.COM See www.Traders.comformore. This articlewasfirstpublishedon10/9/2007. Traders .com ¥ page13

STOCKCHARTS.COM Copyrights 2008 © Technical Analysis, Inc. All rights reserved. atmosphere in the market. the in atmosphere positive divergence in a bullish a in divergence positive NASDAQ Composite surged on surged Composite NASDAQ by ChaitaliMohile Breaks Out Composite NASDAQ BREAKOUTS page 14 by DavidPenn T December In The PointPicking AShort Divergences W REVERSAL index wouldsoonreachitsoldhighlevels. on theRSI(14)support50-daymovingaveragebreakout.TheNASDAQComposite FIGURE 1:$COMPQ,DAILY. -Note Rally Tradable: atching The ¥Traders $COMPQ .com The positivedivergenceonthehistogramandhigherlows creased thevolume,supporting These twobullishindicationsin- low, reconfirminglim tion, thehistogramformedahigher cating areducedbearishforce.Inaddi- moved belowthe200-dayMA,indi- 30-level support,evenwhentheindex T tive strengthindex(R with strongbullishindicators.Therela- mediately byafastrecoveryinprice day MAsupportwasestablishedim- moving average.However,the200- downfall, evenbelowthe200-day resistance failed,resultinginastrong of the50-daymovingaverage(MA) throughout August.Thefirstbreakout but othertimes simplyaddingorsub- using theaveragetruerange indicator, the signalsessionasakey,sometimes the mostpart,Ilookedat rangeof rewarded in the market. the in rewarded getting whipsawed and getting and whipsawed getting make all the difference between difference the all make F W aiting for a confirming close can close confirming a for aiting Tradable: a givenbuyorsellsignal.For how besttoenteramarketafter or yearsIstruggledtofigureout ($C the N wo movingaverageskept OMP TYZ7 ASDAQ Q) inawiderange SI ited downside.

) (14)heldits Composite

STOCKCHARTS.COM opposed tosimply nolongermoving of movinginthedesireddirection (as show thatamarketisactually capable seems tome,isallthatrequired to points, thatkindoffollow-through, it a pointbeyondthehighorlow orfive market’s confirmingcloseisonlyhalf of thesignalsession.Whethera firming closebeyondthehighorlow much simpler:afollow-through,con- short trade. that sessionasatargetforlongor session’s rangetothehighorlowof tracting somefractionofthatsignal lished strongsupportonthe50-day below theday’shighbuthasestab- buying opportunities. lows andhigherhighs,offeringnew positive divergence,andtheR good volume,andthehistogramhas time thebuyerswerealreadyinwith on theresistanceline.Butbythis doji candlewasformedprominently 50-day MAseemeduncertainasthe possibility ofabullishrally. Not onlythat,theR the 50-dayMAwithadojicandle. highs, whilethepricewasstuckat moved abovethezerolinewithnew level (Figure1).Thehistogramhas continued toremainabovethe50 for abreakout. FIGURE 2:$COMPQ,WEEKLY. At thispoint,Irelyonsomething Tuesday’s bullishsessionhasclosed Now, thesecondbreakoutof SI

(14) hashigher The lowerlevelconsolidationaccumulatedthestrength SI

(14) ber Treasurynotes(T in theolddirection). MA. TheR ing onabreakoutrally.■ medium-term chartalsosupportsbuy- are bullishonabreakoutrally.This formed ahigherlow.Sotheindicators togram thoughinnegativeterritoryhas above thegoldenlevelof50.Thehis- Increasing M late JulyexceededthatofJune. gence (M moving averageconvergence/diver- bullishness wasmadeclearwhenthe been inastrongbulltrend.This 1). Themarketforthesenoteshad correct inthe meanwhile,theprice that, howevermuchthemarket might Traders ofT-notesinlateJuly knew gaining inmomentumtothe upside. are onesignalofamarket thatis age. TheR level abovethe50-daymovingaver- formed astrongbottomatthe2500 ports thebreakout.Theindexhas bought withprevioushighsastargets. breakout. Thus,thisbreakoutcanbe in volumewouldhelptosustainthe this newrally.Inaddition,theincrease cally andindicatesbullishstrengthin Consider theexampleofDecem- The weeklychart(Figure2)sup- See www.Traders.comformore. This articlewasfirstpublishedon9/5/2007. ACD SI SI

(14) hasmovedsteadily

ACD (14) hasmovedverti- ) histogrampeakin January/February 2008

histogram peaks YZ 7) (Figure

Copyrights 2008 © Technical Analysis, Inc. All rights reserved. by the$T and bymid-July,yields,asmeasured ing —peakedinmid-Juneofthisyear gram developedanothernegativedi- MACD histogram peak. histogram MACD positive divergence and a sizable a and divergence positive f January/February 2008 moving average(E slipped belowits50-dayexponential Y breakout BOSO confirmed A by DavidPenn And Away? Yields: Up, 10-Year Treasury REVERSAL nity onAugust31,astheM the downside. gence patternshouldnotbetradedto Based onthatclose,thenegativediver- the marketrallybackto108.8125. However, thecloseofthatsessionsaw T-notes tradedaslow108.1875. August 23,themarketforDecember the August22ndlowof108.453.On gust 22. form ofaclosebelowthelowAu- follow-through confirmingcloseinthe Why? Themarketfailedtomakea tential endtotheT-noterally?No. negative divergenceashortandpo- 22 withamMmpattern.Wasthat histogram wasconfirmedonAugust first negativedivergenceintheM candlestick patternsinisolation).The (as IwasinlateJuly,lookingatcertain of adoubterlookingtofadetherally sury notemarketfromtheperspective within twocalendarweeks. highs oflateJulywouldbeexceeded. trend tradingopportunityforbond bulls. September, representingan excellent were oversoldfrommid-July tomid- August, 10-yearTreasurynote yields stochastic oscillator. matically oversoldasmeasuredbythe even moreconvincing,becamedra- cline. ItwasinJulythatthe$T ollows both a MACD histogram MACD a both ollows Bearish tradersgotanotheropportu- There wasintradaypenetrationof But considertheDecemberTrea- As itturnedout,theywereexceeded My favoritescenario tolookforina In fact,saveforfourdaysin early Tradable: the costoflong-termborrow- notes ($T ields on10-yearTreasury NX , wereinfull-blownde- $TNX NX MA ) —theproxyfor ) and,perhaps ACD

histo- ACD NX you wantittodoasatrader.Andinthe and aB going backmorethanafewmonths, Figure 1. tic becomingnewlyoverbought).See lower ones,but alsotheadvanceoff strongly suggesthigherprices before the newlyoverboughtstochastic less likelyinthiscase.Not only does seems tosuggestthatsuch a retestis the technicalmakeupof market market toretestthelowsafterabounce, tures bothcharacteristics.TheM however, onOctober12,asthe$T the move.Confirmationdidcome, high ofthatsessioninordertoconfirm 24, buttherewasnocloseabovethe tempted suchabreakoutonSeptember B September 24thsessionandanewer closed abovethehighsofbothold and theB charts. Withregardtothestochastic going backfortwoyearsinthedaily histogram peakisthelargestin$T over allrecentM assurance thatthemarket ing closewillprovidethatmuchmore often thannot,waitingforaconfirm- closes willcarrylessweight.Butmore or nearthelowsnext,confirming one dayandbearsclosingthemarketat closing themarketatornearhighs rapidly backandforthbetweenbulls when controlofamarketisshifting are especiallyvolatileandindecisive, stance? Ofcoursenot.Whenmarkets confirming closeworkineveryin- $500 percontract. ing at110.0156,againofmorethan day laterDecemberT-noteswereclos- close onSeptember12at110.5781.A confirmed byafollow-throughlower tember 11,andthatdivergencewas was completedasofthecloseonSep- pattern withinthenegativedivergence the firsthalfofSeptember.ThemMm bears withthenegativedivergencein eventually didthrowabonetothe 31 —meaningnoshorttrade. failed toclosebelowthelowofAugust vergence. Butonceagainthemarket (M average convergence/divergence bounce thatfeatureseitheramoving side. ThesecondthingIliketoseeisa cates waningmomentumtothedown- the positivedivergence,whichindi- process ofbottomingistolookfirstfor market thathasbeenormaybeinthe OSO The currentcaseofthe$T Although itisalwayspossiblefora Will thistacticofwaitingforthe The marketforDecemberT-notes ACD buysignalfromOctober9. OSO ) histogrampeakthattowers OSO

breakout (thatis,astochas-

breakout, the$T ACD

histogram peaks can

do what NX NX

ACD fea-

NX NX at- that isneededforasoundtrade. proper context,thatassuranceisall September thatthesenegativedivergencesignalsproducedatradablemove. and earlyautumnof2007.Yetitwasnotuntilaconfirmedcloseinthefirsthalf gences emergedasthemarketforDecemberT-notesmovedhigherinlatesummer FIGURE 1:10-YEARTREASURYNOTE,DECEMBERFUTURES,DAILY. synched withthe 10-,20-,and50-day proaches isthewaythatboundary has the trendchannelasmid-October ap- teresting aboutthelowerboundary of trend channel.Whatisparticularly in- bottom thusfarhasbeencontained by entry sessionforthelongBOSOtradebasedonstochastic. made. Notealsothehighlightedcandlestickinpricepanel, whichrepresentsthe MACD histogram(highlightedandinblue)thatdevelopsshortly afterthebottomis the MACDhistogramhelpsindicateabottominearlySeptember. Notethesizeof FIGURE 1:10-YEARTREASURYNOTEYIELD($TNX),DAILY.

■ of strongsupportatthe46level. E MA s tocreateatleasttheappearance A runningpositivedivergencein See www.Traders.com formore. This articlewasfirstpublishedon10/16/2007. See www.Traders.comformore. This articlewasfirstpublishedon9/26/2007. Traders Multiple negativediver- .com ¥ page15

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PROPHET FINANCIAL PROPHET FINANCIAL Copyrights 2008 © Technical Analysis, Inc. All rights reserved. average convergence/divergence(M a solidpositivedivergenceinthemoving very wellsetuptomovehigher:therewas At thetime,$T Traders.com Advantage;October16,2007). Treasury Yields:Up,AndAway?” gone awry. gone TECHNICALANALYSIS page 16 A setup a at look another day, Another by DavidPenn Whacked Get 10-Year Yields Rate Breakdown: a confirmedB immediately followingthedivergence,and histogram, aspikehigherinthehistogram for stocksonOctober17,andwithindays, higher 10-yearyields:panic. tic movedintooverboughtterritory. Nervous investorsbeganswappingbonds But afunnythinghappenedonthewayto Tradable: www.stockmarketstore.com OrCall702.361.5161today! Order ¥Traders A TrendisaTerrible year Treasuryyields(“10-Year the bullishprospectsfor10- bout aweekagoIlookedat ADXcellence—Power Trend Strategies $TNX OSO ADXcellence .com

breakout asthestochas- NX Thing ToWaste

looked likeitwas By Dr. CharlesB.Schaap andtheTrend MasterSeriesonline at ACD trading... theauthorheldnothingback.” “The mostexcellentbookI’veeverreadon “If onewishestobeatrader... at thetopoflist.” ) “This bookisbrilliantÉoneofthebestbooksIhave read.” “ADXcellence” form. I’lltaketwo!” breakdown inthe$T term opportunityforthebears. long turnedinto—atleastashort- warn traderswhenthe“can’t-lose” clues mighthavebeenavailableto reversal sessionbytoseewhat 23, 2007),let’stakealookatthis Triangle InU The Yen:RevisitingAscending vantage piece,“DollarDownAgainst anticipated (seemyTraders.comAd- sis thatturnedoutdifferentlythan things. SeeFigure1. few speculatorsonthewrongsideof October likelycaughtmorethana turned aroundtothedownsideinmid- ing, theforcewithwhichmarket has notsetanewlowasofthiswrit- sudden sharpdecline.Whilethe$T on the10-yearTreasurynotewerein both thestockmarketandyields divergence intheM average support,asizablepositive October: trendchannelandmoving ising comingoutofthefirsthalf The technicalpicturewasquiteprom- both theM and theconfirmedB However, whenthe$T There isalsoaCDonpivotsandtrendlines. Be aTrend Master. Becauseifyoudon’t It wasnotabigsurprisethatthe As Ididwithanothermarketanaly- understand Trend...you don’tunderstand. ACD SD

is anexpensiveseminarinbook /J histogram andstochasticthedayafter PY NX ,” fromOctober ACD OSO

NX was sosharp.

histogram,

formed negativedivergencesin long signalinthestochastic. ADXcellence NX exponential movingaverageenroutetolowerlevels. one sessionbeforethe10-yearT-noteyieldindexplungedbelow50-day in thestochastic(BOSObreakout).Thosenegativedivergenceswereconfirmed the MACDhistogramandstochasticdevelopedjustafteraconfirmedlongsignal FIGURE 1:10-YEARTREASURYNOTEYIELDINDEX,DAILY. mustbe the $T wild thencertainlynotbullish,either. ated inlightoftherealityindicatorsgoneifnot the potentialforlongtradeneededtobereevalu- lower, follow-throughcloseonthedayafterthat— those negativedivergenceswereconfirmedbya stochastic buysignalwasconfirmed—andwhen those earlySeptemberlowshold. it willbeverymuchworthwatchingtoseewhether saying that,giventhepreviouspositivedivergences, lows whencetherallyhadcome.Itgoeswithout until itwastestingthoseverysameearlySeptember Over thenextfivedays,$T Now you can choose “Op40” as a team with: team a as “Op40” choose can you Now The dayafterthebearishsignalswereconfirmed, OPTIONS “40IN4” to predetermineextrahighpotential. Module ofthe“9to1EdgeFinder”isable Special Signals for +90%: +90%: for Signals Special Trading Edge Signal Logic: Signal needed: Data Homework: Objective: NX From outsideUSA:828-692-3401

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+40% gainormore,within4days Modest one-timefee. [email protected] 10to20minutesafertheclose value, whichcontrolstheprofitoutlook Plainmathgivesyouyournextday’s S&P 100indexoptionspricesonly In 13th year! 13th In See www.Traders.comformore. This articlewasfirstpublishedon10/25/2007. Negative divergencesinboth January/February 2008 Large Gains NX

only movedlower

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PROPHET FINANCIAL Copyrights 2008 © Technical Analysis, Inc. All rights reserved. January/February 2008 Traders .com ¥ page17

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Copyrights 2008 © Technical Analysis, Inc. All rights reserved. double bottom. double guard for a bounce and a potential a and bounce a for guard we shouldbeonguardforabounce. the combinationaffirmssupportand candlestick wasblack.Nevertheless, the closewasnotasstrongbecause candlestick formedinSeptember,but the weekandclosedstrong.Asimilar ing theweek,butralliedbyendof reversal. Thestockmovedlowerdur- shadow andthisshowsanintraweek features acandlestickwithlonglower firming inSeptember.TheAugustlow tion lowinAugustandshowssignsof retracement, thestockformedareac- be itupordown. retrace thisamountofthepriormove, ratio of0.618andstockssometimes 26; 62%stemsfromtheFibonacci and thestockisfindingsupportaround decline retraced62%oftheadvance declined overthelastsixmonths.This July 2006untilApril2007andthen prior low, and traders should be on be should traders and low, prior page 20 L its from support testing is Inc. THQ by ArthurHill For THQI A Support Test DOUBLEBOTTOMS In additiontosupportfromthe Tradable: ¥Traders 1). Thestockadvancedfrom for someperspective(Figure et’s startwiththeweeklychart Create your free trader SEAT now! SEAT trader free your Create THQI .com C H A RTP A TERNS C H A RTP A TERNS C H A RTP A TERNS C H A RTP A TERNS C H A RTP A TERNS C H A RTP A TERNS C H A RTP A TERNS C H A RTP A TERNS C H A RTP A TERNS C H A RTP A TERNS C H A RTP A TERNS C H A RTP A TERNS C H A RTP A TERNS mentum andtheRSI. would bebullishformo- above theAugusthigh mentum. Furtherstrength shows lessdownsidemo- positive divergencethat low andthiscreatedthe dex (R pickers. the earlysignalforbottom- three daysagoandthisis stock surgedoffsupport this istheleveltobeat.The into resistanceat30,and that brokensupportturned confirm thepattern.Note move abovethislevelto tance anditwouldtakea marks double-bottomresis- 25Ð26. TheAugusthigh ing doublebottomaround ure 2),wecanseetheevolv- the R to anewlowinSeptember, sold. Whilethestockmoved August andbecameover- moved below30inearly gence isworking.TheR low andapositivediver- The relativestrengthin- On thedailychart(Fig- SI SI

held aboveitsprior ) formedahigher For moreinformation, visittheS&Cadindexat ■ SI over thenextsixmonths. FIGURE 1:THQI,WEEKLY. FIGURE 2:THQI,DAILY. Traders.com/reader/ S S magazines •articlesbookssoftware t-shirts •subscribe renew•hotdeals! Here wecanseetheevolvingdoublebottomaround25Ð26. T T http:// This stockadvancedfromJuly2006toApril2007andthendeclined OCKS OCKS Get theexactinformation you wantonlineatthe Online Store Online Store store.traders store.traders &C &C OMMODITIES OMMODITIES See www.Traders.comformore. This articlewasfirstpublishedon9/26/2007. January/February 2008 .com

TA07D7

TELECHART2007 Copyrights 2008 © Technical Analysis, Inc. All rights reserved. of Wal-Mart(W according tothetradingstyleadopted. be analyzedwhenmakingdecisions, between riskandreward,whichmust opportunity. Itistheusualtradeoff your risk,ofcourse,butalsotheprofit opening aposition.Thiswillreduce if thesecondgapgetsfilledbefore cur andyoumightwanttowaitsee direction forms.Falsesignalsmayoc- before thesecondgapinopposite market cantradeforseveralsessions converse istrueforislandtops.The structure ofthemarketaction.The text, andhowpricesfitinthegeneral cant reversal,dependingonthecon- new longtrades. because ofthegoodnewsandopen tions arewrongandothersgetexcited ticipants realizethattheirshortposi- high volumewhensomemarketpar- released. Theclosureofthegapprints Often, thegapsoccurwhennewsis ing emotionallytothestock’smove. indicates thatthepublicisparticipat- haustion andthebreakawaygaps.This is printedincoincidencewiththeex- reversal. Normally,veryhighvolume sal patternandusuallyindicatesatrend the upsidecompletesislandrever- by spaceorwater.Abreakawaygapto action lookslikeanisland,surrounded before gappingtotheupside.Theprice sometimes opensatradingrangephase ing thegapandmovinghigher. gap openoneormoredays,thenclos- an extendeddowntrend,leavingthe is formedwhenpricesgaplowerafter the patterndevelops.Anislandbottom September sales. September Thursday on news of higher of news on Thursday T last completed was pattern The by PaoloPezzutti Island Pattern Bullish Reversal W REVERSAL January/February 2008 vides dataconsidered areferenceof lion customersweekly,Wal-Mart pro- ings forecast.Withmorethan 127mil- on Tuesdayandcutitsfull-year earn- lower-than-expected quarterly profit A) whenWal-MartStoresreported a initiated onAugust14thisyear(point daily chart(Figure1).Thepatternwas months. InFigure1,youcanseethe Let’s startanalyzingthepriceaction This patterncandevelopasignifi- The downwardexhaustiongap Tradable: al-Mart: A trend reversal.Let’sseehow vides areliableindicationof he islandreversalpatternpro- WMT MT ) duringthepast W weekly chart.Notethatsince2005, stock? InFigure3,youcanseethe ongoing onthestocksincelastAugust. indicates thataccumulationhasbeen point B.Inparticularthemoneyflow tors printedapositivedivergenceat rebound, W new lowonSeptember10.Aftera and resumedthedowntrendtoprinta cents wasdistributed. have toconsiderthatadividendof22 day priceswerestilldown,butyou whatever pricethatmorning.Thenext and thepublicgotridoftheirsharesat market reactedemotionallytothenews lost 2.35points,closingat$43.82.The million sharestraded,thoughthestock since September2006withmore63 closure ofthe gap atpointBinFigure efficient entrywouldhave been the before openingaposition. Amore you waittohavesignalsconfirmed is notthatgreat,butthistypical when risk isabout$2.Therisk/reward ratio $51. Therewardisabout$4andthe is identifiedwiththeuppertrendlineat To theupside,therefore,resistance cessfully thesupportofchannel. $51. InAugustthestocktestedsuc- sideways channelbetween$42and (M ing averageconvergence/divergence can seeinFigure2thatboththemov- upside isunlikely. that thecontinuationofmoveto sents astop-loss,butalsoanindication closed inthenextsessions.Thatrepre- fundamental thattheupgapisnot August gap. third lowerthanonoccasionofthe high volume,althoughalmostone with thenews,pricesgappedupon of 62centsto65cents.Incoincidence per share,upfromapreviousforecast ing operationsof66centsto69 third-quarter earningsfromcontinu- discount retailersaiditnowexpects a yearraisingitsearningsforecast.The ber salesatUSstoresopenwithleast economy wasconcrete. fear ofanimpacttoothersectorsthe of thesubprimemortgagecrisis, down oftheUSeconomy.Inmiddle confirming thepossibilityofaslow- the nation’sretailsector.Thiswas W pleted lastThursday(pointC)when change. signal thatsomethingwasaboutto gap wasreadilyclosedandthatthe lower volumethanonAugust14.The gap onSeptember25,butwithmuch What istheupsidepotentialof Prices inAugustdevelopedaflag From thetechnicalperspective,you For theformationtobeeffectiveitis W The reversalislandpatternwascom- MT MT ACD MT

reported a1.4%riseinSeptem- has beenmovingwithinawide ) andthemoneyflowindica-

printed thehighestvolume MT

printed anotherdown closed prettysoon. second gaptothedownside(pointB)wasprintedonmuchlowervolumeandit high volume,indicatingtheemotionalinvolvementofpublic(pointsAandC). FIGURE 1:WMTDAILYCHART. resumption of theupmove.■ gap occursandthenfailswith aquick wait andseeifatentativeclosure ofthe want toreduceyourstop-loss, youcan easy toimplement.Asanoption, ifyou it clearlyidentifiesastop-loss anditis to theupside. 1, whichpresentedahigherpotential sideways withinawidechannel. FIGURE 3:WMTWEEKLYCHART. associated tootherpatternscancontributebuildthebigpicture. developed inSeptember.Divergencescanprovidemanyfalsesignals,butwhen FIGURE 2:WMTDAILYCHART. I personallylikethispatternbecause The downandtheupgapsthatformpatternprinted A positivedivergenceofMACDandmoneyflowwas During thepastyearsstockhasbeenmoving space orwater. an island,surrounded by The priceactionlookslike See www.Traders.com formore. This articlewasfirstpublishedon10/15/2007. Traders .com ¥ page21

TRADESTATION Copyrights 2008 © Technical Analysis, Inc. All rights reserved. term uptrend. term signal a continuation of the long- the of continuation a signal months, and a breakout would breakout a and months, pattern over the last two to three to two last the over pattern CUPWITHHANDLE page 22 mid-August. Intel(I rest ofthemarketfrommid-Julyto O continuation bullish a formed Intel by ArthurHill Handle ForIntel A Cup-With- continuation pattern.Thismeansit confirm thepattern. handle andabreakabove26.5would other runtoresistancecompletedthe shallower andformedthehandle.An- September. Thispullbackwasmuch and thestockagainpulledbackinearly highs establishedresistanceat26.5 rallied backtoitsJulyhigh.Thesetwo with aspikelowinmid-Augustand The cup-with-handleisabullish Tradable: team stocks andcommodities,canbeutilized successfullyindaytradingaswell aslong-termtrading. The Profitunity Trading Group offersourclientsover 40years oftradingexperience.Our methodologyworks inboth T NEW Home Study CourseIncludes: estimonials were senttoProfitunityTrading Group fromactualinvestorstradingtheProfitunityTrading Groupsystem.There is ariskoflossintradingcommodities. ¥Traders and thenpulledbackwiththe the stocksurgedinJuneÐJuly n thedailychart(Figure1), T

and takecontrol ofyour financialfuture. No onewilltakecare ofyour moneybetterthanyou! • • • • • • • • INTC ake Control of Your Financial Future V Eight weeks ofdailyDVD lessons T T Access toMembers Only area Traders Tip Sheets &Order Pads Autogenic Training Audio CDs Ongoing FREEtechnicalsupport utorial Manual rading Chaos:Second Edition ideo Study Guide .com NTC ) bottomed TRADING GROUP V isit usat:WWW.PROFITUNITY.COM tance onanybreakout.Moving is likelytoprovidealittleresis- the lastthreeyears,andthisarea stock failedatthisleveltwicein 2004 andJuly2005highs.The around 29Ð30fromtheMay points toaround30. timate anupsidetargetandit tended theuppertrendlinetoes- outside linesareparallel.Iex- line isalinearregressionandthe regression channel.Themiddle The bluetrendlinesshowtheRaff been risingthelast15months. bottomed inmid-2006andhas trend withweeklybars.Thestock breakout. expanding volumetoconfirmany tant andIwouldalsolookfor around 29Ð30.Volumeisimpor- would targetfurtherstrengthto points andabreakoutat26.5 estimate thisdistancearoundthree breakout foranupsidetarget.I bowl supportisaddedtothe distance fromrimresistanceto continuation ofthistrend.The forms inuptrendsandmarksa a breakbelowthehandlelowwould back tothecup-with-handlepattern, There isalsoresistance Figure 2showsthelong-term unity • eSignal aeoe doubledmyaccount" -D. Todd I have over ov outwith$23,500inmyaccount.AsoftodayIhave" Istarted er $50,000incashandopencontracts. In lessthansixmonths months. FIGURE 2:INTC,WEEKLY.Thestockbottomedinmid-2006andhasbeenrisingthelast15 rest ofthemarketfrommid-Julytomid-August. FIGURE 1:INTC,DAILY. The holistic approach to trading and investing. and trading to approach holistic The Or emailusat:[email protected] For moreinformationcall760-436-8054 We expect asupporttestaround23. negate thesetupandwecouldthen ™ •CQG don’t justteach...We trade! I ndicators Compatiblewith: The stocksurgedinJuneandJulythenpulledbackwiththe ™ •MetaStock ■ ™ • TradeStation See www.Traders.comformore. This articlewasfirstpublishedon9/27/2007. J oin thewinning January/February 2008 ™

METASTOCK Copyrights 2008 © Technical Analysis, Inc. All rights reserved. STOCKCHARTS.COM tradable move. tradable move backuptochallengethe$27 would bebettingtheotherway,toa applied tothedownsidemove. between thepeakandtroughas point moveisequaltothedistance target becomes$15ornearit.Thissix- $21, thenthedouble-topcompletion Should thishappenwithaclosebelow downside withsomeconviction. the trendlinehastobebroken transpire. been correct,asamovenear$21did could beinthemakingwouldhave traders whosurmisedadoubletop top wasestablished.Those“earlybird” at $21.Fivemonthslaterthesecond near $27,atroughlinewasestablished with pattern analysis suggesting a suggesting analysis pattern with DOUBLETOPS January/February 2008 T here, point crucial a at is Staples by GaryGrosschadl A Double Top Staples Inc. Tests FIGURE 1:STAPLES, WEEKLY. By thelooksofcurrentchart,I For adoubletoptoofficiallybein, Tradable: (Figure 1).Afterthefirstpeak shows adoubletopbeingtested his multiyearweeklychart SPLS This chartshows Staplesatanimportantjuncture. bets —$27or$15? ($15) intoplay.Gentlemen,placeyour bring thedouble-topcompletiontarget $21 and$22.Failureherecouldthen again testthesupportlevelbetween (E period exponentialmovingaverage vious low)andtheever-important200- the combinationoftrendline(pre- the currentposition,supportbeing peak. Thedoubletopwillberejectedat dex (R tial upswing.Therelativestrengthin- positive divergence,hintingatapoten- ing. Notethehistogramisshowing level withanuptickpossiblyemerg- gence/divergence (M forward. Themovingaverageconver- themselves toabullishviewgoing the signsofabounce. fund managerwatchesthislevelfor many atraderortechnicallyminded as significantsupportorresistanceand tance offeredbythe20-periodE first hurdleisnearbyoverheadresis- tor isreverberatinginanoversoldzone. port at30whilethestochasticoscilla- E However, anotherrefusalatthe20-day drive northtochallengeprevioushighs. Success therecouldsignalaserious MA MA The indicatorsbelowthechartlend Should thisbullishviewprevail,the

). Thismovingaverageoftenacts could drivethestocktoonce SI ) appearstohavefoundsup- See www.Traders.comformore. This articlewasfirstpublishedon10/22/2007.

■ ACD ) isatalow MA . information about that market that you can have. information aboutthatmarketyou can pieceof you haveinyourpossessionthemostimportant upon, establishhow Ifyou can much thistrendberelied can the others. trend market thatstandsoutfrom alsohasatrue butevery times, cross-currents Ofcourseamarket hasvarious oftrends atall has. it how much kineticenergy how much themarket istrending, doasatraderistoestablish thingyou can The mostimportant T things: But foruseinanymarket. and applicable easytouse timeframe-neutral, tonon-arbitrary, close adjusting, itisself- LikeOcean Standard, software. of theOceanStandard Ocean Plus the of parts Thevarious yetalsoelegantandnatural. quite complex, Thecodeis outofitsalgorithms. twistsandturnsarising various T market atthattime. optimumthe greatest-probability stopplacementforthat thatrepresentslowing marketswithafaithfulhighfidelity fol- inincredible ways, turningandcurving shapes, derful STX You ofthe havetolookatcharts only amazingtosee. truly Also known asthe T about amarket. you know themostfundamentalthingyou needtoknow that, Knowing thedegree oftrend inthemarket andmeasures it. bility, the What mined. deter- andisnotarbitrarily outoftheequationsthemselves arises thatquality however, Itisself-adjusting; market hasatthistime. waytoestablishhow new much trendiness a It isarevolutionary T kind ofconsensus. “T I can say unequivocally thatyouandPat havecreated sayunequivocally I can “I “B he Ultimate he Ultimate Trend he Ultimate Stop he Ultimate Stop he Ultimate he Ultimate Trend T smr oefl.I’ sci. – is morepowerful...It’spsychic.” STX he powerofthenaturalorderisfarmoreevident.” find the STX quite amazing. Its uncanny ability is, ability Its uncanny quiteamazing. find theSTX rwot9.%o l orohridctr.Ocean yourotherindicators. hrow out99.9%ofall TX i a oehn e:OceanPlus Jim hassomethingnew: atric nOenPu+ – inOceanPlus+. a masterpiece osytelat quiteimpressive...intuitive... to saytheleast, noeaint e o euiu ti.Ittakeswon- in operationtoseehow beautifulitis. T he Ultimate he Ultimate Trend is brilliant! is brilliant! informationinitisprofound. The are continually talkingtoeachotheruntiltheyreachare a continually oefl.vlal. – powerful...valuable.” and click onthe and click , F based on Ocean Theory, is a radical new extension new isaradical based onOcean Theory, or moreinformationplease visit BTX mayyoubehappy.com scntnl otn tef self-adjustingin moltingitself, is constantly . or , STX A .. LosAngeles –C.C., osi sals,withthehighestproba- does isestablish, BTX TTENTION Jim Sloman! (Stop Index), The Ultimate Stop is Stop TheUltimate Index), (Stop and Ocean (Bounded Trend Index)doesthat. Fans of T he Ultimate Stop he Ultimate D button atleft. B,NewYork .B., .. LosAngeles L.S., Ocean Plus ..Virginia S.C. Traders . .com adds two + ¥ page23

Copyrights 2008 © Technical Analysis, Inc. All rights reserved. page 24 ¥Traders .com January/February 2008

Copyrights 2008 © Technical Analysis, Inc. All rights reserved. January/February 2008 Traders .com ¥ page25

Copyrights 2008 © Technical Analysis, Inc. All rights reserved. more sensitive. and Iwantedtomaketheindicator Safeway hasrelativelylowvolatility to tightenthesesettingsbecause and twostandarddeviations.Ielected tings arefora20-daymovingaverage erage. TheclassicBollingerBandset- dard deviationsfromthismovingav- ing averageandthebandsare1.5stan- gaps createdan islandandthosewho gapped downonOctober15. Thetwo 11, consolidatedfortwodays, andthen well. Thestockgappedupon October frame capturestheislandreversal quite uptrend. r v sooner breakout a to point Bands reversal, and the stock is on the on is stock the and reversal, r page 26 F island an formed Taylor Ann by ArthurHill Ann Taylor Reversal For An Island ISLANDREVERSAL F trading tight a into moved Safeway by ArthurHill For Safeway PlayA Squeeze last fewweeks.TheBollingerBands September andthenconsolidatedthe BOLLINGERBANDS ather than later. than ather ange, and contracting Bollinger contracting and ange, erge of reversing a two-month a reversing of erge S Tradable: Tradable: WY

centerline isa15-periodmov- with theBollingerBands.The (A igure 1showsAnnTaylor igure 1showsSafeway(S sticks, andthisshort-termtime ¥Traders surged inthefirstpartof NN ) with60-minutecandle SWY ANN .com WY ) bearish. a movebelowtheselowswouldbe The pennantlowsmarksupportand target furtherstrengthtoward36-37. (three tofourpoints)andthiswould I wouldthenexpectasimilarmove continuation oftheSeptembersurge. and abreakabove34wouldsignal and pennant.Thisisabullishsetup averages areflatteningaround33. stalled around33andbothmoving turned intosupport.Thestockhas tive andthesemovingaveragesnow moving averages.Thisisquiteposi- broke boththe200-dayand50-day ber (Figure2).Thesurgeabove33 the pricepatternsinceearlySeptem- at somekeymovingaveragesand consolidation break. months andthiscouldforeshadowa Bollinger Bandsarethenarrowestin is aprettytightrange.Infact,the ing BollingerBandsconfirmthatthis the lastthreeweeksandcontract- has tradedwithinatwo-pointrange as thestockconsolidated.Safeway tility increasedandthencontracted expanded duringthissurgeasvola- a consolidationbreak. and thiscouldforeshadow the narrowestinmonths The BollingerBandsare island reversal. FIGURE 1:ANNTAYLOR,HOURLY. The pricepatternlookslikeasurge For directionalclues,Iamlooking

■ See www.Traders.comformore. This articlewasfirstpublishedon10/12/2007. ANN isshownherewith60-minute candlesticks,andtheshort-termtimeframecaptures the are fora20-daymovingaverageandtwostandarddeviations. FIGURE 1:SAFEWAY,DAILY. moving averages. FIGURE 2:SAFEWAY,DAILY. Here’s SFYwithBollingerBands.Theclassicbandsettings The surgeabove33brokeboththe200-dayand50-day January/February 2008

TC2000.COM; TELECHART 2007 TELECHART2007 Copyrights 2008 © Technical Analysis, Inc. All rights reserved. ber, buttheM tember. ThestockcontinuedhigherinOcto- this indicatorstartedflatteninginearlySep- gence (M for furtherweakness. trendline wouldbreakthechannelandcall nel isstillrising,butamovebelowthelower at resistancefrombrokensupport.Thechan- rising channelandtheislandreversalformed the pasttwomonths.Theadvanceformeda July andralliedbacktobrokensupportover January/February 2008 the intermediatetrend.A confirm thepattern. line) wouldsignalacontinuationlowerand der. Abreakbelownecklinesupport(green over thelastthreedaysformedrightshoul- last weekformedthehead.Theconsolidation form theleftshoulder.Thesurgeanddecline The stockconsolidatedinearlyOctoberto also ahead&shoulderspatterntakingshape. losing positions. went longonthisislandarenowtrappedwith territory wouldbebearishformomentum. positive territory,andamoveintonegative a negativedivergence.TheM www.winningedgesystem.com The movingaverageconvergence/diver- Figure 2showsdailypricesandcaptures In additiontotheislandreversal,thereis See www.Traders.comformore. This articlewasfirstpublishedon10/19/2007. Comprehensive manualand coaching. Weekend andlive Professional traderteaches Winning EdgeS&P Private tutoringandlive T Winning EdgeDayAnd ACD Swing Trading Signals proprietary software. proprietary FREE ONLINE rading Systems trading workshops. Day &Swing you hisrenowned ACD ) isalsoshownonFigure2,and SEMINARS 1-800-500-5207

did notconfirmandformed Precise, Simple T NN rading System & Profitable

broken downin ACD

remains in

■ FIGURE 2:ANNTAYLOR,HOURLY. For moreinformation visittheadindexat Here aredailypricesandtheintermediatetrend. Traders.com/reader/ Traders .com ¥ page27

TC2000.COM; TELECHART 2007 Copyrights 2008 © Technical Analysis, Inc. All rights reserved. tom. Andthatgiftwasdeliveredright technical divergenceatatoporbot- speculating communitythanaclear There maybenogreatergifttothe way thereversalwastelegraphed. spike innaturalgaspriceswasthe than $15.75bymid-December. again, withnaturalgasreachingmore ers werebiddingpriceshigheronce low as$11inmid-November,buy- pullback thatsawthefuturesdipas above $14.00.Afterashortsharp By theendofmonth,theypassed sis continuousfutures)cleared$10. September, naturalgasfutures(ba- kept ongoing.Bythebeginningof year-to-date highsnorthof$9.50and they managedtobreakoutnew prices movedhigherinmid-August the firsthalfof2005.However,as $5.00 throughout2004andthrough range between,roughly,$7.50and second halfof2005. market fornaturalgasfuturesinthe natural gas futures in October. in futures gas natural tic anticipated a move higher in higher move a anticipated tic MACD histogram and the stochas- the and histogram MACD page 28 O P by DavidPenn Natural GasHigher Send December P Resistance Bounding Into REVERSAL ositive divergences in both the both in divergences ositive ositive Divergences Part ofwhatisamazingaboutthis Prices hadbeentravelinginawide Tradable: ¥Traders recent timestookplaceinthe lapses inthefuturesmarket ne ofthemostamazingcol- NG,NGZ7 METALS &ENERGY METALS &ENERGY .com in boththestochasticandM when weeklynegativedivergences lators everywhereDecember30, to thedoorstepsofnaturalgasspecu- is thepresenceofasizableM ing fornaturalgasbullsatthisjuncture $7.92. September 12atapproximately August 28thatwasnotfilleduntil signaled abuyingopportunityon in indicator”lowsoflateAugustand June andthe“lowerinprice/higher price/lower inindicator”lowsoflate vergences relatetothe“higherin move higher.Specifically,thesedi- that couldplayaroleinsustained shorter-term positivedivergences natural gas,wecanseesmaller, to lookattheDecembercontractfor thing fornaturalgasbulls. gences weren’tnecessarilya“good” for naturalgasbears,thosediver- positive divergenceswereabadthing site directionbeginning.Sowhilethe ending andmomentumintheoppo- between momentuminonedirection like topointout,thereisadifference momentum hadfinallyended.AsI gesting thatthepowerfuldownside ing fromthebottomofcorrection peak, comingjustaspriceswererally- histogram peakinSeptember.This the M divergence inboththestochasticand but moreimportant,asizablepositive Prices hadfallentolessthan$4.60, as ifthecollapsehadcometoanend. spike andcollapse. $7.50Ð5.00 rangethatprecededthe returned tothe(broadlyspeaking) sions later. priced atamere$6.65only10ses- tinuous futures),naturalgaswas of approximately$11.25(basiscon- close. WithaDecember30thprice histogram wereconfirmedonthe One thingthatisespeciallypromis- Until, perhaps,now.Zoomingin In thesummerof2006,itappeared Since then,naturalgaspriceshave ACD

histogram developed,sug- ACD ACD MACD histogramandthestochasticsuggesthigherpricesahead fornaturalgas. FIGURE 2:NATURALGAS,DECEMBERFUTURES,DAILY. and theMACDhistogramappeartohavesignaledabottominfirsthalfof2006. pated thetopinnaturalgasfutures2005.Positivedivergencesbothstochastic FIGURE 1:NATURALGAS,CONTINUOUSFUTURES,WEEKLY. prices. tive ofhighernaturalgas such, itisstronglysugges- back severalmonths.As ber, ishigherthananygoing in lateAugust/earlySeptem-

■ telegraphed. was thewayreversal this spikeinnaturalgasprices Part ofwhatisamazingabout Positive divergencesinboththe See www.Traders.comformore. This articlewasfirstpublishedon10/4/2007. Negative divergencesantici- January/February 2008

PROPHET FINANCIAL Copyrights 2008 © Technical Analysis, Inc. All rights reserved. the centermedianline.Whattran- lower medianlineeventuallyreaches off eithertheuppermedianlineor pitchfork theorymaintainsthatamove resistance levels.Oneoftherules lines representinglikelysupportand ware automaticallyplotsthemedian high, low)andthenthechartingsoft- points arechosen(inthiscase,low, and resistance. alternative methodofplottingsupport originator, AlanAndrews,showsan Andrews linemethod,namedafterthe of theborder.Thispitchforktool,or for energyindexeslikelyonbothsides pitchfork indicatingfurtherstrength How muchlongerwillthiscontinue? the weak US currency. US weak the dollar, which is really a function of function a really is which dollar, started trading higher than the US the than higher trading started 13,888). In addition, the loonie the addition, In 13,888). time (currently at 14,332 vs. Dow vs. 14,332 at (currently time rose above the DJIA for the first the for DJIA the above rose ev by ANDREWSPITCHFORK January/February 2008 effect ontheT above $85,wecanseethisadditive oil andgassector.Withtrading I remembered be will 2007 year The by GaryGrosschadl Gushing Higher Index Still Energy The TSX With thismethod,threeturning Figure 1showsabullishpointing ents. First, this year the TSX the year this First, ents. Canadian traders for two main two for traders Canadian Tradable: for them,too! n part,whathelpeddriveCanadian part istheheavierweightingof markets abovetheirUScounter for them,too! publications, [email protected], orseewww.Traders.com formoreinformation. You readour publications, You readour trading, tradingpsychology, options,cycles...and more... charting, tradingsystems,moneymanagement,intraday now write now write Fax resumeto(206)938-1307, call(206)938-0570,email If youare knowledgeable abouttechnicalindicators, $SPTEN SX

and itsenergyindex. we’d liketohearfrom you! E move totestsupportatthe200-day median lineinSeptemberandthena ample weseeaperfectmovetothe through themedianline.Inthisex- test lowersupportoraboldthrust spires theniseitheramovedownto ment index(A the chart,averagedirectionalmove- mixed bagofsentiment.Atthetop median line. proaching anothertestofthecenter lower medianline.Nowweareap- then thenextmajorsupportwas median linetouch.Hadthisfailed, plotted withoutthebenefitofthatfirst divergence (M chart themovingaverageconvergence/ trend strengthisindicated.Belowthe Typically, anA $100 abarrelofoil? upper medianline.Cananyonesay bility ofaneventualmovetothe above thatlineentertainsthepossi- above thecentermedianline.Aclose bullish viewwouldentailaboldmove day E tively, Iwouldliketoseethe200- this pitchforkview.Moreconserva- not breached,bullishnessprevailsin correcting downleg. cautionary notetobewatchfulofa territory abovethe80mark.Thisisa minds usthatweareinoverbought gyrated between50and70. index (R continuing upleg.Therelativestrength turn atthezero-line.Thishintsa rise fromApriltoJulywhiletheR tend tobetoppyat70.Notethelarge above the50zone;however,things the A shows astrongtrendinplace.Should MA The fourindicatorsdisplayedarea More thanayearorsoago,Ifirst As longasthelowermedianlineis Finally, thestochasticoscillatorre- . Rememberthatthepitchforkis DX MA

swing upfromhere,bullish SI

For moreinformation, visittheS&Cadindexat hold support.Thesuper- ) showsbullishstrength DX ACD ) lineisweakat13.61. DX ) showsabullish

of 20orhigher SI time thatwasabitofstretch. a barrelofoilwaspossibility.Atthat posted anoilchartthatsuggested$50 FIGURE 1:TSXENERGYINDEX,DAILY. See www.Traders.comformore. This articlewasfirstpublishedon10/23/2007. Traders.com/reader/

■ The energyindexisstillpoisedonanupwardtrack. pitchfork view. bullishness prevailsinthis line isnotbreached, As longasthelowermedian Traders .com ¥ page29

STOCKCHARTS.COM Copyrights 2008 © Technical Analysis, Inc. All rights reserved. S Dynamics (S higher prices for the stock. the for prices higher y relative strength breakout points to points breakout strength relative the in correction for potential outside reversal at support and a and support at reversal outside support stochastic and histogram CANDLESTICKCHARTING page 30 ber. Therewas asurgeonOctober17 September, andthenflattened inOcto- tive surgedinAugust,edged higherin T big a formed Dynamics Steel by ArthurHill Strength Shows Relative Steel Dynamics M MACD the in divergences Negative by DavidPenn Confirmation A December Gold Evening StarIn when S Poor’s 500.Thepricerelative rises COMPARATIVE RELATIVESTRENGTH trading daysofSeptemberandthefirst evening starpatternbetweenthefinal short-term consolidationledtoan late Septemberasabreakoutfrom through September,andintoOctober. gold advancedstronglyoutofAugust, dencies (bothdiscussedinthatarticle), cal portraitandfavorableseasonalten- a testofitsJunelows. mately 676.20andhadjustralliedfrom cember goldwastradingatapproxi- September 5,2007).Atthetime,De- (“A 2BBottomInDecemberGold?”, up technicallytoestablishabottom ellow metal. ellow TLD The firstsignoftroubleappearedin With thebenefitofabullishtechni- Tradable: Tradable: waits Bearish

underperforms. Thepricerela- TLD pares theperformanceofSteel the pricerelativeandthiscom- he topindicatoronFigure1is ¥Traders y lastdiscussionaboutgold that themarketwasshaping in Traders.comsuggested

outperforms andfallswhen TLD GCZ7 STLD ) withtheStandard& .com tic andtheM case, boththestochas- dicators —inthis contract highs. gold wasmakingnew appeared, December evening starpattern seven daysafterthe Sure enough,within ity asasellsignal. eliminated itsvalid- symbol —andallbut bearishness ofthe gated muchofthe ing basis.Thisne- downside onaclos- follow-through tothe yield anysignificant however, didnot evening starpattern, ber (Figure1).This trading daysofOcto- star andthemorere- both theolderevening togram —confirmed vious onesdoesmakeitsomewhat all themorepronouncedthanpre- with thelateOctobereveningstarare the lowofpattern. the lackofaconfirmingclosebelow the caseofformereveningstarwas making betsagainstthegoldmarketin should haveprevented—tradersfrom tober (Figure2).Whatprevented—or cent onethathasappearedinlateOc- breakout on good volumeandthis consolidation resistancetriggered anice big volume.Thefollow-through above terns, especiallywhenbacked upby since July.Thesearepowerful pat- the stockclosedatitshighest level ered almostallofthepriordeclineand reversal. Thisoutsidereversalrecov- candlestick tracedoutabigoutside clined thepriorfivedaysandthis ordinary candlestick.Thestockde- candlestick andabove-averagevolume. bounce occurredwithalongwhite October, andmid-October.Thelatest port at44inlateSeptember,early these averagesandbouncedoffsup- port. Notehowthestockheldabove these subsequentlyturnedintosup- moving averagesintheprocessand 1). S solidated thelastfourweeks(Figure above 45inSeptemberandthencon- and showsgoodrelativestrength. high. Thisisquitepositiveforthestock and thepricerelativebroketoanew Key technicalin- The factthatthecurrentdivergences This longwhitecandlestickisno On thepricechart,stocksurged TLD

broke the50-dayand200-day ACD

his- previous eveningstarpattern. in DecembergoldearliestOctoberfollowinga of downsidefollow-throughpreventedashortsale FIGURE 1:GOLD,DECEMBERFUTURES,DAILY. and keysupport issetat44. would targetanadvancetoaround 60 September advance.Asimilar move signals acontinuationofthe AugustÐ consolidated thefollowingfourweeks. FIGURE 1:STEELDYNAMICS.Thestocksurgedabove45inSeptemberandthen rally fromtheAugustlows. take headonwhathasbeenastrong ably dowelltowaitbeforetrying mately 749),goldbearswouldprob- evening starpattern(alowatapproxi- confirming closebelowthelowof market forDecembergoldmakesa nificant correction.However,untilthe evening starwillresultinamoresig- more likelythatthelateOctober The lack

■ ■ of October. tential oftheeveningstarpatterninsecondhalf MACD histogramhelpedconfirmthebearishpo- tive divergencesinboththestochasticand FIGURE 2:GOLD,DECEMBERFUTURES,DAILY. evening starpattern term consolidationledtoan as abreakoutfromshort- appeared inlateSeptember The firstsignoftrouble See www.Traders.comformore. This articlewasfirstpublishedon10/24/2007. See www.Traders.comformore. This articlewasfirstpublishedon10/19/2007. January/February 2008 Nega-

eSIGNAL Copyrights 2008 © Technical Analysis, Inc. All rights reserved. fashion. Toppingoutnear$80 in2006, crude oilfuturesfellina dizzying crude to come in? come to crude time charmed? time since August 2006. Is it time for time it Is 2006. August since a bottom three times. Is this third this Is times. three bottom a December crude to levels not seen not levels to crude December alternative energy play has tested has play energy alternative T took 2007 in market bull strong A by DavidPenn Negative Divergences New HighsAnd Line Crosses The December Crude January/February 2008 B this months four last the Over by GaryGrosschadl Bottom Struggles With Systems Ballard Power NEWHIGHS-NEWLOWS REVERSAL action supportsthisviaalargebullish nal abottom.Thesubsequenttrading this tweezerappearance.Thiscansig- bottom. Thelongmatchingtailsgive candlestick patterncalleda“tweezer” credence tothisspeculation. making. Severalindicationslendsome that apossibletriplebottomisinthe metry isnotverygood,wecandiscern a bottom(Figure1).Althoughthesym- ful pictureofastocktryingtoestablish British Columbia. powered busrunninginVancouver, cell technologyandhasahydrogen- the largercompaniesdevelopingfuel The latestbottomattemptshowsa This dailychartpaintsaratherpain- Tradable: Tradable: weeks of2007,December summer of2006tothefirstfew here andbackagain.Fromthe as BallardResearch,isoneof which wasoriginallyfounded allard PowerSystems(B CLZ7 BLD.TO LD ), divergence (M price hasbeendraggingbottom. these indicatorsrisingwhilethestock of acomingmove.Notetheslope tiple divergencesareoftenaharbinger ment viapositivedivergences.Mul- the chartshowanimportantdevelop- bullish conviction. over thepastweekoftradingshows addition, theincreasedvolumesignal strength index(R based onwhatweseeinFigure 1?At afterward. fail tofollowthroughthe upside fade marketsthatmakenew highsbut test oftop,whichencouragestradersto are indeedsellingnewhighsisthe2B way ofconfirmingwhetherthe“pros” increased focus.Myfavoritetechnical highs versusbuyingthemcomesinto highs, Velez’spointaboutsellingthose ward particularlyimpressivenew them.” AsDecembercrudesoarsto- teurs buynewhighs,whileprossell $80 level. of 2007liftedpricesbackabovethe and thesecondhalfofthirdquarter quarter of2007,thesummer surges incrudeoilpricesthefirst down hasbeencompletelyretracedas As Figure1shows,however,thatmove $56 abarrelatthebeginningof2007. December crudetradedforaslow Chaikin moneyflowindicator(C bottom ofthechart.Lookingat oscillator allhintatamoveoffthe ponential movingaverage(E overhead resistanceofthe50-dayex- candlestick closingabovethenearby taking zoneof$5.60to$6. money andruninthesurmisedprofit- tive traderswillmostlikelytakethe day E support fromthealwaysimportant200- we wouldhavetoseethestockfind better longer-termmovetodevelop, tance levelsof5.55andnear$6.Fora currently at5.64,andpreviousresis- contains theoverhead200-dayE zone between$5.55and$6.This an aggressivetradercouldtargeta from $4.40tonear$6. last June,whenthestockcatapulted The previoustimethishappenedwas we seeashifttobullishbuyingpower. The movingaverageconvergence/ Several displayedindicatorsunder So isDecembercrude“fadeable” Oliver VelezJr.oncesaid,“Ama- Should atradableupthrustdevelop, See www.Traders.comformore. This articlewasfirstpublishedon9/28/2007. MA . Untilthathappens,specula- SI ACD ), andthestochastic ), therelative

■ MA MF ). In MA ), , summer of2007. forming ever-smaller gram, whichhasbeen vergence (M average convergence/di- the shapeofmoving waning. Wecanseethisin rally inDecembercrudeis is someevidencethatthe ever-higher prices.There important tonote,close)at will beabletomove(and, market toseeifitindeed should keepaneyeonthis probably no,buttraders this point,theansweris FIGURE 1:BLD,DAILY. see inFigure1? based onwhatwe crude “fadeable” So isDecember In ordertotradenegative diver- ACD ) histo- This charthintsatathrustupwardtowardoverheadresistance. peaks sincethe significant correctioniscoming. to followthroughtheupsidecouldmeanthata the markettonewhighsinlateSeptember.Butfailure nine-month rallyinDecembercrudeoilfuturestook FIGURE 1:CRUDEOIL,DECEMBERFUTURES,WEEKLY. gences intheM histogram aswellaconfirming close need bothan“mMm”pattern inthe ACD Traders

histogram, traders .com ¥ page31 The

PROPHET FINANCIAL STOCKCHARTS.COM Copyrights 2008 © Technical Analysis, Inc. All rights reserved. over thelastfewdaysbutmanaged consolidating beforeitsnextmove. four weeks,andthestockcouldbe rallies. Tradingturnedflatoverthelast retracement aretypicalforbearmarket advance. Boththepatternand wedge andretracedaround50%ofthis JulyÐAugust, Alcoaformedarising (Figure 1).Afterasharpdeclinein w frames, and these should be should these and frames, w page 32 T competing two formed Alcoa by ArthurHill For Alcoa Dueling Wedges WEDGEFORMATIONS moments earlyinthetradeasDecembercrude bounced, therewouldhavebeensometense would havefallenaslow68.30beforethey short atapproximately70.74.Andwhileprices the endofweekbeginningAugust6. beginning July30,gotaconfirmingcloseasof over theweeksfromJuly16throughweek smaller peak.Thispattern,whichtakesplace can seetherequisitemMmpatterninsecond, the secondquarterandearlyinthird—we 2 —thedivergencebetweenpeaksearlyin the initial below thelowoflast“m”session.Lookingat atched for the next signal. next the for atched edges in two different time different two in edges The stockbrokethelowertrendline That confirmingclosewouldhaveatrader Tradable: call themedium-termtrend daily chartandwhatIwould he firsttimeframecoversthe ¥Traders negative divergenceshowninFigure AA .com higher prices. be short-termbullishandarguefor line). Abreakabovethislevelwould prior reactionhigh(redresistance trendline buthasyettoexceedthe stock brokeabovetheupperwedge wedge overthelastfewweeks.The September andthenformedafalling the short-termtrend.Alcoasurgedin 60-minute barsandwhatIwouldcall tential bullishtrades.Figure2shows verse, traderscanstillconsiderpo- area holds. of thedoubtaslongsupport August low.Thebullsgetthebenefit uptrend andcallforatestofthe fully reversethemedium-term 36, andabreakbelowthislevelwould lows. Iammarkingkeysupportat moving average,andtheOctober 50-day movingaverage,the200-day Support inthisareastemsfromthe to firmandfindsupportaround37. Because thetrendhasyettore- See www.Traders.comformore. This articlewasfirstpublishedon10/25/2007. short sidethatmightbewellworthmaking. then traderswillhaveanopportunitytothe the lowoflast“m”in“mMm”pattern, note, themarketmakeaconfirmingclosebelow should thatpatternappearand,itisimportantto the courseofpastseveralmonths.But has beenaverystrongmovetotheupsideover seriously beginthinkingaboutshortingwhat gram (the“mMm”pattern)beforetheycan will needasimilarsetupintheM tage ofacorrectioninDecembercrude’srally intraweek low. eased higherbeforemovinglowertothat68.30 Traders lookingtotakeevenbetteradvan-

■ See www.Traders.comformore. This articlewasfirstpublishedon9/28/2007. over thelastfew weeks. FIGURE 2:ALCOA,HOURLY. wedge andretracedaround50%ofthisadvance. FIGURE 1:ALCOA,DAILY. ACD

histo- ■ After asharpdeclineinJulyandAugust,AAformedrising ing theprevailingtrend. abandon theirpositionsifthemarketshowssignsofrenew- ers lookingtoexploitcorrectionsneedbeready divergences arenotuncommoninadvancingtrends.Trad- FIGURE 2:CRUDEOIL,DECEMBERFUTURES,WEEKLY. AA surgedinSeptemberand then formedafallingwedge January/February 2008 Negative

TELECHART2007 Copyrights 2008 © Technical Analysis, Inc. All rights reserved. a bullish rally. bullish a dation at all-time highs, leading to leading highs, all-time at dation January/February 2008 XLK is undergoing healthy consoli- healthy undergoing is XLK by ChaitaliMohile At New Levels Consolidating Select Sector Tec FLAGSANDPENNANTS pares theperformanceofindex shows thepricerelative,whichcom- two days.SeeFigure1. resistance withapullbackoverthelast last fewweeks,butagainfailedat510 index ralliedbackabove500overthe established resistancearound510.The August highinearlySeptemberand semiconductor index($S above itsJulyhighinSeptember,the omen as we head into October. into head we as omen and relative weakness is a bad a is weakness relative and participate in the September rally, September the in participate N broke outandisunderperformingthe T not did Index Semiconductor The by ArthurHill Lagging Semis Are COMPARATIVE RELATIVESTRENGTH ogy sector.WhiletheN ASDAQ The indicatorwindow(redline) Tradable: Tradable: the N up animportantcomponentof he semiconductorstocksmake hnology . Theindexfirstfailedatits S ECTOR S ECTOR S ECTOR ASDAQ XLK $SOX

and thetechnol- ASDAQ OX ) never

moved X witnessed apullbackrallyand helped recent fewweeks,theentire market pressure oftheprevioushigh. Inthe through avolatileperiodunder the odds favorabreaktothedownside. index showingrelativeweakness,the and weighonthetechsector.With tinuation oftheJuly-Augustdecline be bearish.Thiswouldsignalacon- lower trendlineofthetrianglewould break belowthelowerbandand toward theJulyhigh.Conversely,a would bebullishandtargetamove upper trendlineofthetriangle.This would breaktheupperbandand directional move.Amoveabove510 weeks, andthisusuallyprecedesa bands contractedoverthelastfew showing theBollingerBands.The evolved inSeptemberandIamalso the lasttwotothreemonths.Atriangle July-August andthenconsolidatedover ure 2),theindexdeclinedsharplyin reversing thisdowntrend. first resistancelevel(blackline)tostart The pricerelativeneedstobreakthe weakness versusthebroadermarket. downtrend andthisconfirmsrelative new lowsinearlyOctober.Itisaclear relative peakedinJulyanddeclinedto the pricerelativedeclines.The relative risesandunderperformswhen ogy SelectSectorS this newlyformedsupport,Technol- 50-day movingaveragesupport.On to reach26.50andsustainabovethe was notonheavyvolume;itmanaged average resistance.Therally,though, ally climbedabovethe50-daymoving The upsidemovefrom24.50gradu- average supportatapproximately24. ing alowbelowthe200-daymoving The $S against theStandard&Poor’s500. D LK Turning backtothepricechart(Fig- directional move. usually precedesa few weeks,andthis contracted overthelast The BollingerBands fill itsbasket,making anall-time OX tablished around24.50,mark- July-August, supportwases- uring thedecliningrallyin See www.Traders.comformore. This articlewasfirstpublishedon10/4/2007.

outperforms whentheprice PDR

(X LK ) went

■ tional movement.Similarly, asX carries tremendousstrengthfordirec- positions. Theconsolidationbreakout portunity fortraderstoreviewtheir a healthyperiod,andprovidesanop- upper rangeat27.50.Consolidationis with thelowersupportat72and 1, thesidewaysmoveisverynarrow now enteredconsolidation.InFigure ing opportunitiesfortraders. $1.50 andopeneddoorsforfreshbuy- high at27.50.Thisadvancerallygained over thelasttwotothreemonths. FIGURE 2:$SOX,DAILY. the performanceofindexagainstS&P500. FIGURE 1:$SOX,DAILY. average directional movementindex supportive oftheupsidebreakout. The upside rallywillbegin. moves outofthissidewaysmove, fresh With thisadvance,thesectorhas Let’s findwhethertheoscillators are The indexdeclinedsharplyinJulyÐAugustandthenconsolidated The indicatorwindowshowsthepricerelative,whichcompares LK the lengthof flagpoleorthelength mum levelismeasuredonthe basisof the calculatedtargetof$29.This mini- traders togolongabove$27.50 with tion. Iwouldthereforerecommend breakout isnecessaryforconfirma- length oftheconsolidationperiod,soa side breakout. confirms ahighpossibilityofanup- (12,26,9) ispositiveandthereforere- age convergence/divergence(M further upsiderally.Themovingaver- rally andalsopointstostabilityina cating bullishstrengthintheentire (14) hasmovedsteadilyupward,indi- (A trend. Therelativestrengthindex(R It isverydifficulttoestimatethe DX ) (14)showsawell-developed Traders .com ¥ page33 ACD SI ) )

TELECHART 2007 Copyrights 2008 © Technical Analysis, Inc. All rights reserved. ally movingabove70.TheM be goodbuyingopportunity. confirmed breakoutabove27.50can before undergoinganytrade.Onlya is inevitable. favor ofbulls,sotheupsidebreakout However, thetrendisdevelopingin consolidation periodmaylastlonger. to higherlevelsalongwithprice,the since theseindicatorsfailedtomove again supportingthebreakout.But is abouttoshowabullishcrossover, challenge comes into view. into comes challenge and a half years, but now a serious a now but years, half a and tial movingaverage(E port hasbeenthe50-periodexponen- relevant movingaveragelineofsup- ure 1).Notehowinthattimeitsmost nice double in stock price in two in price stock in double nice page 34 A a investors given has Co. Boeing by GaryGrosschadl T High-Flying Days Are Boeing’s DOUBLETOPS ing higherlevels.TheR indicators areintheprocessofreach- in thatpricemadeanewhighbutthe level. Thepresentscenarioisdifferent remained positivemovingaround0.75 (12,26,9), afterthebullishcrossover, the R Previously, atthehigherlevelof27, here isadivergenceontheindicators. there. TheimportantsignalInoticed 27 andhasestablishedstrongsupport has crossedthepreviousresistanceat fresh targetof$29. to 27.50(breakoutlevel),wegeta of theadvancerally.Sobyadding1.5 tion. Inaddition,theM closer to70,sothat’sapositiveindica- tion targetofthe $83area,whichen- ered, thefirstbeingpattern comple- downside targetsshouldbe consid- this importantlevelofsupport fail,two area midwaybetweenthepeaks. Should pattern looksgood,withthe trough double-top test.Thesymmetryofthe port, isbeingtestedforthethirdtime. that line,theimportantlevelofsup- opped Out? Traders canwatchforpriceaction On theweeklychart(Figure2),X This testtakestheformofapotential Tradable: SI

(14) wasoverbought,margin- ¥Traders s thismultiyearweeklychart peccable runsince2005(Fig- shows, Boeinghashadanim BA .com MA ACD SI

). Currently, (14) moved

(12,26,9)

■ ACD LK course correctionforthiscompany. support discussedshouldchart thenext $105 toparea.Theseimportant linesof spell anothersurgenorthtotestthe hand, supporthereatthetrendlinecould toward downsidetargets.Ontheother ing thefruitionofadoubletopmoving starting tobail. credence totheideathatinvestorsare shares fromarecentweek,lending large volumespikenearing65million may beevolving.Inaddition,notethe the stockprice,adownsidechange these goingintheoppositedirectionof a stockshowsimportantindicatorsas show largenegativedivergences.When and therelativestrengthindicator(R age convergence/divergence(M below thechart.Bothmovingaver- darkened bytwodisplayedindicators area ofprevioussupportnear$70. can makethebreakoutsuccessful. rally to$29.Allthreeindicatorshavebullishforceandtherefore FIGURE 1:XLK,DAILY. period E ous areaistheever-important200-day Should thatsupportfail,thenextobvi- trendline. possible downsidemovebelowthat peak fromthetrendlineappliedtoa compasses theheightofdouble Watch foraclosebelow$93,signal- Boeing’s blueskiesarepotentially bulls, sotheupsidebreakoutisinevitable. However, thetrendisdevelopinginfavorof MA See www.Traders.com formore. This articlewasfirstpublishedon10/24/2007.

(currently $73)andastrong The flag&pennantbreakoutwillleadthe ACD SI ■ ) ) FIGURE 1:BOEING,WEEKLY.

STOCKCHARTS.COM highs. RSI (14)andtheMACD(12,26,9)areontheirwaytoprevious previous high,enablingtherallytomoveahead.Inaddition, FIGURE 2:XLK,WEEKLY. BA’s weeklychartsuggestsadouble-top testisunderway. See www.Traders.comformore. This articlewasfirstpublishedon10/10/2007. XLK hasestablishedstrongsupportona January/February 2008

STOCKCHARTS.COM Copyrights 2008 © Technical Analysis, Inc. All rights reserved. as X moved up.Now theindicatorishealthy witha can takeagoodlong-sidetradeonconfirmedbreakoutabove$28. moving averageandaccompaniedbyincreasingvolume,sotraders made ahighof$28.Thepatterniswellsupportedby50-day FIGURE 1:XLP,WEEKLY. January/February 2008 T highs. new toward heading is XLP by ChaitaliMohile To Select SectorSurges Consumer Staples CANDLESTICKCHARTING price surgedabovetheupper range,theR any breakoutindication,just accumulation.Asthe levels, whilethepriceconsolidation failedtogive bullish runcameup.The zig-zag movesto50 convergence/divergence (M move inthelastthreeweeks.Themovingaverage The volumerosesmartly,supportingthebullish previous highpivotwithasmalllowershadow. X pressure. Onthethreewhitesoldiersformation, the periodwhenentiremarketwasunderbearish went throughalongconsolidationperiod.Thatwas strength index(R gram hasmovedonzero-linesupport.Therelative ing positivewithabullishcrossover.Thehisto- X white soldierscandlestickpattern(seeFigure1). 27.87. Thethree-weekbullishmoveformedathree weeks andreachedtheprevioushighresistanceat of September.Therallycontinuedthenexttwo LP LP The thirdcandleclosedmarginallyabovethe Tradable: wentbacktoitsprevioushighs. LP Previous High declined fromitsprevioushighsinitiallyand

rushed to27-pluslevelsinthesecondweek The consolidationrangeonthissupportbroke the 50-daymovingaverage(MA)support. he X LP XLP

has accumulatedbullishstrengthat SI ) (14)hasalowerlowuntil the The threewhitesoldierscandlestickpattern ACD ) (12,26,9)isturn- SI

(14) The symmetricaltrianglewasformed,andeven- volatility thatfollowedresultedinhigherlows. bullish bias.Thestrengthshowsnewlevelsin X in, X As theglobaltumblingofstockmarketcame LP • SubscribetoOurFree“Trend Weekly” E-Letter • Target 100%Gains withMinimalRisk • Your PortalforProfits W

STOCKCHARTS.COM sped up,forminglowerhighs,andthe pressure. previous highs.Thisoldhighofferedstrongsupporttofuturebullish FIGURE 2:XLP,DAILY. allStreetWindow.Com • InnovativeCompaniesinNicheMarkets • CupandHandleChartFormations • ChartsWith Top Relative Strength • 100%RevenueGrowth Go toWallStreetWindow.Com • TheGreatTraders FollowtheTrends • 16,000Subscribers Can’t beWrong • We IdentifyStocks inTrend Sectors The triangularbreakoutledtherallyabove LP . a stop-lossof27.64. go longonaconfirmedbreakoutabove$28,with ing inX LP . Andthedailychartallowstradersto tually, X and the M and the ume pouredin.TheR diminished onbreakout,vol- pretty interesting.Asvolatility Figure 2,thevolumeflowis new highs,closingat28.In current rallygraduallymade with strongnewsupport.The sistance tosupportandmoved ber that happenedinearlySeptem- narrower range.Thebreakout soldiers areopentofreshbuy- els incomingdays. bullish, indicatinghigherlev-

poured in. on breakout,volume volatility diminished interesting. As volume flowispretty In Figure2,the ■ See www.Traders.comformore. This articlewasfirstpublishedon10/3/2007. Therefore, thethreewhite turned toa50-dayMAre- Traders LP

ACD began movingina

.com (12,26,9) are ¥ page35 SI

(14)

Copyrights 2008 © Technical Analysis, Inc. All rights reserved. and M 500 shottonewhighsinSeptember occurred becausetheStandard&Poor’s low attheendofSeptember.This ued todriftlowerandrecordedanew months, butthepricerelativecontin- gust. M peaked inMayanddeclineduntilAu- and thenformedatriangleconsolida- clined sharplyfromJunetoAugust underperformed. the JulyÐAugust decline. JulyÐAugust the moving average resistance. average moving of continuation a to points this and makes a U-turn from long-term from U-turn a makes market, broader the underperform MACD page 36 I SPDR Sector Select Financials by ChaitaliMohile T W SUPPORT&RESISTANCE F to continues Lynch Merrill by ArthurHill Merrill Lays Low ened thebounce. Thoughthishurdle previous highresistancethat weak- fresh support;the35level wasthe tances weremuchstronger thanthe day MAwasestablished.The resis- around 32untilsomesupport ofthe50- constantly dippingtothelowerlevels the pricemomentum.Thewas higher. Instead,M The X creating abearishmovingcrossover. with the50-dayMAmovingbelow, day MAwasthestrongestresistance, losing $8inmid-July2007.The200- urns Weaker On thepricechart,stockde- Tradable: Tradable: eak XLF 200-day movingaveragesupport, (X n theFinancialsSelectSectorS LF ER LF The stockandthepricerelative (M igure 1showsMerrillLynch ¥Traders ER

now hasbearshoveringover ), thepriceslippedbelow

did notfollowthemarket ER

firmed overthelasttwo for thenextsignal. triangle boundaries I amwatchingthe ) andthepricerelative. MER XLF .com ER

laid lowand PDR ation ofthepriordecline. favor abreakbelow70andcontinu- continued relativeweakness,theodds below 70wouldbebearish.Given above 78wouldbebullishandabreak aries forthenextsignal.Abreak and Iamwatchingthetrianglebound- This representsarestafterthedecline tion overthelasttwoandahalfmonths. (R strength oftherelativeindex tance area. consolidating aroundthenewresis- mulate thestrengthforsurgeby angle breakinthestock. This couldbeusedtoconfirmatri- low -1toturnbearishonmomentum. now, Iamwatchingforamovebe- bulls haveaslightmomentumedge territory thismonth.Eventhoughthe R near the200-dayMAresistance, Even asthepricewasconsolidating the priceclosetoresistancearea. recovery ofR to thelowerlevelof32.Thefast ginally oversoldasthepriceslipped its firsttarget.TheX achieve the200-dayMAresistanceas volume. Thebreakoutrallycould ened furtherintheabsenceofgood in earlyOctober2007,therallyweak- was violatedwithasingle-daybounce the triangle,M consolidated andtradedflatwithin sented abearishextreme.Asthestock low -3inAugustandthisrepre- divergence (M els. Themovingaverageconvergence/ force. Butyesterday’s middayprofit- ing itssteaminpresenceof bearish See Figure1. rally aheadoftheprevioushigh pivot. tive divergencethatadded aforced back. TheM until thelong-termresistancewashit tive towardthebreakoutprocedure (M ing averageconvergence/divergence as theM moment oftruthisnowapproaching zero representsflatmomentum.The sentially flatfortwomonthsand sense becausemomentumwases- way backtothezeroline.Thismakes SI Figure 2showsM The upsidejourneywasonbullish However, theconsolidationwas los- SI ACD

(14) washoldingitsbullishlev- ) (14).Theoscillatorwasmar- ). Theindicatormovedbe- See www.Traders.comformore. This articlewasfirstpublishedon10/18/2007. ACD ACD SI ACD

edged intopositive

(14) helpedsustain

(12,24,9) hasposi- ) wasequallyposi- ER ACD LF

with themov-

tried toaccu-

worked its ■ a bearishextreme. FIGURE 2:MERANDTHEMACD. and thenformedatriangleconsolidationoverthefollowingtwohalfmonths. FIGURE 1:MERANDTHEPRICERELATIVE. July. was born.Thesamesupportis nowresistanceafterthelargecorrectionduringMayto FIGURE 2:XLF,WEEKLY.Earlierwiththesupportof50-day MA,anewadvancerally The MACDmovedbelow-3inAugustandthisrepresented The stockdeclinedsharplyfromJunetoAugust January/February 2008

STOCKCHARTS.COM METASTOCK Copyrights 2008 © Technical Analysis, Inc. All rights reserved. Taken together,thisshowsthatL started contractingtoformthetriangle. ing formationwasexpandingbutthen a symmetricaltriangle.Thebroaden- ing formationandtherighthalfshows half ofthediamondshowsabroaden- tinues, theM indicators. Iftheprofit-bookingcon- now, theonlyconcernisabout support. Thoughnotalarmingasof other supports,likethe50-dayMA the previoushighsupportbuthasfew tance level.Thepriceclosedbelow impending breakout. impending winding ever tighter ahead of an of ahead tighter ever winding since early June and the coil is coil the and June early since January/February 2008 and thesearetighteningagain. Note a directionalbias. tral patternsthatrequireabreakout for tight consolidation.Diamondsareneu- panded, andthenmovedbackintoa traded inatightconsolidation,ex- F consolidating been has Lilly Eli by ArthurHill Pitch For The Up Lilly Winds SYMMETRICALTRIANGLE the X booking boostedthebears;asaresult, ume initially,butasthetradingrange was supportedbyappreciatedvol- lowest levelof31.5.Thepullback downfall wentstronger,reachingthe As thissupportwasleftbehind,the the 50-dayMAsupport(Figure2). weekly chartturnedthepricebelow bullish level. R SI I haveoverlaidtheBollinger Bands The double-topeffectonthe Tradable: indicators turnbearishaswell. likely tomovelowerifthe bears hasmadeaU-turnandis The XLFinpresenceofpowerful

(14) canbebroughttobelowtheir LF the BollingerBands.Theleft with adiamondformationand igure 1showsEliLilly(L

made aU-turnfromtheresis- LLY ACD

(12,26,9) andthe LY LY ) resistance. TheM and thepricetoohitits50-dayMA great difficultycrossingthe50level, estimate adownsidetarget. Mirror techniquescanbeapplied to low 55.5wouldclearlybebearish. bullish scenariohere,butabreakbe- around 63Ð64.Iamonlyofferingthe breakout. Thisalsotargetsamoveto the pattern(5.5)wasaddedto around 63Ð64.Second,thelengthof This graytrendlinetargetsamoveto triangle trendlineandextendeditout. drew atrendlineparalleltothelower two waystofindthistarget.First,I strength toaround63Ð64.Therewere would bebullishandprojectfurther tance at58.2.Abreakaboveresistance triangle withsupportat55.5andresis- for abreakout. we mustturntosupport/resistance do notgiveusdirectionalcluesand volatility expansion.BollingerBands it istimetostartlookingforanother that thingshavequieteddownagain, wild inthefirsthalfofAugust.Now stock fellbacksharplyandthenturned was occurring(greenarrow),butthe line). Itlookedlikeanupsidebreakout just beforevolatilityexpanded(blue that thebandstightenedinearlyJuly well. Inaddition,theR narrowed, thevolumeloweredas ging thepricetowardsupport. booking pouredbearishforce,drag- resistance. Inaddition,theprofit- on bothtimeframesisunderstrong ish crossover.Thepricemomentum under negativeterritorywithabull- tors turnbearishaswell. is likelytomoveloweriftheindica- powerful bearshasmadeaU-turnand Figure 2focusesonthesymmetrical Therefore, theX See www.Traders.comformore. This articlewasfirstpublishedon10/18/2007. See www.Traders.comformore. This articlewasfirstpublishedon9/27/2007. ACD LF

in presenceof

(12,26,9) is

SI ■

■ (14) had July. was born.ThesamesupportisnowresistanceafterthelargecorrectionduringMayto FIGURE 2:XLF,WEEKLY. and projectfurtherstrengthto around63. FIGURE 2:LLY,SYMMETRICALTRIANGLE. broadening formationandtherighthalfshowsasymmetricaltriangle. FIGURE 1:LLY,DIAMONDANDBOLLINGERBANDS. Earlier withthesupportof50-dayMA,anewadvancerally A breakaboveresistancewouldbebullish The lefthalfofthediamondshowsa Traders .com ¥ page37

METASTOCK Copyrights 2008 © Technical Analysis, Inc. All rights reserved. mance betweenSprintandtheD you canseeacomparisonoftheperfor- years reflectsthissituation.InFigure1 mance ofthestockduringpast compared tomanypeers.Theperfor- segments. Thefundamentalsareweak through thewirelessandlong-distance services, conductingitsoperations cess. WiM links orfullmobilecellulartypeac- long distancesthroughpoint-to-point aimed atprovidingwirelessdataover The technologyiscalledWiMaxand are bothgrowingsignificantlyfaster. AT&T andVerizonWireless,which strategy tocountermarketleaders tions totheInternet.Thisispartofa network withfastwirelessconnec- up to$5billionby2010createa an edgeoverrivalsandplanstospend most 20%. June andup35%,Sprintisdownal- very closetoitsrecenthighasoflast quite impressive.Whiletheindexis since April2006.Thedifferenceis access the Internet. the access implement a new technology to technology new a implement plans a huge investment to investment huge a plans TECHNICALANALYSIS page 38 Telecommunications Index(D S company communications The by PaoloPezzutti Pa Tec Sprint: New total; thevolume ofeachbarwitha call thatthisindicatoraddsto arunning constantly accumulated.You mayre- absent, whereastheIndex has been cumulation ofthestockispractically volume displaysasituation where ac- market itsservices.Theon-balance working inthecompany’sstrategyto Telecomm Index.Somethingisnot have seenrapidadvancesinthe lower thanin2005,whichcontrast you canalsonotethatpricesnoware $19, whichisreallynotbad.However, the stockhasrecovereduptopresent 2003. Sincethelowof2002at$6.03 see theweeklychartofstocksince ceeding initsbet.InFigure2youcan ognizing thepossibilityofSprintsuc- mature, thepotentialisgreat. sive applications.Althoughstillnot bandwidth foravarietyofdata-inten- The companyisnowtryingtoseek For themoment,pricesarenotrec- Tradable: ying OffSoFar communications productsand range ofwirelessandwireline print NextelCorp.(S)offersa hnology Not ¥Traders AX

S is ameansofincreasing .com JUSTL JUS ) is useful. of positiveandnegativedivergences of thisindicatorthroughtheanalysis volume anditsaverageprice.Theuse lated bymultiplyingthecurrentbar’s ous bar’saverageprice.Itiscalcu- bar’s averagepriceexceedstheprevi- positive moneyflowwhenthecurrent high, andlowofabar.Youhave ing theaverageofopen,close, calculation oftheaverageprice,us- downtrend. so importantatthebeginningoflast identified inthe$20.50levelthatwas tance, theobjectivetoupsideis manage tobreakoutabovetheresis- a positivedivergence.Shouldprices the moneyflowindicatorsareprinting convergence/divergence (M here isthatboththemovingaverage short term.Whatisinterestingtonote sents animportantresistanceinthe relative highat$19.21,whichrepre- range andarenowtestingtheprevious that level.Pricere-enteredthetrading $17.55 butdidnotbreakdownbelow picture. Priceshitthepreviouslowof bullish pattern. been verynegativeasitnegatedanice breakdown ofthe$20.50levelhas which wasabove$23.Technically,the sharp correctionfromthetopinJune, can seehowSprinthasdevelopeda ful indications. and divergencescanalsoprovideuse- perspective frompriceorvolumealone price andvolumeprovidesadifferent each barwithalowerclose.Theuseof subtracts fromthetotalvolumeof higher closethanthebarbeforeand sign ofitfromthetechnical side. sheets. Forthemoment,there isno vide greatbenefitstothe balance choices ofthecompanywouldpro- knowledge thatthetechnological in thefuture,shouldmarketac- the peersindex.Thingscouldchange stock thatisclearlyunderperforming dium termisnotfavorabletothe larly good.Thesituationintheme- the risk/rewardratioisnotparticu- It istrue,however,thatatthispoint toward thenextresistanceat$20.50. the possibilitytocontinuerebound of thestockinshorttermindicates can behelpful. Also forthisindicator,divergences is alsoaveragedandthenplotted. difference isthenplotted.Thisvalue (E two exponentialmovingaverages Very simply,theM The moneyflowisbasedonthe In Figure4,weseeashorter-term On thedailychartinFigure3,you In summary,thetechnicalsituation MA s) ofspecifiedlengthsandthe See www.Traders.com formore. This articlewasfirstpublished on10/2/2007. ACD

calculates ACD ) and

■ stock sinceApril2006. Telecommunications IndexandSprinthighlightthepoorrelativeperformanceof FIGURE 3:SPRINT,DAILY. lation hasbeenonthestockduringpastfewyears. FIGURE 2:SPRINT,WEEKLY. FIGURE 1:DJUSTIVS.S. should thebreakoutbesuccessful isat$20.50. positive divergence.Pricesare nowtestingashort-termresistance.Nextobjective FIGURE 4:SPRINT,DAILY. June. Thenegationofthebullishpatterninfigurehasbeenquitenegative. The comparisonbetweentheperformanceofDJUS The MACDandthemoneyflow indicatorsareprintinga The stockhasdevelopedasharpdownmovesincelast The on-balancevolumeindicatorshowsthatnoaccumu- January/February 2008

TRADESTATION TRADESTATION TRADESTATION STOCKCHARTS.COM Copyrights 2008 © Technical Analysis, Inc. All rights reserved. of thecentury, ascentralbanksaround high of$825in1980to$253 by theend buy andsellphysicalbarsof gold. and selldollarsonthemarket thanto of theworld.Itwasfareasier tobuy became “asgoodasgold”fortherest This pair(U franc currencypairinthefirsthalfofSeptember. encountering resistance,andbeginstomovedown. already shownweakness,failstomovehigherafter against amarketistodosowhenthathas remains thatoneofthemosteffectivewaysbetting market topisnottobeunderestimated.Butthefact far f the U consecutive days.Thisopenedupthepossibilitythat and managedtocloseatorabovethatlevelforthree fe USD/CHF. lower a for make close confirming a January/February 2008 W past the of scenario darkest The by KoosvanderMerwe US Dollar The Falling ELLIOTTWAVE exponential movingaverage(E T and EMA 50-day the at support below break A by DavidPenn Swissy Down Greenback/ Breaks The Bearish mMmPattern REVERSAL Bueller?”), thefourthdayofU 1.2200 level. the firsthalfofAugustwhenpairchallenged resistance atthe50-dayE alling US dollar. How much How dollar. US alling w years for the world has been a been has world the for years w The goldpricestartedfalling froma We canseethishappenintheUSdollar/Swiss Unfortunately forU Tradable: Tradable: ther? SD ing starJapanesecandlestickpatternata fully shortinganegativedivergenceorshoot he thrill—andprofitabilityofsuccess /C HF lar fromgold,thedollar cided todelinktheUSdol- hen theUnitedStatesde- SD

might regainthebullishmomentumof USD/CHF UDX /C HF ) hadralliedabovethe50-day SD /C MA HF

was thesessionat MA

bulls (“Anyone? ) inlateAugust SD /C FIGURE 1:GOLD,MONTHLY. HF 463.00

08 28 48 68 88 09 29 49 69 89 00 99 98 97 96 95 94 93 92 91 90 89 88 87 86 85 84 83 82 81 80 test of C URENIS C URENIS C URENIS 715.00 $GOLD represents apotentiallybearishpatternintheM Alexander Elder(of the letters“mMm.”Thisshorthand,borrowedfrom and moveddown,formingapatternthatresembles in earlySeptemberbeganmovingup,thenreversed ing outabovethe50-dayE place whenamarketclosesbelowthe50-dayE like abrokenleg.”Forme,thatkindofbreaktakes should “lookbad.Ifitmadeasound,wouldsound Smith oncesaidofshortingstocksthatthechart mMm patternintheM down belowthe50-dayE September 5withthebearishengulfing,break- the U ment lower—mirroredandconfirmedthefailureof continue movinghigher—and,instead,itsmove- in momentum.Here,thefailureofhistogramto histogram andcanbeusedtospotshort-termshifts ported theideaoflowerpricesforU great. stick, thepotentialforfurtherdownsideseemed And inthecontextofbearishengulfingcandle- the lowerpanelinFigure1howM created. Thatconfirmingcloseoccurredonthefol- session, September5,whenallthesesignalswere required wasaconfirmingclosebelowthelowof market forU line closedbackbelowthe50-dayE Not onlythat,butthebearishengulfingcandlestick candlestick linewasformed. the previousday’sopen.Assuch,abearishengulfing previous day’scloseandclosedseveralpipsbelow which themarketopenedatsamelevelas 298.00 There wasyetanothertechnicalcluethatsup- The finalingredientistheconfirmingclose. 510.10 (Daily) 682.30 SD /C HF Here arethewavesasprice ofgoldfell.

to continuemovinghigherafterbreak- SD 282.00 /C HF Trading ForALiving

ACD signaled itsnextmoveon MA MA histogram. Allthatwas . , andthecompleted 497.10 MA SD ACD /C . TraderGary HF

histogram . Notein

note), ACD MA . writing, U mately 1.2005.Lessthan24hourslater,asofthis lowing day,providingforashortentryatapproxi- in thegreenback/swissyearlySeptember. histogram —anticipatedanopportunitytothedownside a breakbelowthe50-dayEMAtoanmMminMACD bearish signals—fromaengulfingcandlestickto FIGURE 1:USDOLLAR/SWISSFRANC,DAILY. 326.30 SD /C HF istradingat1.1870. 414.70 See www.Traders.comformore. This articlewasfirstpublishedon9/7/2007. Traders .com

A numberof ■ ¥ page39 253.00

STOCKCHARTS.COM eSIGNAL Copyrights 2008 © Technical Analysis, Inc. All rights reserved. dex (R Note toothattherelativestrengthin- close tothefifthwaveprojectionof67. This wouldseeitfalltothe64level, price willfallthedistanceofentry. the pricenotcorrectatitslevel, against the yen. the against the declinehashardlybeenantici- Yes, thedollarhasfallenfurther,but the market,butby50basispoints. 25 basispointsalreadydiscountedin were, whentheUScutratesnotby announcement showshowwrongthey Fed fromcuttinginterestrates.The tumbling currencywouldpreventthe cheap dollar.Thethoughtwasthata paying astheT-billsmature,witha expensive dollarandwillnowbere- through thesaleofTreasurybillsatan cause theUSborrowedmoney dollar suitstheFederalReserve,be- ing dollarsfast.Ofcourse,aweak markets, andtheyappeartobeditch- the crisesinAmericanfinancial higher prices for the greenback the for prices higher it coincidedperfectly withaswing The significanceofthislevel wasthat reached aprojectedtargetnear 123.50. June 22,2007),themarket hadjust M little lowerthanpresentprices,butthe gests thatthecurrenttargetisindeeda break) indicatorofAdvancedG A T in bottom triangle ascending An by DavidPenn The Bottom Pullback Off Breakout And USD/JPY: BREAKOUTS page 40 target of67.71.TheM throes ofafifthwave,withpossible the USdollarcouldbeinfinal My Elliottwavecountsuggeststhat dollar hasfallensince2001tilltoday. gold fell. from StockChartsshowsthewavesas reserves. Figure1,thecharthere,taken the worldstartedsellingtheirgold U ugust and September hints at hints September and ugust SD OB Investors appeartobespookedby My secondchartshowshowtheUS Tradable: /J

indicator alsosaysthatshould PY SI Traders.com Advantage(“The greenback/yen currencypairfor he lasttimeItookalookatthe ¥Traders ) isoversold.

Breakout StallsAtTarget,” USD/JPY .com OB

(make or ET

sug- when theU the articlewaspostedday tom justnorthof115.Infact,theday had enjoyedsinceanearlyMarchbot- also reachedtheendofadvanceit its swingruletarget,butthepairhad U what seemsclearisthatthemarket for triangle isprobablyimmaterial. But about 116.50—isatrueascending virtually horizontalsupportlevelat consolidation’s upwardbias—andits with aslightupwardbias.Whetherthis solidated inalargelysidewaysrange August bottom,theU half ofAugust.Inthemonthsince 112 onanintrasessionbasisinthefirst just above124inlateJunetoaslow in adizzyingmeltdown,fallingfrom midmonth, has executedatestofresis- dation inearliestOctober and,by that notonlyhadtheU in earlyJune. ruleÐderived projectionbasedonadip ing atanannualrateof14%,with figures forJulyshowedexportsgrow- has shrunkconsiderably.Monthlytrade close athand.TheUSexternaldeficit charts aretellingmethatthebottomis started inearlyAugust. than 1.5%sincethefinancialturmoil pated panickedrout.Ithasfallenless FIGURE 2:USDOLLARINDEX,MONHTLY. intrasession high124.15. SD What Ididnotknowatthetimewas How farcanthedollarstillfall?My Since thattop,theU /J PY

did breakoutofthatconsoli- SD /J PY

topped outwithan SD SD SD /J /J /J PY PY PY

has been has con-

reached Here ishowtheUSdollarhasfallenfrom2001tilltoday. U failed breakoutsuchastheonein tum tendstobeswift.Similarly,a the resumptionofupsidemomen- rection thatcausedthecup—and shallow, forexample,thanthecor- back isrelativelyshallow—more ket hasupsidemomentum,thepull- to breakoutfails.Becausethemar- often developsasanattemptedmove cup withhandlepattern.The failed breakoutlikethehandleofa level. SeeFigure1. tance-turned-support atthebreakout breakouts thatinitiallyfail. the often-sizablemovesafter is inlargepartwhathelpsproduce weak handsreturningtothemarket occurs sometimeafterward.These hands beforethe“real”breakout represents theAugusthighsin theU as 120.Interestingly,the120 levelalso suggesting anupsidemove to ashigh 116.50 toabout113atitswidest point, dollar crash,andmayevenbetempted gest supplier,haslittletogainfroma tinue togrow?China,America’sbig- will remainlow,butexportscon- mild (seemypreviousarticle)imports facing, arecessionthatIbelievewillbe the largestinyears. imports atonly5%.Thisdifferentialis J PY SD It canbehelpfultoconsidera The consolidationmeasures from With therecessionthatAmericais and, savefor the newlycreated, /J PY

serves toshakeoutweak SD / find supportatthebreakoutlevelnear116.50. resistance atthe118levelandpullsbackto early OctoberbreakoutintheUSD/JPYfinds FIGURE 1:USDOLLAR/JAPANESEYEN,DAILY. U thing likelytostemanadvance inthe potential resistanceat118,is theonly gesting otherwise. gold.” Mychartshowever,aresug- dollar, theeuroisnowasgood world couldsay,“Tohellwiththe to floattheyuan.Thenofcourse, SD /J PY . See www.Traders.com formore. This articlewasfirstpublishedon10/18/2007.

See www.Traders.comformore. This articlewasfirstpublishedon9/26/2007. ■ January/February 2008

■ An

eSIGNAL ADVANCEDGET Copyrights 2008 © Technical Analysis, Inc. All rights reserved. last week’soversoldreading.Theabil- the indexquicklybouncedbackafter readings lastedoverfourweeks,but downtrend continues.SeeFigure1. sold andremainoversoldasthe shows howasecuritycanbecomeover- of JulyandallSeptember.This chastic oscillatorwasbelow20most last week(reddottedline).Thesto- stochastic oscillatordippedbelow20 the indexagainbecameoversoldas latest declineoverthelasttwomonths, market forU money, wasonOctober3 when the though. hard. Here’s how it happened. it how Here’s hard. f sellers took the USD/JPY down USD/JPY the took sellers poised looks Index Dollar US the triangle hinted at higher prices, higher at hinted triangle fo January/February 2008 W ascending an after days few A by DavidPenn In USD/JPY Ascending Triangle Revisiting The Against The Yen Dollar Down TRADINGSYSTEMS T and oversold becoming After by ArthurHill T US DollarIndex nasty breakdown. that turnedapotentialbreakout intoa weakness intheU when traderscouldhavespottedthe back andlookatthatmarketsee thought itwouldbeagoodideatogo or a bounce. Don’t get too excited, too get Don’t bounce. a or OVERBOUGHT/O rm ries To Firm ries To The JulyandSeptemberoversold The buysignalinU Tradable: Tradable: ing a bullish engulfing pattern, engulfing bullish a ing ing atmultiyearlows.Withthe clearly inadowntrendandtrad- he USDollarIndex($U J turning intoaplunge,I ith thepullbackinU PY SD $DXY USD/JPY ’s ascendingtriangle /J PY SD

/J broke outabove PY SD VERSOLD

— weakness /J PY , formy SD SD ) is / minding hisor herbreakevenstopafter sions (October15,16,and17). Atrader lower lowsonthreeconsecutive ses- ing signswerelargelyinthe formof for thosewhowerelong.These warn- already thrownupsomewarning signs about theU ing tradesgofromwinnerstolosers. reached canhelptradersavoidwatch- once thisorasimilarmilestoneis minimum, movingstopstobreakeven once amarketgivesme100pips.At 117.95. Generally,I’vetakenprofits 15, U gradually afterthatpoint.ByOctober as oftheenddayonOctober5. high of116.77.(SeeFigure1.) required acloseabovetheOctober4th developed onOctober4.Thatsignal (stochastic breakout)longsignalthat ing closewasalsogoodforaB close of116.92. two dayslateronOctober5witha 116.79). Thisconfirmingclosecame the October3rdsession(ahighof waiting foracloseabovethehighof closes wheneverpossible,whichmeans 116.79. Iliketowaitforconfirming the highsofSeptembertocloseat September high. trendline, brokensupport,andtheearly Resistance herestemsfromtheJune 80Ð81 andthisistheupsidetarget. I ammarkingaresistancezonearound expect morethananoversoldbounce. short-term bullish,tradersshouldnot mid-August trendline. firmation. Thiswouldalsobreakthe move above78.5wouldprovidecon- patterns requireconfirmation,anda versal showsbuyingpressure.These prior candlestickandthisintradayre- candlestick completelyengulfsthe above thepriorhigh.Thelongwhite is belowthepriorlowandclose tern. Thispatternformswhentheopen firmness withabullishengulfingpat- an oversoldbounce. itself andtheindexcouldbepoisedfor that thedowntrendmaybeexhausting ity tomovebackabove20suggests By thetimeIwrotemyrecentarticle The marketforU So eitherway,wearelongat116.92 I shouldpointoutthatthisconfirm- While suchabreakoutwouldbe The indexalsoshowssomesignsof See www.Traders.comformore. This articlewasfirstpublishedon10/24/2007. SD /J PY SD

made anintradayhighof /J PY ■

pair, themarkethad SD /J PY

moved up OSO neath the50-dayE cause Iviewaclosebe- sitions. Inpart,thisisbe- traders outoftheirlongpo- all butthemostobstinate tober 17shouldhavechased tial movingaverageonOc- below the50-dayexponen- she hadstayedon,theclose this point.Butevenifheor level wouldhaveexitedat the markethit100+pip placement. and/or breakevenstop points forprofit-taking fallen therequisite100+ ber 19,theU session onFriday,Octo- the endoffollowing 115.57 onOctober18.By FIGURE 2:USDOLLARINDEX. FIGURE 1:USDOLLARINDEX. day E the wakeofsubÐ50 The confirmingclosein reasonably goneshort. but theyalsocouldhave traders nothavebeenlong, tober 18,notonlyshould confirming closeonOc- arrived onOctober18. downside —whichinfact a confirmingclosetothe a sellsignalifsucceededby At thispoint,withthe MA

close cameat

■ SD /J MA PY

to be had The indexshowssomesignsoffirmnesslately,however. $USD isclearlyinadowntrend. clear the118level. — orshortbeforetheUSD/JPYlongtradecould selling towardmid-Octoberlikelyforcedtradersout signal whenthestochasticcrossedabove80.But in earlyOctoberwasconfirmedbyaBOSOlong FIGURE 1:USDOLLAR/JAPANESEYEN,DAILY.Abreakout See www.Traders.com formore. This articlewasfirstpublishedon10/23/2007. Traders .com ¥ page41

eSIGNAL METASTOCK Copyrights 2008 © Technical Analysis, Inc. All rights reserved. apply indicatorssoyoucantradeprofitably. time, Iwanttodiscusshowidentifythetrendsand and thedifferentkindsofmovingaverages.This Money.com, Iwroteaboutusingmovingaverages trade successfully. trade identify trends and apply indicators so you can you so indicators apply and trends identify av page 42 the longer-termmovingaverageisaboveshorter- existing trendaswellreversalpossibilities.When The overlaysofvariousmovingaveragessignifythe I moving of types various discussed I Previously, by ChaitaliMohile DENTIFYING THE CHARTIST erages. This time, I will discuss how to how discuss will I time, This erages. I I ¥Traders tors. InmylastarticleforWorking- tion toolsandpricemomentumindica- ages (MAs)andothertrendidentifica- like totradetrendsusingmovingaver- Chasing TheTrend WithIndicators .com

TRENDS For moreinformation, visittheS&Cadindexat ■ To simplify: longer-term one,anuptrendisindicated(Figure1). if theshorter-termmovingaverageisabove term one,adowntrendrulesthemarket.Conversely, moving averages.Ialsodrawtrendlinesifnecessary ■ directional movementindex(A saws Iprefertousetrendindicatorsliketheaverage whipsaws resultinginfalsesignals.Toavoidwhip- averages inisolationisthatyoumayseealotof the 20-dayMA.Onedisadvantageofusingmoving the market,whileothersmayuse50-dayMAand average anda50-daymovingforviewing trader. Sometradersmayuseonlya200-daymoving

10-day MAabove20-day50-day The timespanusedwilldifferfromtraderto 50-day MAabove20-day10-day = downtrend = uptrend Traders.com/reader/ DX ) andAroonwith ■ ■ I usethiscombinationoftechnicaltools. easier toidentifyintermediate-trendreversalswhen range-bound move.KeepinmindthatwhentheA average convergence/divergence(M tives crossover. signals aregeneratedwhenthe+DIand-DI when +DIand-DImoveswithequalpace.Buy&sell range. Theexistingtrendusuallycomesunderthreat DI). TheDIgivesyouanideaofthetruemarket positive andnegativedirectionalindex(+DI- ■ average directionalmovementindex(A One ofJ.WellesWilder’sbestdevelopmentsisthe T lation takingtime periodandthehighest lowest are usedtoidentifythetrend. Chandemadeacalcu- in betweenzeroand100;Aroon upandAroondown trend indicatorwithitsindependent features,weighted rameter oscillatorinthemid-1990s. Aroonisalsoa Analyst TusharChandedevelopedthissinglepa- A extended periodoftime. the indicatorcanstayat55-60levelforan when theindicatorstartstodecline.Thisisbecause is atoverheatedlevels,youshouldonlytakeprofits ■ simplified andeasyform: applying theA ing thetrendstrength.TheA Wilder preferredusinga14-dayperiodforidentify- trend andalsoidentifiesthereversalsituation. indicator measuresthestrengthofprevailing ■ the relativestrengthindex(R to helpmeidentifymarketdirection.Ialsolikeuse HE In hisbook The possibilityoffalsesignalsoccurringwhen ROON The A trend. flattens out. The A the A you canusetheoscillatorstohelptrade.If consolidation afteratrendingmove.Inthiscase, When theA When theA downtrend isdeveloping. a profitisbetteriftheA consolidation expectedsoon.Asaresult,taking above isinterpretedasastrongtrendwith The A levels, itmeansthetrendisstrengthening. nario, oscillatorsliketheR a weaktrendorconsolidation.Insuchsce- , AshwaniGujralinterpretedtheA A DX DX DX DX DX

declining below30isinterpretedasa How ToMakeMoneyTradingDeriva- at anextremelyhighlevelof45or above 30isinterpretedasastrong breaks down,itindicatesthata DX DX DX

rises from15to25orlower is lessthan20,itinterpretedas is highlylikely,particularlyina January/February 2008 DX SI SI DX mayworkbetter. ) andthemoving

makes atopor

consists ofthe ACD ). Ifindit DX DX ). This

in a DX

Copyrights 2008 © Technical Analysis, Inc. All rights reserved. continued forthreeyears,finallygivingareversal and Aroonupslippedbelow30.Thisbearmarket turned strongerasAroondownmovedabove70 in 2001,startingthebearishtrend.Thedowntrend each other,thereisaconsolidationimpending. Aroon upanddownstartmovingcloseto trend below30indicatesareversalsituation.If Aroon, atrendabovethe70levelisstrongerand January/February 2008 A close intoconsiderationtoidentifytrends.Like 20-day MAisabovethe10-dayMA,indextrendingdownward. moving average(MA)isabovethe20-dayMA,indexinanuptrend.When how movingaverageshelpidentifythedirectionoftrend.When10-day FIGURE 1:IDENTIFYINGTRENDS($XOI). tshirt sweatshirt tshirtsweatshirt DX 22.75 33.75 22.7533.75 In Figure2,Aroondownmovedaboveup , Aroonindicatesthetrendphase.Accordingto STOCK UP! t-shirts&sweatshirts,thatis! STOCK UP! Light Gray Polyester. Available inLargeandX-Large. Available inTan and ** Sweatshirts: colors: Natural,BrightYellow, andLightBlue A Fruit oftheLoom™50/50Tee (50Cotton/50Polyester). A * T-shirts: vailable insizesLarge&X-Largeandthefollowing vailable inMedium,LargeandX-Large.Allother t-shirts are BACK ON YOURCOTTON ON YOURCOTTON

(logo appearsasshownonbotht-shirtandsweatshirt) White are100%HanesHeavyweight™CottonTee. The Heavyweights™byHanes 50Cotton/50 On thedailychartofoilindex,youcansee nary stages. opportunity toenteralongpositionintheprelimi- to thislatesignal,manytradersmayhavemissedan moved outofthecorrectionareainearly2003.Due above Aroondownin2004,whereaspricealready lator. Aroonupmoved about theAroonoscil- would liketopointout signal in2004. In Figure2,Ihavedrawntrendlinesforsupporting Here issomethingI The Traders’ Magazine FRONT

STOCKCHARTS.COM

a yearlater,whichmakesitlaggingindicator. indicating thedownwardtrendwouldbestrong.Thereversalwassignaledabout is usedtoidentifythestrengthofatrend.In2001,Aroondownwasabove70, FIGURE 2:THEAROONINDICATOR($NDX).

○○○○○○○○○ ○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○○ www.Traders.com •1-800-832-4642Direct206-938-0570 •Fax206-938-1307 To Signature ______Date______Acct. No:______Exp:_____ Ph# ___ Zip/PostalCode_____ City ______State______Address ______Name ______S WA Tr Tr bank, andmadepayabletoTechnical Analysis,Inc.) dr’TSit 37 a+Qty______SizeColor______Qty______SizeColor______$23.75ea.+ $33.75ea.+ aders’Sweatshirt** aders’ T-Shirt* a nlsd$______tal enclosed YES! Check enclosed t. Sales Tax8.8% ______Email ______Email ______

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Copyrights 2008 © Technical Analysis, Inc. All rights reserved. ment ofstockprices. whipsaws andmakesiteasytounderstandthemove- most reliablecombinations.Thisavoidsofthe 9) maygiveabearishcrossover.AlthoughtheA 2007, X plied. The14-periodrelativestrengthindex(R resistance andpriceretracedfirsttothe20-dayE trade failurewasreducedwiththisconfirmation. bears, wastakenoverbythebulls.Thepossibilityofa trend. on thistradebelowthe50-dayE remained stronglybullish,Iwouldkeepmystop-loss page 44 (14) isneutralabove50. then tothe50-dayE R other threeindicatorsconfirmedthisbuysignal.The (X R reading. Ihavefoundmovingaveragesalongwiththe Moving averagesarethebasictoolsIapplytomychart I pullback rally. through suchabroadeningchannelmayleadtofast this writing,hasyettobeviolated.Thebreakout turned outtobeabroadeningchannelwhich,asof narrow range-boundphase.Themove This gavethehintofafreshbulltrend. breached andtheindexconsolidatedabovetrendline. reversed atanypoint.Theuppertrendlinewasfinally seen asacautioustime,andthetrendcouldhave stop-loss belowthe20-dayE strong supportnow.AtthismomentIwouldkeepafirm an uptrend.TheM uptrend. Theupwardslopingtrendlinealsoindicates indicates astronguptrend,itisdeclining,andtheR M R signal whenitwentbelowthe50level.InFigure3, the 20-dayE moving averages(E in themarket.Thebullishoverlayofexponential used togetanideaofthestrengththatisprevailing And theA bullish/bearish crossoversandsignalspossibletrades. A MPORTANCE SI SI SI PRIVATE TUTORING •FREETRIAL DX ACD Figure 3,theHealthCareSelectSectorS After thisbreakoutthetrendlinedrawnreactedas X The indexralliedabout500pointsandentereda LV Intermediate Trading andLong Term Trading. Inner-Daytrading •Speed-Trading • be taughthowtoMakeMoney: Daytrading• In thisExclusive Trading Courseyou’ll Precise &canbe Traded Electronically All Trading Methods Taught arePowerful, Gold •T-Notes •GrainsETC E-MINI S&Ps•StocksCurrencies T Chicago Board of Trade Membercan gaveabuysignalwhenitwasabove50andsell , (14),theM (14) movedabove50fromalowerlevelof30,the LV each You toMakeMoneyTrading:

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Copyrights 2008 © Technical Analysis, Inc. All rights reserved. Elliott WaveTheory Directional MovementIndex(DMI) Buy andHold Exponential MovingAverage Breakout — Fade Divergence Convergence —Whenfuturespricesandspot Bollinger Bands— Average DirectionalMovementIndex(ADX)— Andrews MethodorPitchfork— page 46 reached [email protected]. www.whatsonsale.ca/financial.html andhemaybe Peterborough, Ontario,Canada.Hiswebsiteis equities traderandtechnicalanalystbasedin Gary Grosschadl home.earthlink.net/~smithster/ of hisworkcanbefoundinhttp:// his red1984Fieroroadworthy.Otherexamples enjoys N of galleriesandperiodicals.Inhisfreetime,he has hadworkexhibitedandpublishedinavariety Kenneth Smith(coverart) ket trend. oped byJ.WellesWilder,DMImeasuresmar- indices failtoshowconfirmingtrends. price spansandtargetsmaybeprojected. waves up.Fibonacciratiosareappliedtothe ferred toasa“correction”oftheprecedingfive eight waves.Thethreewavesdownarere- three wavesdowntoformacompletecycleof lows arhythmorpatternoffivewavesupand 1939, whichholdsthatthestockmarketfol- technique publishedbyRalphNelsonElliottin powerful andmaycontinueinthatdirection. when broken,areanindicationthatthetrendis tility andcontractindecreasedvolatility, Bollinger Bandswidenduringincreasedvola- opening would beshort. price. Forexample,atrader whofadedanup = no.ofperiods. moving average*(1-k)),where k=2/(n+1);n (Today’s closingprice*k)+(Yesterday’s formula forcalculatingEMAis:= weight onthemostrecentclosingprice.The the movingaverage,EMAplacesmore prices cometogetheratthefuturesexpiration. measure markettrendintensity. Indicator developedbyJ.WellesWilderto out ofthetrendchannel. the longtermratherthanquickturnover. tance andsupportlevelsforthepricechannel. tive phase.Theparallellinesdefinetheresis- through thehighandlowpointsofcorrec- tive phase.Linesparalleltothelinearedrawn bisects alinedrawnthroughthenextcorrec- or highanddrawalinefromthispointthat whereby atechnicianwillpickanextremelow — Sellingarisingpriceor buyingafalling ¥Traders PR , classicalandjazzmusic,keeping

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