My fav 5/20 Money Flow Set Up

My favorite buy signal I call the 200/5/20. It occurrs  when a stock gets crushed and sells off hard. Usually over many weeks or months before forming a bottom. This bottom offered refered to as stage 1 in 4 stages of stock price cycle. 

Price settled down well below the 200 day moving average and behind move sideways to slightly higher. 

What I want to see is price break above the 20 day moving average and the 5 day moving average crosses the 20’day moving average as well. Price needs close above both.

This is my signal that new uptrend is underway. Think about it, price is above the 5 day average (1 week) and above 20 day average (1 month). Price is moving higher. 

Value investors seek out stocks that pay dividends that are trading below the 200 day moving average and often at 52 week lows. These buyers stepping in will push the price of the stock back to the 200 moving average. 

Check out chart of MO below

Taking Down Risk as RSI Hits 72

YYY after making dividend payment last Friday is now hitt 72 RSI. I am selling 500 of my 2500 shares here. 70 + RSI and ADX signaling overbought excellent time to take down risk look to possibly put that money to work in CEFL that is 10 days from it’s EX-DIV date. If you look closely at the chart below, after hitting 70+ RSI a big sell off follows.


BIZD & BDCL Update

Sometimes things workout exactly as planned. Feels good. I was in 1/2 position on BIZD ETF since sell signal beginning August. September 18th price closed above 20’day moving average and MACD signaled buy.  I doubled my position using BDCL the 2x leveraged ETN that tracks same index. BDCL position is up 7.27% and BIZD returned 3.99% and qualifying for $.45 ex-dividend payment 10/2/17.

The next hurdle is qualifying for dividend on BDCL on 10/12/17. These funds tend to run up into the ex-divided date. Hopefully the BDCs hold ground over next couple weeks of trading. 

Last night was pay day for YYY. The divided was $.13 a share. 10/12/17 will be ex-dividend day for 2x leveraged ETN CEFL. 

Starbucks breakout 

I’ve been posting about the coming breakout in $SBUX. This one my favorite patterns. A solid blue chip company trading below its 200 day moving average. 

Price begins to move side ways in a trading range giving the 5,20,50 moving averages time to flatten and turn up in proper numerical alignment. Price needs to print above the 5 day and 20 day moving average for the signal to be a trade. 

The $53 zone my stop my target is $57 zone. My purchase price $54.15. Easy money!

How I Read More Into Indicators

Notice on the chart below YYY is pushing up against a previous high. This is referred to as overhead resistance zone. The general rule of thumb regarding overhead resistance,

This is a zone where price will often struggle to get through. The last time price reached these levels sellers overwhelmed buyers pushing price back down.

It can take time before enough buyers step in to break through a previous high but once it happens that resistance will now become a zone of support. 

These zones aren’t exact prices levels but more of a general area where price will stop dropping or stop rising.

Think of a roof and or a ceiling. Once broken the rule is they flip. When price smashes through support zone that zone will then often become a zone of overhead resistance at some future date when price recovers and begins its climb. 

Previous highs becomes overhead resistance or where sellers outweigh buyers, previous lows become support zone where buyers out weight sellers.

YYY is now pushing up against a ceiling. A zone of overhead resistance. As a trend trader I will stay with the “trend until it ends”, but at the same time I can make logical bet based on past price performance.

First, I turn to the indicators. Notice the blue lines from left to right. Last time price was in this zone the indicators TSI, MACD and RSI where much higher. 

The indicators are telling me price has room to move to the upside. The benefit of the doubt here goes to current trend.  

The trend is your friend until it ends”

Price should continue to move up. Last week I prepared for this by downsizing CEFL and moving those funds into its un-leveraged counter part YYY which has identical price chart.

I downsized my leverage just in case price stalls out here and pulls back. Which is common and expected near zones of resistance.

Learn to read what the indicators

No matter what you trade, learning to read what the indicators are telling you will improve your trading results.