Monthly Archives: January 2017

Market Headed Higher?

Well we finally hit 20,000. It was just a matter of time. When ever a market hangs out in a price zone..expect the current trend to continue. The market often climbs a wall of worry…slow climb but takes the elevator down. You can lose months of profits in just a few days. This can play on your emotions if you don’t understand this is just the way the market works.

All my indicators are pointing higher. The only issue is RSI and the TSI/MACD are already in bullish/overbought zone. Feels like a 9th inning push. Notice the blue circles in the chart below. Yes, TSI and MACD are giving me a bullish crossover and yes, price has broken out of a resistance zone. That is all bullish. All I can do now is wait, watch and be ready to respond to what price tells me. Right now price says it wants to go higher. $$$$$$$$$$$$$

 dia2717

What is RSI telling me?

Part of my trading system is RSI indicator. The RSI flashes a signal that price is about to stall or change direction. Of course I have no way of know which but I can take action to profit from either situation. In the chart below notice the blue circles at the bottom. These circles point out the RSI in extreme overbought or oversold condition. These are excellent spots to lock in profit or at least prepare for possible trend change.

Since I only trade long on CEFL and go to a half position when I get a sell signal so going short isn’t an option. But if I have been in a half position during a long down move the RSI signaling oversold I know the downtrend is running out of steam. If I have been in a nice long position like today…where I am up really nice since the last buy signal I know when the RSI moves into overbought zone (70) I should look to lock in some profit. Not close the trade…the chart below is giving warning signs this run might be running out of steam. The adx/dmi is in extreme overbought…the TSI and MACD are wanting to rollover and RSI is near its extreme. Everything signal but price and the moving averages are flashing a warning. I wait….as long as moving averages stay properly aligned and price remains above the 20 ma I stay long a full 2000 shares.

cefl124

 

Proper Moving Average Aligment

In the chart below we see price repeating a pattern. Notice the two blue circles. Both zones are a place where price paused and consolidated. The first circle the moving averages aren’t properly aligned. The slopes are pointing downward and the 50 ma is acting as overhead resistance.

Now if we look at the 2nd blue circle…notice the moving averages. The moving averages are aligning properly. I anticipate a break to the upside in next few days.

jnug123

 

Only Fools Try Short Bull Markets!

People love to be right. Especially when it comes to the stock market. Trying to pick tops and bottoms is the ruin of many traders. Don’t bother trying. I spent years trying before I realized it is a fools game. Instead read the moving averages and indicators. What are they telling you?

Look at the chart of the Dow Jones below. Your signal to take profits was about 10 trade days ago. RSI went overbought, MACD and TSI rolled over. That was your signal to lock in some of the great gain you would have had. Do we close out the trade or go short? NO!…stay with the trade because the 5 ema, 20 sma and 50 ma are all in proper alignment. Now price is trading sideways in a month long consolidation. Markets rarely take that long to roll over and sell off. Bullish!

The 50 ma is sloping straight up…so NO shorting….lock in profit yes….sell all NO….wait and see how this consolidation plays out. If we break below and close below the Dec 30th low that would be your sign this run might be done and you should close the trade.

dow0110

Might be time to Take Profit….

Well as I mentioned in post last week….we are starting to get yellow light…it’s not red just  yet but yellow…caution…RSI now over 70 (overbought) the ADX is about to break outside the bands of the DMI…and CEFL is entering a resistance zone….that is 3 yellow lights. By no means is the trade over. Price is north of the 5 ema…the 5 ema is north the 20 sma, and the 20 sma is north the 50 sma. Proper moving average alignment.

I will stay with this trend till it turns….but no reason not to lock in some of the price appreciation I have earned since the buy signal in November. I added a 2nd lot of 1000 shares Nov 22nd and Nov 23rd around $16.00. I am up $1040 in price appreciation collected $480 coupon payment last month. Ex-Div day is 1/11/17…it is $.37  That will be $370 on 1000 shares and $740 on 2000 shares.

With that big of an ex-div qualification only days away I don’t want to move to fast to take profit here even though I am starting to get yellow warning signs. The perfect play would be price moves up tomorrow then drops on ex-div day to around today’s price.

cefl0109

When Resistance Becomes Support

Support and Resistance are import concepts to understand when it comes to trading. This tells you where a stock, bond, commodity or ETF has come from and where it might be going.

If what your trading breaks through a zone of resistance that zone now becomes a zone of support. The same applies for price falls below support, that support now becomes resistance.

In the Chart below of GDXJ you can clearly see the $32 zone was support for about a month of trading until December 14th when price crashed through support. That zone now becomes an overhead zone of resistance that price must break through to build a trade able uptrend.

Often these zones will be the place moving averages cross. The GDXJ chart below we see the 5 ema crossed the 20 sma in this zone of resistance. Price broke though…I was long in the $33 on break out day and added to the position around $32.50 zone…

gdxj19

where is the next zone of resistance? The $40 zone….I will look to take profits in that zone as I am sure the RSI will go overbought.

Notice these concepts flow together…RSI tops out or bottoms out near zones of support and resistance….moving averages cross over in areas where price as consolidated in the past.

Trade like a pro…..