Hi, these are just ideas not recommendations, sometimes I trade my ideas, sometimes I don’t.
Always remember, yours is the responsibility for your trades,
Good luck,
Erick



Sunday, October 30, 2011

OK, but what´s next?

There is some long term resistance around 12800, also the Dow stopped short of the internal trend line. I would be more comfortable if the index cross the line and it becomes support, that hasn’t come yet. We have a beautiful summation index, but you must remember is a bit lagging.



Wave U-V went from 10800 to 11645 for 845 points or almost 8%, if this wave was meant to be the biggest, the movement would have ended already around 12000.

Wave 1 on W-X is 550 points, wave 2 was a sharp 1 day correction of 207 points or an exactly 38 Fibonacci percent. Wave 3 still running is 557 points at Friday´s close. Hopefully the Dow will cross the internal trend line, if not, 11900 should act as support and the target for the end of the move will become clearer.


Mondays are the worst days of the week for the stock market, Fridays are the best so don’t be surprised if tomorrow the Dow closes low.
PS: Most of the times a compression of the moving averages gives us ample warning of a trend reversal, if that proves right you better let your profits run a little bit more.

Wednesday, October 26, 2011

Flextronics Price Reflex

The technology group has been lagging the general market for the last month but some industries within the group look strong. The electronic equipment industry is showing a one month positive relative strength against the Dow, within that group Flextronics is shinning with a RS above 10%.

Last Thursday after market close the company announced results for its second quarter ended September 30, net sales increased $622 million or 8% and the Co. generated $176 million of free cash flow for the quarter.

FLEX was trading inside a perfect up trending channel since mid-august, the upper line was broken in October 10 and seven days later it seemed that the price was returning to the channel.
The day following the announcement Flex broke decisively above the upper channel line closing almost 8% up with a super strong volume.



Channel measuring techniques result in a 7.30 immediate target for a quick 10% gain after today´s 6.63 close. The upper channel must act as support.

Disclosure: I bought FLEX today.

Thursday, October 20, 2011

Is the First up Leg still going?

The Dow found support today around 11400, more or less over the internal trend line.
Both 10 and 20 days momentum are positive. The index went from 10655 to 11644, a 9+% gain in 9 trading days, a consolidation was mandatory.

Most of the times the first up waves after a big drop retrace up to a 75% of the movement so be in the lookout.



Resistance at 11600 must be broken decisively for a continuation of the up leg.

Anyway November and December are coming.

Sunday, October 9, 2011

Is The Bull Coming?

Both down targets set in our previous post on September 18 were reached last week in two successive days, on October 3 the Dow closed at 10,655 and the next day the intraday low was 10,404.


Now it looks like a bullish falling wedge formation was completed on October 6 with the penetration of the upper down trending line, if that is the case we will see the Dow rising with maybe a return move to the upper line before the take off.

Unlikely but possible, the Dow will retest the Lows before breaking the upper line for good. Anyway, the falling diagonal is most of the time a bullish formation.


What to do?

Wait for a decisive close above 11,250 or if you want to be really sure wait for a close above 11,600, before going long. If the bull is really coming there will be plenty of time to make money in the long direction.

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About Me

I am a civil engineer who likes charts, to me, speculating in the markets is both a hobby and a second profession and in my view the stock market is the most honest environment, since it is only your knowledge and preparation that matters. I live, and work in the construction industry, in the Dominican Republic. I read and answer all my mail so please feel free to write sternloinaz@gmail.com Thanks, Erick