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ARCHIVE:    JUNE 1999-DECEMBER 2000  

An InvestorLinks article
distributed every market day.

BEA Systems Inc  (NASDAQ: BEAS)
Market Call™ for January 4, 2001
Contributed by Mark Seleznov, TrendTrader.com.

The purpose of this Market Call section is to educate readers in technical analysis patterns and indicators. As with all investment information, you need to research information and consult your financial advisor before initiating any strategies that are contained in Market Call.

Also, you must realize that as with all trading strategies, opinions can change quickly depending on market conditions and developments.

This column tries to present historical examples, potential set ups, and examples of entry and exit strategies.

Yesterday, I wrote the following article:

How low is low? How high is high? Is it too late to exit a stock? If a trader trades a signal, can it reverse the next day or next hour?

I think the answers to the above questions are obvious.

As a Day Trader, I have seen attempted rally after attempted rally fail minutes or hours later.

A trend usually remains in place until the evidence clearly shows a reversal. We use moving averages, look for support and identify patterns to help us anticipate the future.

We must be prepared for the reversal and exit of losing trades and the possible reversing of positions.

Moving Averages and Moving Average Crossovers

The moving average crossover method calculates two moving averages, each based on a different number of periods of trading data. When the shorter-term (fewer days) average crosses above the longer-term average from below, this is a buy signal. When the shorter-term average crosses below the longer-term average from above, this is a sell signal.

Moving averages are used to smooth prices, dampening the distractions of short price movement so that the underlying trend is clearer. Moving averages always lag the market and, therefore, will never buy market bottoms or sell market tops. Like any other trend-following system, the moving average crossover will perform best when markets are trending because it automatically places the trader on the right side of every extended move. When markets are moving sideways, however, the lack of extended moves will cause losses.

Let’s look at Bea Systems, BEAS.

We are using 30-minute bars that will help a trader get in faster than using daily bars. It also allows managing risk better since the stops can be closer.

The Moving averages that you are looking at are 5 and 20 period exponential moving averages on 60-minute bars.

On December 28, BEAS flashed a Sell signal using our MACD indicator. The following day, the Moving Averages also crossed signaling an exit and/or short position in BEA.

A trader exiting and shorting in the 76 area would have been out during this decline to 53.

The MACD can also be used as an oscillator and is very oversold.

If you are short or looking to go long, watch the MACD and moving average for a possible Buy signal. In the meantime, just watch the trend work and stay short BEAS until a technical indicator signals a reversal.



Today, January 3, 2001, with the help of the Federal Reserve, BEAS gave both MACD and Moving Average Cross Buys. A trader with the proper intra day software would have entered and have a profitable trade. Thanks to Alan Greenspan, we may see stocks continue higher. Use the MACD and Moving Average methods to plan an exit if it should reverse. In the meantime, let your profits run.

For tick by tick charting and quotes for trading, use Trend Trader TORS Software.

Chart courtesy of
 


Interested in adding Market Call to your website?
Click here for details: Market Call Information

Mark A. Seleznov is a General Securities Principal and Managing Partner of Trend Trader, LLC, a NASD, SIPC broker/dealer firm located in Scottsdale, Arizona. A professional trader for over 25 years, Mark was a Market Maker on the Philadelphia Stock Exchange, a Retail Registered Representative, and futures trader. Mark is an author and recognized expert in equity Day Trading. He conducts seminars in Equity Day Trading and offers his firm traders training and support. If his firm holds any positions in the public companies he writes about, it will be noted at the bottom of his article.

Market Calls is a daily syndicated column on trading by Mark A. Seleznov, Managing Partner of Trend Trader, LLC. For information on obtaining Market Calls for your web site, newspapers, or publication, contact
Trend Trader, LLC at 602-948-1146

Disclaimer: Trading in securities may not be suitable for all individuals. Consult your broker or other professional to determine your suitability. This is not an offer to buy or sell securities. The advice given above is of a general nature and should not be taken as a recommendation to buy or sell the referenced security.

 
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Last modified: January 04, 2001

Published By Tulips and Bears LLC