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.
Basing Patterns in combination with other indicators
When a security is forming a base, there is a defined pattern of
support and resistance taking place. Support levels are the price where the majority of
traders feel the value is a good buy. Resistance is the level in which the majority of
traders feel prices will move lower.
When the majority of traders and investors change their
expectations, these support and resistance areas get violated and a new trend may be
beginning. This can occur due to changes in expectation of earnings, new product
development, change of personnel, cut backs or expansions.
Basing patterns occur intra day in 60 minute bars or on daily
charts, or on weekly charts.
Let's look at Barnesandnoble,com, BNBN. BNBN has been in a long
basing pattern that looks like a saucer. The stock has been trading between 15 and 17 for
the last three weeks. On Friday June 18, BNBN started moving up. It looks like a breakout
of a basing pattern to me.
* Our moving average crossover just gave a Buy signal.
* The MACD is also on a recent Buy signal.
* Momentum has just crossed the zero line an is moving up.
* On Balance Volume (OBV) is turning positive.
I would Buy BNBN here. I would place a stop at 16 3/4
