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.
Focus on Exit
When a trade entered goes as planed, the next step is to exit the
trade. If you are following a trend following method such as crossing moving averages,
MACD signals, or Momentum, these indicators will also be you trigger to exit.
Many methods will keep you in a stock either long or short. Other
methods will use one or more indicators just for exit, and another for entry. Let look at
our chart below on Sun Microsystems, (NASDAQ: SUNW)
On June 28, SUNW gave a Moving Average Buy signal. The MACD and
Momentum indicators confirmed this signal.
By the end of July 6, these three indicators turned to a negative
bias. MACD and Momentum turned down and the moving averages crossed to a sell signal.
Notice how SUNW open up strong today, but closed at the low. This is usually not a good
sign of a strong stock.
I would exit any long positions in SUNW. An aggressive trader may
want to Short SUNW. I would place a stop on any short at 70 1/4.
