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.
Last week I wrote:
Let's take a look at General Motors, GM.
"Over reactions to News and News Articles – I am
always fascinated with the reactions to news and news articles. Newspapers and magazines
like the Wall Street Journal, Barron’s and Investor’s Business Daily
can move markets. But do these articles just hype a stock or are the moves sustainable? My
questions is always "who knows what is being published and when did they know
it?"
Late last week we saw GM break from a resistance area at 65 and
run to 69 on Friday July 2. The front-page story in this weeks Barron's was on GM. When
trading opened on Tuesday, GM gaped up and quickly ran to 72 7/16 by noon on Tuesday.
Despite a positive market and new highs in the DOW on Wednesday
July 7, 1999, GM closed down 1 9/16. The failure of GM being able to hold this gap from
the story is a negative pattern. Was this run up on improved fundamental developments at
the company or the anticipation of the news story in Barron's.
I would exit GM on any morning weakness. An aggressive trader may
want to consider a Short position here with a stop at 72."
Since that Market Call, GM dropped and had additional bad news
from a lawsuit that hit the stock. How did GM respond to this bad news? The stock seems to
have found a new base of support at 67 � and now seems poised to move to the upside.
MACD, Momentum and OBV have turned up. On any rise in the
morning, GM will also give a Moving Average Buy signal. I would Buy GM here on any morning
strength. I would place my stop at 67 3/8.
