Computer
Associates (NYSE: CA)
Market Call™ for August 2, 1999
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.
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.
Support and Resistance
Think of security prices as a war. It is a battle between a bull (the
buyer) and a bear (the seller). The bulls push prices higher and the bears
push prices lower. A buyer that feels an area has good value, will buy at
that level. The seller that feels that a stock has reached fair value, will
sell at that higher fair value price. The direction prices actually move
reveals who is winning the battle.
Remember when a trade takes place, a buyer and seller agreed to a price.
There was a buyer and a seller involved in the transaction. The buyer feels
the stock will go up. The seller wants to move on to another stock that he
may feel will appreciate faster.
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.
I would like stress that one key in pattern recognition or indicator
trading is to understand your time frame and investment objectives. Certain
patterns on a daily chart may look completely different than by using a
60-minute chart. Traders that use 5-minute charts may also have a different
picture.
For the purpose of education, 60-minute charts are used here.
Let's look at Computer Associates, CA
During the first week of July through July 19, CA traded in a range of 54
to 57.
This defined a consolidation area of Support and Resistance.
CA had been in an uptrend prior to this consolidation and a trend follow
would expect a continuation higher after a consolidation.
However, the advantage of a trading plan and using technical analysis tools
can provide a plan for handling any situation.
On July 19, CA broke support and began a downtrend looking for the next
support level.
It found support at 46 �.
CA then traded between 46 � and 49 � in a new Support and
Resistance area.
Late Friday, CA once again broke resistance and will now have to look for a
new Support area.
I would exit any positions in CA.
An aggressive trader may want to enter a Short position here.
If a short were entered here, I would place my stop at 49.
Chart courtesy of
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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.
Copyright �
1998-2000 Tulips and Bears LLC.
All Rights Reserved. Republication of this material,
including posting to message boards or news groups,
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Last modified: March 17, 2001
Published By Tulips and Bears
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