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ARCHIVE:    JUNE/JULY  AUGUST/SEPTEMBER

An InvestorLinks article
distributed every market day.

Standard & Poors 500 ($SPX)
Market Call™ for September 24, 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.

If we are in a sideways pattern, some traders will abandon moving averages or another trend following method. I am basically a Trend Trader. I am looking for a trend and will accept the problem of whipsaw associated with sideways markets. I also realize that we have a market of stocks, not necessarily a stock market.

My point here is to find indicators and pattern that you can establish sound systematic strategies knowing that they working better during some markets and not as well in others. Over the long run, if your strategies have sound foundation and cuts losses, you should prevail in the long run.

Some of these stocks are breaking out to new highs and others are breaking below support. The only strategy that makes sense to me is to evaluate each stock separately and stay the course with your plan.

Today, September 23, 1999, most stocks broke down. This includes the major market index’s.

Channel Breakouts

Channel Breakouts are a popular method of trading stocks. The principal behind a Channel Breakout is that when a stock trades above the highest price or below the lowest price in the last N (number of periods) number of periods, a new trend may be starting to take place.

This channel trading method can be used in any number of periods from minute bars to weekly time frames. The results of using such a method will often result in a stock moving above a defined resistance or below a defined support area.

I feel that with any pattern, indicator, or strategy, the key is to recognize when it works and when it doesn’t. A pattern or indicator tested over a long period of time may only have a 50-50 chance of working out in a trader’s favor. A key to successful trading is to limit losses with stops and recognize when the pattern or indicator did not perform as expected. I like using a 20 period breakout.

Let's look at the breakdown in the S&P 500, $SPX

After bouncing off support on August 10, 1999, we saw a tradable bounce and the S&P try to rally to new highs. I think it is clear that it has broken support and many fund majors and market timers will be exiting positions.

Dow theorists will say that today's action in the Dow, whose chart looks similar to the S&P, has now confirmed a signal to a down market. By trading moving average crossovers or channel breaks, a trader should be short this market. Look at channel breakdown in your stocks.

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: March 17, 2001

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