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ARCHIVE:    JUNE 1999-OCTOBER 2000  

An InvestorLinks article
distributed every market day.

i2 Technologies  (NASDAQ: ITWO)
Market Call™ for November 14, 2000
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.

Dead Cat bounces occur often. I have a Dead Cat on my computer to show how far a Dead Cat bounces. The idea of using a systematic trading plan, like moving averages, is to help avoid playing small bounces and stay with the trend.

Moving Average Crossovers

Moving averages are one of the oldest and most popular technical analysis tools.

A moving average is the average price of a security at a given time. When calculating a moving average, you specify the time span to calculate the average price for X number of periods. For example, 20 periods. These periods may be 5 minute bars, 15 minute bars, 60 minute or daily bars).

The classic interpretation of a moving average is to use it to observe changes in prices. Investors typically buy when a security's price rises above its moving average and sell when the price falls below its moving average.

The moving average crossover method calculates two moving averages, each based on a different number of periods of trading data. When the shorter-term (fewer days) average crosses above the longer-term average from below, this is a buy signal for tomorrow's open. When the shorter-term average crosses below the longer-term average from above, this is a sell signal for tomorrow's open.

The current charts we are using calculate a 5-period and a 20-period exponential MA of the closing prices on 60 minute bars. If the 5-period MA crosses above (becomes greater than) the 20-period MA, you would buy the next bars opening because the system is saying that an uptrend has begun. You maintain this long position as long as the 5-period MA is greater than the 20-period MA. When the 5-period MA crosses below the 20-period MA, the trend is now down and you would liquidate your long position and establish a new short position on the next bars open.

i2 Technologies (NASDAQ: ITWO)

On November 8, 2000 at 169 ITWO flashed a sell signal. Although on several occasions, including today, ITWO tried to bounce.

Each bounce is what I call a Dead Cat bounce. It is not a trend reversal. Stay with the trend. There are many stocks with similar patterns.

There will be time to play the long side of this market when it turns. Stay with the trend on your stocks, as defined by a trading plan. Let the market take you out of your shorts and let the market put you in your long positions.

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: November 14, 2000

Published By Tulips and Bears LLC