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ARCHIVE:    JUNE 1999-OCTOBER 2000  

An InvestorLinks article
distributed every market day.

Broadcom Corp  (NASDAQ: BRCM)
Market Call™ for December 4, 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.

How low is low? How high is high?

Is it too late to exit a stock?

If a trader trades a signal, can it reverse the next day or next hour?

I think the answers to the above questions are obvious. Last year we saw stocks like PCLN move to stratospheric highs only to fall off of the screens.

We saw AT&T (T) move down from 60 to 20 in 9 months. I am sure a trade would have taken an exit at many points along the way.

As a Day Trader, I have seen attempted rally after attempted rally fail minutes or hours later.

A trend usually remains in place until the evidence clearly shows a reversal. We use moving averages, look for support and identify patterns to help us anticipate the future.

We must be prepared for the reversal and exit of losing trades and the possible reversing of positions.

Moving Averages and Moving Average Crossovers

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. When the shorter-term average crosses below the longer-term average from above, this is a sell signal.

Moving averages are used to smooth prices, dampening the distractions of short price movement so that the underlying trend is clearer. Moving averages always lag the market and, therefore, will never buy market bottoms or sell market tops. Like any other trend-following system, the moving average crossover will perform best when markets are trending because it automatically places the trader on the right side of every extended move. When markets are moving sideways, however, the lack of extended moves will cause losses.

Let’s look at Broadcom Corp. (NASDAQ: BRCM).

We are using 60-minute bars that will help a trader get in faster than using daily bars. It also allows managing risk better since the stops can be closer.

The Moving averages that you are looking at are 5 and 20 period exponential moving averages on 60-minute bars.

On Thursday, November 30, BRCM flashed a Buy signal late in the day.

The expectation is that BRCM continues to move up from here after a large decline from the last sell signal at 150.

However, a trader must be prepared for another failed rally.

Trading is matter of “trading on expectations”. BRCM should not reverse back to the 20 period moving average at 100.

If you are long BRCM on go long at the open Monday, I would place a stop and a stop and reverse at 100.

If BRCM continues up as expected, stay with the trade. If it reverses, get out at 100.

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: December 04, 2000

Published By Tulips and Bears LLC