BEA
Systems Inc (NASDAQ: BEAS)
Market Call™ for January 4, 2001
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.
Yesterday, I wrote the following article:
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.
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 Bea Systems,
BEAS.
We are using 30-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 December 28, BEAS flashed a Sell signal using our MACD indicator. The
following day, the Moving Averages also crossed signaling an exit and/or
short position in BEA.
A trader exiting and shorting in the 76 area would have been out during this
decline to 53.
The MACD can also be used as an oscillator and is very oversold.
If you are short or looking to go long, watch the MACD and moving average
for a possible Buy signal.
In the meantime, just watch the trend work and stay short BEAS until a
technical indicator signals a reversal.
Today, January 3, 2001, with the help of the Federal Reserve, BEAS gave both
MACD and Moving Average Cross Buys. A trader with the proper intra day
software would have entered and have a profitable trade. Thanks to Alan
Greenspan, we may see stocks continue higher. Use the MACD and Moving
Average methods to plan an exit if it should reverse. In the meantime, let
your profits run.
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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.
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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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is strictly prohibited.
Last modified: January 04, 2001
Published By Tulips and Bears
LLC
