An
InvestorLinks article
distributed every market day.
Dell
Computer (NASDAQ: DELL)
Market Call™ for October 8, 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.
Regardless of the direction of the general market, some stocks will move in
the other direction.
Today, October 8, 1999, we are getting a key economic report with
employment statistics.
We can get a move up or down depending on how investors perceive the
information.
Looking for stocks in a channel and playing a breakout above resistance if
the market moves higher can be a way to play the day.
Support and Resistance and Breakouts
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 has won 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.
One interesting pattern that traders see after a breakout, is that the
stock or index retraces a part of the initial move by about 50%. If the 50%
retracement does not hold, the stock or index can still be in a trend if
the previous breakout resistance holds.
Let look at Dell Computer (NASDAQ: DELL)
Over the past few days, DELL is consolidating at higher levels between 42
� and 44 �.
Notice a small reverse head and shoulder formation forming on our hourly
charts.
This head and shoulder formation has a left shoulder in the Sept 24 through
30 period.
The head is the sudden drop on October 1.
The right shoulder has been forming all this week.
The traditional way to play this is to draw a neckline across the highs at 45.
If DELL can break 45, a Buy would be signaled.
I would place a market order if DELL hits 45 �.
If DELL does not rise and break this resistance, I would just stand aside
and not enter the trade.
Chart courtesy of
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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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is strictly prohibited.
Last modified: March 17, 2001
Published By Tulips and Bears
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