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Market Call™ for November 15, 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.
Channel Breakouts to New Highs
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.
When a breakout occurs to New Highs, the move can be the start of a new
major move or the continuation of a stock that is breaking New Highs.
Remember that if you want your stock to double, it has to be making new
highs often.
Let's look at recently added Dow component Home Depot (NYSE: HD).
HD has been in a steady rise since August.
It has the typical pattern of a strong stock of making new highs, then
having a small retracement, and then once again breaking to new highs.
On Monday of last week, HD hit a new high of 79 7/16.
On Tuesday, Wednesday and Thursday of last week, HD retraced a part of the
last move but stayed in a tight trading range. On Friday, HD gapped up
above the old 79 7/16 highs and closed near its high at 80 7/16.
If HD opens higher on Monday, the stock should continue higher again
breaking to new highs.
I would Buy HD on any up open on Monday.
I would place a stop at 78 3/8.
Chart courtesy of
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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,
without the prior written consent of Tulips and Bears LLC
is strictly prohibited.
Last modified: March 17, 2001
Published By Tulips and Bears
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