An
InvestorLinks article
distributed every market day.
Pfizer
Inc (NYSE: PFE)
Market Call™ for December 13, 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.
Support and Resistance
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 is winning 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.
Let's look at short term Support and Resistance in Pfizer, PFE.
The battle of support and resistance goes on all the time. On many stocks,
the support and resistance areas are very clear and a stock will trade in
that range over a long period of time.
These support and resistance areas set up low risk trades in these stocks.
A trader can Buy support with a close stop and sell when a stock hits
resistance.
PFE has been in a trading range between 34 and 38 for months. There was one
false break above support, but that failed and stock went back into a
trading range. This late October break (not shown below) is also an example
of a channel break out that failed as the stock fell back into a trading
range.
Back to our current example using 60-minute bars. Notice that on November
18 and 19 PFE came down to a long term support level the 33-34 area. Both
the MACD and Moving Average turned to Buy signals and PFE ran up to 38.
At 39, PFE hit the $38, resistance area and sellers began selling. Over the
next 2 weeks, PFE sank back to the 33-34 area.
Now back in this support area, MACD has signaled a buy and Moving averages
are ready to cross.
It should be clear that Buyers believe PFE is a bargain at 33-34 and this
makes up support.
I would Buy PFE here.
I would place a close stop at 32 �.
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.
Copyright �
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
LLC
