Mr_Nasdaq's Blog

[Mr_Nasdaq]

Definition of a 'Bear Trap'

A bear trap begins with a Triple-Bottom Breakdown that encourages traders to establish short positions in anticipation of further downside. The Triple-Bottom Breakdown, however, is then followed by a sharp rally (like the one that began on Monday) that traps the bearish traders in their short positions.

The following Point and Figure Chart of the Nasdaq Composite Index displays a classic bear trap formation. The arrow on the chart points to the Triple-Bottom Breakdown that occurred last Friday. The rising column of Xs that immediately follows represents the sharp rally of Monday and Tuesday (Wednesday's and Thursday's continuation of the rally, not shown here, stacks even more Xs).

To learn more about Point and Figure Charts, the following web site provides an interactive online turtorial that is excellent and free: http://www.dorseywright.com

 

[Mr_Nasdaq]

QQQQ - Thursday's 5-Minute Chart ...

The QQQQ gave Resistance at its 2006 High a proper test on Thursday. Resistance was found upon this first approach and the QQQQ pulled back to a subsequent low of $42.67.

Thursday's 5-Minute Chart (below) shows the QQQQ pulling back impressively from Gathering Resistance.

On Friday, the QQQQ, which has had an eventful week, may be willing to move quietly into the weekend. A violation of its 3-member area of Gathering Support between $42.23 and $42.34, however, would have traders wondering if the rally that began from last Friday's Low ($41.61) has topped out.

Note: Each day's area of Gathering Support and Gathering Resistance is calculated the night before.

 

[Mr_Nasdaq]

Thursday's Buy and Sell Alerts (SPY, QQQQ and QID

Traders who correctly calculated the following areas of Gathering Support and Gathering Resistance on Wednesday evening reaped the following profits during Thursday's trade.

Note: Each day's area of Gathering Support and Gathering Resistance is calculated the night before.

 

[Mr_Nasdaq]

EBAY - Monday's Sell Alert...

Traders who correctly calculated the following area of Gathering Resistance (Sell Alert) over the weekend reaped the following profits during Monday's trade.

Note: Each day's area of Gathering Support and Gathering Resistance is calculated the night before.

 

[Mr_Nasdaq]

AMD - Tuesday's Buy Alert

The 5-Minute Chart below shows that traders who waited for AMD to fall into its area of Gathering Support before venturing a purchase executed a profitable trade by avoiding the common trading error of jumping in too soon.

Note: Each day's area of Gathering Support and Gathering Resistance is calculated the night before.

 

[Mr_Nasdaq]

RMBS - Wednesday's Sell Alert

The 5-Minute Chart below shows that traders who waited for RMBS to rise into its area of Gathering Resistance before venturing a short sale executed a profitable trade by avoiding the common trading error of jumping in too soon.

Note: Each day's area of Gathering Support and Gathering Resistance is calculated the night before.

 

[Mr_Nasdaq]

ORCL - Thursday's Buy Alert

The 5-Minute Chart below shows that traders who waited for ORCL to fall into its area of Gathering Support before venturing a purchase executed a profitable trade by avoiding the common trading error of jumping in too soon.

Note: Each day's area of Gathering Support and Gathering Resistance is calculated the night before.

 

[Mr_Nasdaq]

GLD - Thursday's Sell Alert

Here is my approach:

1) Identifiy areas of Gathering Support (Buy Alerts) and areas of Gathering Resistance (Sell Alerts) each evening in preparation for the next day's trade.

2) Load the Buy and Sell Alerts into the Medved QuoteTracker alert system with the click of one button (the 'Paste from Excel' button on the 'Quick Alerts' Tab of the QuoteTracker).

QuoteTracker is the widely used trading program. Best of all, it's free: http://www.quotetracker.com

3) When an alert triggers during the following day's trade, I use QuoteTracker to create a 5-Minute Chart and go from there....

***********

Traders who correctly calculated the following area of Gathering Resistance (Sell Alert) on Wednesday evening reaped the following profits during Thursday's trade.

Note: Each day's area of Gathering Support and Gathering Resistance is calculated the night before.

 

[Mr_Nasdaq]

QQQQ - Friday's 5-Minute Chart...

The QQQQ dipped to Gathering Support in early trade on Friday in reaction to a weak 'Housing Starts' report...the weakest report in 6 years. Nevertheless, Support was found and the still buoyant QQQQ recovered to close 'even' on the day.

Friday's 5-Minute Chart (below) shows the dip to Gathering Support and the subsequent recovery.

On Monday, the QQQQ remains deep in overbought territory and faces a wider than usual area of Gathering Resistance between $44.30 and $44.60.

At 10:00am (EST), the market will focus on the Leading Economic Indicators Report...one number representing 10 individual economic indicators that, when taken together, suggest either future strength or future weakness in the economy.

 

[Mr_Nasdaq]

QQQQ - Monday's 5-Minute Chart

The QQQQ delivered a volatile day on Monday with a spike down at the open followed by a recovery and a spike down in the afternoon, also followed by a recovery. In between spikes, the QQQQ managed to eek out a new high for 2006 when it printed $44.48.

Monday's 5-Minute Chart (below) shows the day's volatility and a wider than usual area of Gathering Resistance.

On Tuesday, the QQQQ remains deep in overbought territory where it has been content to dwell in recent days.

No one really knows on what day a meaningful pullback will begin. Some speculate that it will be one day in December. Others say, 'after the New Year'.

It may be that the goal of the QQQQ is long-term Resistance at the upper trend line of the Weekly Chart which stands this week at $45.50.

Whether the pull back comes sooner or later, it's time to 'be careful out there'.

Note: Each day's area of Gathering Support and Gathering Resistance is calculated the night before.

 

[Mr_Nasdaq]

Wednesday's Buy Alerts...

Traders who correctly calculated the following areas of Gathering Support (Buy Alerts) on Tuesday evening reaped the following profits during Wednesday through Friday's trade...

Note: Each day's area of Gathering Support and Gathering Resistance is calculated the night before.

 

[Mr_Nasdaq]

QQQQ - Friday's 5-Minute Chart...

The QQQQ demonstrated on Friday that it remains in 'buy the dips' mode. After gaping down at the open, it recovered to yet another new high for 2006 when it printed $44.86.

Friday's 5-Minute Chart (below) shows a gap down open followed by a rally to Gathering Resistance after which the QQQQ pulled back into the close.

On Monday, the QQQQ may stay put while it awaits the week's string of Economic Reports, the first of which arrives on Tuesday.

The most important report of the week will arrive at , 8:30am Wednesday morning. It's the 3rd Quarter Gross Domestic Product (GDP) Report. The GDP is defined as 'the market value of all final goods and services produced within the U.S. in a given period of time' and, therefore, is an indication of whether the economy is growing or shrinking and by how much.

It's sure to be a market mover.

 

[Mr_Nasdaq]

QQQQ - Monday's 5-Minute Chart...

The overbought QQQQ finally succumbed to some serious profit taking on Monday.

Monday's 5-Minute Chart (below) shows how the QQQQ continued it's pullback from Friday's area of Gathering Resistance and how the force of the pullback was such that it violated not one, but two, areas of Gathering Support.

On Tuesday, the QQQQ will face a number of Economic Reports, each of which is a potential market mover:

7:55am - Retail Chain Store Sales
8:30am - Durable Goods Orders
10:00am - Consumer Confidence Report
10:00am - Existing Home Sales

 

[Mr_Nasdaq]

QQQQ - Thursday's 5-Minute Chart...

The QQQQ dipped in the morning, then rallied, then closed pretty much unchanged on the day, resulting in a Doji style candlestick on the Daily Chart. A Doji is a sign of indecision. When one forms at an aspect of Resistance, however, it becomes a caution. $44.10 represents a 50% retrace of the recent pullback. That makes it a Resistance level that traders have their eye on.

Thursday's 5-Minute Chart (below) shows a 3-day up trend from Tuesday's Low. It's joined by the '200-Period Moving Average' to form a very short-term area of Support between $43.94 and $43.95.

On Friday, traders will be watching short-term Resistance at $44.10 and short-term Support at the rising trend line of the 5-Minute Chart ($43.94) in order to see which one gives way first.

The still weakening U.S. Dollar hit a 20-month low on Thursday, thereby, providing a continued boost to commodities such as oil, gold and their related stocks.

 

[Mr_Nasdaq]

QQQQ - Friday's 5-Minute Chart...

The QQQQ demonstrated on Friday the dangers of a Doji style candlestick at Resistance. A Doji at Resistance is often a sign that a reversal down is at hand. Resistance in this case was $44.10 (the 50% retrace of the Monday thru Tuesday pull back)...See the Daily Chart (not show here).

Friday's 5-Minute Chart (below) shows a violation of short-term Support at the rising trend line followed by a visit to Gathering Support. Gathering Support, having been violated in early trade by a sharply falling QQQQ, served as Resistance for the remainder of the day. This is in accordance with the principle of Support that states, 'Support, when violated by a falling price, becomes Resistance'.

On Monday, the QQQQ is poised to test Support at its rising 20-Day Moving Average. A violation of that long standing line of Support opens the door to a test of Support at the 50-Day Moving Average which stands at $42.45 going into Monday's trade.

Support at the 50-Day Moving Average is joined on Monday by Support at the Weekly S2 Pivot Point. Together, they form an impressive area of Gathering Support for the coming week.

 

[Mr_Nasdaq]

QQQQ - Monday's 5-Minute Chart...

The QQQQ opened strong on Monday and continued higher, establishing more than a full recovery from Friday's pull back.

Monday's 5-Minute Chart (below) shows the details of the light volume rally.

On Tuesday , the QQQQ will focus on the 10:00am Factory Orders Report. The report shows how busy factories will be in coming months as manufacturers work to fill new orders. It is, therefore, an indication of the health of the economy.

The Factory Orders Report may receive more than the usual attention from traders since it was a weak manufacturing related report that triggered last Friday's pull back.

 

[Mr_Nasdaq]

QQQQ - Tuesday's 5-Minute Chart...

The QQQQ held onto gains from Monday's rally on Tuesday by spending the day in a narrow trading range that became more narrow as the day wore on.

Tuesday's 5-Minute Chart (below) shows the development of a triangle from which the QQQQ will break either up and out or down and out.

On Wednesday, no economic reports are scheduled for publication. The QQQQ will trade, therefore, based on whatever steam it has left.

If the QQQQ is, indeed, moving up and down within the context of a trading range as the ADX Indicator on the Daily Chart suggests, then, it has now risen to the upper end of that range. This observation, in addition to the fact that Tuesday's price action resulted in another Doji style candlestick (see the Daily Chart) suggests that caution on the long side is in order.

 

[Mr_Nasdaq]

Wednesday's Buy Alerts...

Consistently Successful Traders buy at areas of Gathering Support and sell at areas of Gathering Resistance. Knowing where these areas are located helps them to determine when to buy and when to sell.

The 5-Minute Charts below show that traders who waited for BRCM and SMH to fall into thier respective areas of Gathering Support before venturing a purchase executed a profitable trade by avoiding the common trading error of 'jumping the gun'.

Note: Each day's area of Gathering Support and Gathering Resistance is calculated the night before.

 

[Mr_Nasdaq]

AMGN - Wednesday's Sell Alert ... Thursday's Buy

Consistently Successful Traders buy at areas of Gathering Support and sell at areas of Gathering Resistance. Knowing where these areas are located helps them to determine when to buy and when to sell.

Note: Each day's area of Gathering Support and Gathering Resistance is calculated the night before.

 

[Mr_Nasdaq]

BBBY - Thursday's Sell Alert ... Friday's Buy Al

Consistently Successful Traders buy at areas of Gathering Support and sell at areas of Gathering Resistance. Knowing where these areas are located helps them to determine when to buy and when to sell.

Each day's area of Gathering Support and Gathering Resistance is calculated the night before:

Thursday's Sell Alert:

Friday's Buy Alert: