How I use Yellowband up and down trends; $FIZZ, $SHOP, $IGT, $JCP, $QQQ

I wrote a few posts ago about a key chart pattern that I noticed in the 1990s, called yellowband. It is a way of staying focused on the longer term trend of a stock. A yellowband up-trend is a stock on a weekly chart that closes repeatedly above its rising 10 week average that in turn is consistently above its rising 30 week average. A yellowband down-trend is simply the reverse. The following charts illustrate yellowband patterns. Some charts show the transition from up to down trends. I discovered the value of the yellowband pattern in the 90s. I primarily buy stocks that are above or near their last green line break-out (GLB) that have a yellowband up-trend. I try not to sell as long as the yellowband is intact unless I see unusually high volume selling or a climax top. A close below the 10 week average is a significant technical signal for me to exit or reduce my position. If I had diligently checked a stock’s yellowband pattern I would not have been shaken out and exited many great stocks too early during the past few years. A picture is still worth 1,000 words….

The QQQ remains in a yellowband up-trend and recently found support at the 10 week average, a good place for me to enter or add to a position..

And the GMI remains Green.

Will post again on Wednesday evening.

 

 

 

$QQQ on precipice, $AAPL violates Yellow Band pattern

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The weekly chart below shows the QQQ has, with one small exception in April, not closed a week below its 10 week average (blue dotted line). The 10 week average has in turn been rising well above the 30 week average (red line). This is a strong pattern I have been monitoring since the 90’s when I discovered it and named it the “Yellow Band” pattern. In those days I would draw a band with a yellow highlighter in the empty white space between the 10 and 30 week averages. Hence the name. As long as the QQQ closes this week above the 10 week average (currently 137.57), the bullish pattern will be maintained. This week is a critical week because of the 3 weeks of very heavy down volume, shown by the red volume spikes. Recently, the heavy volume down weeks have overshadowed the volume on up weeks, a possible sign of distribution by the institutions. A bounce up off of the 10 week average would be a very bullish sign to me.

One reason why I think the QQQ may fail is this weekly chart of AAPL, which has already violated its 10 week average on above average volume. Apple’s Yellow Band pattern is over, for now.

The SPY is holding up much better.

The GMI remains at 4 (of 6) and still on a Green signal.

 

 

 

 

35th day of $QQQ short term up-trend; Bloody Fridays often lead to Bloody Monday Opens

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It remains to be seen whether there will be a follow-through on Friday’s tech wreck. Many of the tech stocks had gone vertical on their daily charts and they merely fell back to support. It remains to be seen whether Friday was the start of something more meaningful. A good example is AAPL. This weekly chart shows that AAPL has closed above its 10 week average (blue dotted line) for 27 straight weeks. On Friday, AAPL closed right above its 10 week average. A weekly close below its 10 week average would be a sign of technical weakness for me. On the other hand, it would have to close below its 30 week average (red line) for me to conclude that its longer term up-trend is over.

The GMI is 6 (of 6) but the more sensitive GMI2 has weakened to 4 (of 8).

 

 

30th day of $QQQ short term up-trend; enjoy the party; Judy tweets! Some interesting stocks

All of my market indicators are positive. Barring an unforeseen event, I see only clear skies for the current market. So many great stocks are surging higher. And now that I have changed my technical focus from daily charts to weekly charts, I am able to ride my winners longer without getting whipsawed. A bull market makes us all look like geniuses. But true genius is evident when one can minimize his losses when the market turns down. But for now, I am enjoying the party….

Those of you who have been following this blog know I have a stock buddy with an extraordinary ability to identify great stocks early. Judy is a concept trader. She reads voraciously and has the ability to pick out the few gems among all of the noise. She educated me about the cloud and exciting biotech innovations long before they became well known. Some of you have asked me what Judy has been focusing on these days. You can now follow her yourself on twitter:  @judyfr262 She expects a big week coming up for biotechs with the ASCO meetings……

I ran a scan this weekend for stocks with weekly technicals I like. I came up with 194. Here are the top stocks according to last quarter’s earnings. Note that not all of them are above their last green lines. This is only food for thought and these stocks must be researched further. I am monitoring OLED this week for a possible break-out.

Meanwhile the GMI is at 6 (of 6).

Short and longer term trends remain up–I try to follow trends, not anticipate when they will change

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A trend follower discerns the likely current trend of the market or stocks and rides it until it ends. S/he enters after a bottom and exits after a top is formed. Jesse Livermore said the big money is made by staying with one’s winning position until there is evidence of a change in the stock’s behavior. In spite of the many people who subscribe to this approach, it amazes me that so many of us seem unable to resist the temptation to proclaim tops and bottoms before they occur! Is it just ego and attempts to appear smart? For me, part of the answer is that the day that I will depend on my pension accounts for survival grows ever near and I become more of a chicken with my trading. So I exit too soon.

But the major market indexes remain in Weinstein Stage II up-trends, and I have been resisting it by holding back and looking to take profits before the expected dreaded decline begins.  However, my GMI indicators did alert me to get out of the market in 2000 and 2008 before most of the carnage. So why should I disregard what they are telling me now? Therefore, with the GMI at 6 (of 6, see table below) I am continuing to hold stocks and keep my university pensions fully invested.

But I repeatedly took profits in my trading accounts and sold out of many stocks that have continued to climb to the sky. I am therefore working on correcting that weakness in my trading by focusing more on weekly charts than daily charts. One would go crazy checking his blood pressure or cholesterol levels multiple times each day. I believe that focusing on daily charts has worked against me as a part-time trader also managing a full-time job. I have reviewed many of the stocks I exited on their daily chart because of weakening technical signals, only to see that there were no danger signals showing up on their weekly charts. You might want to try this type of review exercise for yourselves. I recall that William O’Neil  relied primarily on weekly charts. What did he know about this that I do not? I think I am on the right track and will discuss these ideas in my future posts as I figure it out….

 

 

 

 

21st day of $QQQ short term up-trend; Market had a “dead cat bounce?”

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While the QQQ remains in  short and longer term up-trends, I am dubious very short term because the actions of the daily technical indicators I follow are not consistent with the market’s bounce at the end of last week. During the beginning of the rise in the QQQ that began around April 19 (A) the daily 12.26.9 MACD was rising above its signal line as shown by the histogram’s rising and turning black (B). Similarly, the 10.4 stochastic was rising above its 10.4.4 signal line (C). These 2 short term indicators were strengthening along with the QQQ’s rise. Compare that pattern to  last week’s action. While the QQQ started back up (D) the MACD histogram declined and turned red (E) and the stochastic declined (F). This bearish divergence between the action of the QQQ and these 2 indicators suggests to me that Thursday’s and Friday’s rises in the QQQ may have been the proverbial dead cat bounce and should not yet be trusted. (The DIA and SPY exhibit the same divergence.)  Of course if these indicators reverse up this week, I might jump back on the train.

Meanwhile the GMI is at 5 (of 6) and still on a Green signal.

Is the Dow Transportation Average projecting market weakness?

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Dow Theory is a famous system for diagnosing the market’s trend. One of its two components, the Rail or Transportation Index, seems to be showing a possible head and shoulders top pattern. While in this digital oriented economy, the transports may have lost their importance as an indicator of economic activity, a lot of goods and commodities are still moved by train and plane. While the growth tech stocks are still going strong, the weakness in this transportation index may bear watching. Here is the weekly chart of the Dow 20 stocks.The index is down 7 of the last 10 weeks with some large declines coming with volume spikes. It has closed below the six red and and six blue line daily RWB averages, not shown (0/0) The index has now closed back below its critical 30 week average (red line). We need to watch the neckline (purple line). A close below this line might be a  sign of significant weakness.

Meanwhile, the QQQ still looks strong in this daily RWB chart (12/12/6/6).

 

The GMI is now 5 (of 6) and Green.