Blog post: Stocks rally and 2 day old $QQQ short term down-trend may end Monday; $NKE–an example of how I use my latest oversold bounce (OSB) scan to find promising stocks; $QQQ retakes all shorter daily RWB averages

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The key to prospering in the market is to have developed a set-up, defined by objective conditions which leads one to expect that a stock will rise almost immediately. The set-up must also suggests a price at which  to set a stop loss to sell out with a small loss if the set-up fails. If the set-up is good, one will likely end up with a lot of small losses and a few big winners that more than make up for the losses. I ran a new scan on the Dow 30 and found that NKE came up. NKE has recently had a green line break-out (GLB) to an all-time-high (ATH). It bounced on Friday from an oversold position. If I bought this bounce I would immediately place a GTC stop order to sell, just below the bottom of the bounce, at 164.67. If the stock trades below this price then the set-up has likely failed and I would quickly exit with a minimal loss. This scan also ensures that all identified stocks are already in up-trends and have recently reached an ATH. Note the black dot signal too, one indicator of being oversold. I do not own NKE. This example is for educational purposes only.

By the way, QQQ also was identified by this scan! Note the recent bounce up off of  the lower daily 15.2 Bollinger band, one component  of this scan.

QQQ has also closed (dotted line) back above all of the  short term averages (red lines). Looking to buy TQQQ if it holds.

 

The GMI is at  5 (of 6) and on a continuing Green signal. My shorter term trend indicator, currently at D-2, may change to an up-trend  after Monday’s close.

 

 

 

Blog post: 36th day of $QQQ short term up-trend and GMI=5 (of 6) and Green; I went to cash in my trading account last week; One reason, daily MACD histogram turned red, see chart

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In the past, I exited mutual funds in my  university pension accounts only after the longer term trend had turned down. That has not happened yet. In my more tradable IRA accounts I exit the market more frequently when some weakness becomes apparent to me. I do not want to give back all of my recent gains. So when the major indexes appeared to me to be weakening, I sold my TQQQ and other stocks and went to the sidelines.

One indicator suggesting weakness is the 12/26/9 daily MACD histogram that turned red Friday, after days of declining. The chart below shows this relationship. The MACD histogram reflects the difference between the MACD line (blue) and the signal line (purple). When the MACD line crosses below the signal line the histogram turns negative, or red. Note what happened to QQQ when the histogram turned red in March and May. The MACD is a measure of momentum and as the histogram lines decline it indicates waning strength of the move. Similarly, when the lines are rising it indicates strength. During most of the recent QQQ short term up-trend since 5/24,  the histogram has been black, indicating that the MACD was above the signal line. But notice how it has been declining and turned red on Friday. The  histogram does not have to remain red for long, but it signals to me at least current short term weakness. By the way, the histogram for SPY also turned red on Friday. Check it out for yourself!

Blog post: 32nd day of $QQQ short term up-trend; Key to success in market is to have an objective, defined set-up that implies an immediate move up, then if it fails to move rapidly as predicted exit quickly with a small loss; I teach my students several set-ups that I like; one of them is the black dot signal, defined below

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I have TC2000 (see TC2000 tab on blog)  draw a black dot when a stock in an up-trend bounces up from oversold. Oversold is defined as having a daily 10.1 stochastic value of 25 or less in any of the past 3 days. I have discovered that almost every significant rise in a stock begins from an oversold level. But not every oversold level leads to a big rise. Check it out for yourself. The key for me is to find a launched rocket near an all-time-high (ATH) that has become oversold and begins to move up. I can then buy it and place my stop loss below the low of the bounce. My recent TraderLion and Long Island Stock Traders Meetup presentation slides (see prior recent posts for the workshop  links) show how to put a green dot indicator on a daily stock chart. Here is a copy of the slide with the link.

 

To create the black dot signal instead replace the formula in the tutorial with the logic:

I want the 10.1 daily stochastic in any of the last three days to be le25 and for the stock to be higher today than yesterday and to be above its 30 day simple average or its 21 day exponential moving average. The dot is placed at the 5 day low price.

Here are 2 examples of stocks with black and green dot signals. See if you can replicate them and then add the 10.1 stochastic indicator below the price. I love a black dot signal soon after a green line break-out (GLB). I have a TC2000 scan to identify such stocks.