A Little Patience Pays Off, Part 2


Last week I focused on Estee Lauder stock in an article titled A Little Patience Pays Off. I stated “EL is now up 3% from the breakout level, but more importantly is only 1.4% away from setting a new all-time high. The weekly chart suggests another strong step-up in EL would not be unusual.”

As with any case were a stock is approaching a previous high, you must look for clues to whether the stock has enough momentum to conquer the previous high and continue setting new highs, or if buyers are stepping back and taking profits.

Usually, when an analyst points out a previous high and suggests a stock's near term price target will be that previous high, they mean it is likely to get pretty close. If you are a short-term trader, and in a stock that is rising towards a previous high or previous resistance, you may want to take profits as the stock gets CLOSE to the previous high and not wait for the exact price. The best technical charting advice I ever heard, and I don't remember the source, is that trendlines should be drawn with crayons, not pencils, meaning this is not an exact science.

But on Friday, EL came within one penny of its previous all-time high and then turned down. Maybe this is an exact science.

Normally, Friday's rejection of setting a new high, accompanied by high volume, should be a warning. I will not place too much emphasis on Friday's action because it was a ‘quad-witching' day, meaning the expiration of September options. On more popular stocks, this can account for a high turnover in the stock and not necessarily indicate any change in attitude by traders.

The key is to watch the next few trading days. If EL rebounds and easily closes at a new high on increasing volume, it is likely to continue on for a ways – there will be no previous resistance levels to deal with. Then it becomes self-feeding. New highs can capture the attention of institutional traders not already in the stock.

This stock has a strong seasonal track record, good ratings, and the number of funds holding the stock has increased by 15% over the past year. It has the potential, it just needs to prove it has the backing for further gains.

Today's Seasonal Forecaster newsletter covers a similar stock with strong growth prospects and clear evidence of big money taking an interest in the company – very big money.

Of course, there's much more you need to know and many more stocks you can capitalize upon each and every day.  To find out more, type in www.markettamer.com/seasonal-forecaster

By Gregg Harris, MarketTamer Chief Technical Strategist

Copyright (C) 2013 Stock & Options Training LLC

Unless indicated otherwise, at the time of this writing, the author has no positions in any of the above-mentioned securities.

Gregg Harris is the Chief Technical Strategist at MarketTamer.com with extensive experience in the financial sector.

Gregg started out as an Engineer and brings a rigorous thinking to his financial research. Gregg's passion for finance resulted in the creation of a real-time quote system and his work has been featured nationally in publications, such as the Investment Guide magazine.

As an avid researcher, Gregg concentrates on leveraging what institutional and big money players are doing to move the market and create seasonal trend patterns. Using custom research tools, Gregg identifies stocks that are optimal for stock and options traders to exploit these trends and find the tailwinds that can propel stocks to levels that are hidden to the average trader.

Related Posts

 

MarketTamer is not an investment advisor and is not registered with the U.S. Securities and Exchange Commission or the Financial Industry Regulatory Authority. Further, owners, employees, agents or representatives of MarketTamer are not acting as investment advisors and might not be registered with the U.S. Securities and Exchange Commission or the Financial Industry Regulatory.


This company makes no representations or warranties concerning the products, practices or procedures of any company or entity mentioned or recommended in this email, and makes no representations or warranties concerning said company or entity’s compliance with applicable laws and regulations, including, but not limited to, regulations promulgated by the SEC or the CFTC. The sender of this email may receive a portion of the proceeds from the sale of any products or services offered by a company or entity mentioned or recommended in this email. The recipient of this email assumes responsibility for conducting its own due diligence on the aforementioned company or entity and assumes full responsibility, and releases the sender from liability, for any purchase or order made from any company or entity mentioned or recommended in this email.


The content on any of MarketTamer websites, products or communication is for educational purposes only. Nothing in its products, services, or communications shall be construed as a solicitation and/or recommendation to buy or sell a security. Trading stocks, options and other securities involves risk. The risk of loss in trading securities can be substantial. The risk involved with trading stocks, options and other securities is not suitable for all investors. Prior to buying or selling an option, an investor must evaluate his/her own personal financial situation and consider all relevant risk factors. See: Characteristics and Risks of Standardized Options. The www.MarketTamer.com educational training program and software services are provided to improve financial understanding.


The information presented in this site is not intended to be used as the sole basis of any investment decisions, nor should it be construed as advice designed to meet the investment needs of any particular investor. Nothing in our research constitutes legal, accounting or tax advice or individually tailored investment advice. Our research is prepared for general circulation and has been prepared without regard to the individual financial circumstances and objectives of persons who receive or obtain access to it. Our research is based on sources that we believe to be reliable. However, we do not make any representation or warranty, expressed or implied, as to the accuracy of our research, the completeness, or correctness or make any guarantee or other promise as to any results that may be obtained from using our research. To the maximum extent permitted by law, neither we, any of our affiliates, nor any other person, shall have any liability whatsoever to any person for any loss or expense, whether direct, indirect, consequential, incidental or otherwise, arising from or relating in any way to any use of or reliance on our research or the information contained therein. Some discussions contain forward looking statements which are based on current expectations and differences can be expected. All of our research, including the estimates, opinions and information contained therein, reflects our judgment as of the publication or other dissemination date of the research and is subject to change without notice. Further, we expressly disclaim any responsibility to update such research. Investing involves substantial risk. Past performance is not a guarantee of future results, and a loss of original capital may occur. No one receiving or accessing our research should make any investment decision without first consulting his or her own personal financial advisor and conducting his or her own research and due diligence, including carefully reviewing any applicable prospectuses, press releases, reports and other public filings of the issuer of any securities being considered. None of the information presented should be construed as an offer to sell or buy any particular security. As always, use your best judgment when investing.