One thing I've always been amazed at is ‘trending channels'. My favorite charting program is Worden's Telechart. It allows me to draw a trendline, create a parallel line, and then drag it to create a channel. I'm frequently amazed to discover how a stock, ETF, or index, often stays within a channel defined with perfectly parallel lines. A channel is merely the reflection of ‘crowd psychology'. You would think there would be variation from hundreds of thousands of participants, each with their own opinions and trading styles, but instead it seems as if everyone had been drawing the same trendlines and deciding to stay within them.
Where did the NASDAQ Composite decide to turn around and bounce upwards? Exactly at a trendline drawn from June 2011 through Jul 2011 and paralleling the 50-day MA:
Three days of downside, then a turnaround. The top of the up-channel is around 3265. That is about 4% above the NASDAQ's current level. Is there any history of the NASDAQ gaining something like that this time of year, which would take it back to the upper part of the channel?
I just happen to have a seasonal chart handy. Over the next 7 weeks the NASDAQ has gained an average 3.5%, with gains in a good 18 out of 22 years. Over the next 10 weeks, the index has gained an average 5.8%, also on 18 out of 22 years, and over the next 19 weeks, the index has gained an average 9.8% with gains in 19 out of 22 years. A long trade on the NASDAQ index has tailwinds for the next 6 months. But beware of pirates. Smooth sailing is never guaranteed.
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, click here: www.markettamer.com/newsletters
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.
Also on Market Tamer…
Follow Us on Facebook