While I usually use seasonal patterns to filter out the highest probability stock trades, which also allows me to have a high success rate with option trades, sometimes a trade, based purely on technical analysis, will jump out at me.
In the April 16th newsletter I said “If the markets open positively today, and Estee Lauder (EL) stock opens up positively, consider a new long stock position. EL has broken above recent resistance. Yesterday's volume could have been higher. But the recent volume picture looks good – very little volume on down-close days and well-above-average volume on up-close days.”
At the time, the chart looked like:
I added “Estee Lauder is due to announce earnings on May 2nd, before the open, so a small position, at best, is appropriate now. After earnings, and if they are positively received, adding to the position would make sense. The standard 8% stop-loss/trailing-stop makes sense. If EL just makes it back to the December highs it will log a gain of 6.7%. EL doesn't have much of a seasonal bias right now, so this is a trade candidate based solely on technicals. But a setup like this tends to work out a high percentage of the time.”
On May 2nd, Estee Lauder beat estimates by $0.10. The stock jumped 3.4%. With the overall market falling into a sideways trading range, EL retreated. It filled the May 2nd gap, trading in a narrow, low volume range. Until yesterday. EL decided consolidation time was over.
We entered the EL position on 4/16 and this trade is now up 5.2%. Today's Seasonal Forecaster newsletter focuses on whether it is time to take profits, hold on, or add to the current position. But identification of the high probability setup back in April has paid off.
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, please click on the following link: www.markettamer.com/seasonal
Copyright (C) 2014 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.
The content on any of Market Tamer 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 involve risk. The risk of loss in trading securities can be substantial. The risk involved with trading stocks, options and other securities are 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 (http://www.optionsclearing.com/publications/risks/riskstoc.pdf). The www.MarketTamer.com educational training program and software services are provided to improve financial understanding.
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