Teach Talk Trade Day Trading & Technical Analysis

DOW Directions 01-22-08 (Tuesday): A Daily Technical Analytical View of Stocks, Furtures, Eminis and Forex for online and day traders.

DIA (Dow ETF): World markets crash as Fed tries to save the day (week, month, year).

Capitulation definition: Webster’s defines capitulation as a giving up after offering resistance. In the markets: capitulation happens after the market has taken a beating and then, finally, there is a breathtaking directional bottom. 

 Certainly, the DJIA was headed to capitulation on Tuesday.  Major markets, from around the world, were down 4 to 8 percent on Monday.  The US markets were on a holiday Monday, but they were trading down over 500 points in the futures contracts before the Fed came in and cut rates by 3/4 of a point Tuesday morning.  This caused the market to rebound 300 points in early futures trading.  Prepare for Tuesday to be a memorable day on Wall Street.

The StoRSI, our momentum oscillator, has continued to come down for the past week.   Yet, the StoRSI still has room to drop. It has not reach its lower trigger level during this current slide to the downside.  Usually, issues traverse from top to bottom and back again….many times  penetrating the upper and lower trigger levels.  In this case, the StoRSI could put additional pressure on prices as the it slides to its lower trigger.

As stated: any rallies to the T8, our preferred exponential moving average, would be terrific opportunities to sell. Unfortunately, we are now a very long way away from the T8.  What seems like a tall order for this market (the ability to rally back to the downtrending T8) might not be out of reach.  Volatility rules and volatility could gyrate prices back to the downtrending T8.  The T8 indicator dictates our thoughts on the direction of the trend. As the T8 begins to decline at a steeper angle, the T8 is even a more powerful resistance.

Friday’s candle continued to feature black bodies and we see no particular features in the candles. The only distinguishing feature is that we continue to post negative, black candles…day after day. 

Please keep and mind and read the following thoughts on volatility. We have been preaching about volatility since August and we don’t believe that things will calm down for many, many months.

***Volatility Alert:

During the third week in July, volatility returned to the major stock indices. For approximately four years, the markets have had low to very low volatility. This significant change has ushered in swings of 100, 200 & 300+ points, sometimes on a day-to-day basis. Stock indices tend to be either volatile, or not, for three to five years at a time. Expect continued volatility. The current volatility cycle has just started its volatile period. We feel this is the early stages of volatility and we continue to believe it is here to stay.

Please take advantage of the FREE 7 DAY TRIAL to The Morning Call ( we discuss 21 futures, ETF’s, E-minis, NASDAQ & Solar & Alternative Engergy issues ) & The Mechanical Monkey where we discuss our mechanical trades.

 

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Solar & Alternative Energy Stocks 12-10-07 (Monday): Occasional thoughts on alternative energy issues.

FSLR (First Solar Inc.): “T8 tap dancing”

The T8 is the moving average that we  us to define trend.  In other words, if the T8 is pointing up, we consider the trend to be positive.  Of course, the opposite holds true for T8 that are in a down trend.   With a positive trending T8, our preferred moving average, we are looking for only long positions. The rules are simple: a. take only trades (buys) in the direction of the trend (the T8, which is pointing up) b.  buy openings below the T8.

This simple set of rules has triggered five trades since  10/12/07.and On each occasion, the price has opened lower than the positive postured T8. Some issues are more orderly than others.  FSLR falls into the category of “well-behaved”.  Of course, market conditions can change an orderly situation into chaos.  This is an excellent approach to many types of trading.  Simply stated:  buy touches of a positive T8.  The first retracement is always the most important and offers the largest potential return.

 Please take advantage of the FREE 7 DAY TRIAL to The Morning Call ( we discuss 21 futures, ETF’s, E-minis, NASDAQ & Solar & Alternative Engergy issues ) & The Mechanical Monkey where we discuss our mechanical trades.

Daytrading 12-10-07 (Monday): Occasional thoughts on scalping the market.

XTXI (Crosstex Energy Inc.): “Trading the Pipe”

In the case of XTXI, our momentum oscillator, the Chande Momentum Oscillator means very little.  But much like Little Richard, we put it on the chart because it’s so beautiful.  Our daytrading setup consists of a number of moving averages.  First and foremost, we use the T8 (maroon line) to determine trend.  We will only take daytrades in the direction of the T8.  Our second and third set of moving averages are three-day T3 averages of the highs and lows.  The T8 is represented by the fat maroon line on the chart.  The highs and the lows of the T3’s are represented by the dotted red and blue lines on the chart. 

At the number “1″ on the chart, we can see that the T8 is pointed down.  Since we only take trades in the direction of the T8, our exponential moving average,we are looking for short positions.  The rules are simple:  a. take trades in the direction of the trend b. short any opening above a downsloping T8  c. short retracements to a down sloping T8  d. the opposite applies for all long trades. 

As one can see, there are even better parameters set by bracketing price with the average highs of the T3 and the average lows of the T3.  This envelop defines most days highs and lows and allows a trader a well-defined set of numbers to place limit orders to buy and sell.

The three large red arrows below the number “one” are days when the T8 was negative and the market opened above the T8.  These are three opportunities to short the opening.  The three smaller arrows below the number “two” are opportunities to short when price retraces to the T8.  The arrows above the number “three” are three opportunities to buy XTXI on retracements to the trend (T8).  Number “four” represents an opening below the T8 and an opportunity to buy the opening. 

 There are many days when the price touches both the T3 highs and the T3 lows.  These brackets can be great boundaries when trying to extract a few dollars from XTXI on a daily basis.  Set your own rules, but trade with the trend and allow the T8 and the T3’s to guide you in and out on a daily basis.

Please take advantage of the FREE 7 DAY TRIAL to The Morning Call ( we discuss 21 futures, ETF’s, E-minis, NASDAQ & Solar & Alternative Engergy issues ) & The Mechanical Monkey where we discuss our mechanical trades.

Using and Understanding Trailing Stops

Once you get in a trade you hope the price immediately starts moving in your favor.  If so, you need to execute your plan, and if this includes trailing stops, then put your plan into action.  there are a couple of ways to do this.  With online trading it is easy to use a trailing stop that is continually modified according to the price action.  Lets say your trading plan calls for a $.50 trailing stop.  When you enter the order you will initiate the trailing stop which will be $0.50 below the entry price, As the price moves up your trailing stop will also move up.  In the purest sense, you would just leave this stop in until you get stopped out.

If your trading plan includes moving a stop up to a breakeven level after a certain profit level, then you would put in an initial stop and move it up manually following the price action.  You will never be hurt taking a profit or breaking even.  You have to be careful since taking small profits will not make up for the losing trades with larger stop losses.  If you place your stops too tight then you will be stopped out will very little profit.  The overall  game plan is to cut your losses and let your profits run.

If I am day trading in my online account, one of my plans is to lock in a breakeven level as quick as possible and then watch and trade off the candle formations in different short time frames like the five, ten, 30 and 69  minute time frames.  If I see that the trend is breaking down I will lock in a profit or smaller loss.
There are many ways to use trailing stops and there are ways to reduce risk with multiple contracts and using trailing stops.  Teach Talk Trade will educate you in these type of trading methods and philosophies.

Please take advantage of the FREE 7 DAY TRIAL to The Morning Call (we discuss 21 futures, ETF’s, E-minis, NASDAQ & Solar & Alternative Energy issues with analysis)  &  The Mechanical Monkey  where we discuss our mechanical trades & give you entries and exits.