Announcing INO TV in Detail

Apr 22, 2008: 10:05 AM CST

Now you can view trading seminars from the comfort of your home, or in the office or anywhere else there is a high-speed internet connection.

I benefit each week from this service because it gives access to archived presentations from trading experts on a large variety of topics on trading, investment, money management, psychology, strategy development, etc.

I have also used the service to gather small study groups together at my home to view a presentation, take notes, and then discuss ideas with others that we generated from the material together. It can also become an interactive process which stimulates deeper learning and provides motivation to delve deeper into the content.

Topics include detailed information presented in one and a half hour presentations focusing on Point and Figure charting/tactics, Elliot Wave Theory/application, “Back to the Basics” with presenters discussing ideas from the “Founding Fathers” of Technical Analysis, Gann trading techniques/indicators, risk control along with money management strategies, cycle analysis/techniques, ‘pattern’ trading, indicator construction/application, and so much more.

Some of these videos have supported the educational content I am studying for the CMT Designation.

Here is a quick, concise ‘blurb’ straight from the website itself:

Here’s what you get:

* 11 Channels … countless opportunities
* Unlimited 24/7 worldwide instant access
* Over 154 online experts and counting
* Over 413 online seminar workbooks
* Over 547 online trading seminars and counting
* Over 1,000 hours of valuable online trading material

Here’s how you will benefit:

* Learn at your own pace
* Easy listening and learning style
* You will be learning a valuable lifetime skill
* It’s available now and it’s worldwide

The service and access to all this quality information is yours for $99 per year, or $49 per quarter, which is less than half the cost of the plane ticket alone to take you to a free conference on trading.

Here are a couple of links to check it out for yourself:

The “Home Page” and log-in page for INO TV.

Finally, the “Sign-Up” and join membership page (including bonus offer)

Feel free to comment or email me with any questions and I’d be happy to address them. I believe in ‘overcoming fear through education’ and this is exactly what the service provides for you. You also support Afraid to Trade when you support INO TV, as I am a commissioned, affiliate member.


AAPL Insights

Apr 22, 2008: 9:41 AM CST

Apple Inc (AAPL) completed its buy signal and is running into potential overhead resistance which could temporarily halt the growing up-move in the stock.

The buy signal I highlighted previously worked even better than I anticipated, with price gapping up multiple days to reach the first profit target – the resistance line at $170.

Traders, you may want to consider taking at least some profits at this level and waiting for a clean break above this level before trading higher, but that all depends on your strategy and risk-management parameters.

Also, I do want to highlight a divergence.

The recent move off the February lows has expanded each week on relatively lower volume, which is a technical non-confirmation of higher prices.

Let’s look at this two ways:

1. Higher prices are not attracting new buyers and the rally is suspect or at least due for a deeper retracement

2. The capitulation bottom of early 2008 zapped away all the ‘weak’ holders in a climax reversal, and so this must be considered when addressing ‘relative volume’

In other words, there’s no way to match or exceed climactic volume – this would be the more optimistic approach and the first statement would be pessimistic.

Keep your eye on this stock and let’s continue to watch or trade the exciting emerging developments.


Rising Intraday Support

Apr 21, 2008: 10:42 PM CST

I thought the rising support pattern provided by the 20 period moving average was interesting and wanted to show the diagram.

I’m showing the DIA (Dow Jones ETF) on the 15-minute chart with a 20 and 50 period exponential moving average.

While I often trade off the 5-minute chart, I view the structure of the higher time frames (yes, a 15-minute chart is a slightly higher time frame for me!). Higher time frames can develop biases or expectations for you, and can also provide risk management points and trade entry points.

The typical interpretation is to identify the trend structure on the higher time frame and then time your entries and exits (targets too) on lower time frames.

For example, if a 30 minute chart shows a resistance level just ahead, and your 5-minute chart gives you a buy signal, you may use the resistance level on the 30-minute chart as a target for when the market might reverse.

Anyway, let’s look at the above chart.

Notice how price is supported as it trends higher by the 20 period moving average. As price gaps higher and forms a U-Turn sell (or rounded top), retracements (pullbacks) are deeper but still are supported by the rising 50 period average.

Trend reversals are often preceded by such ‘loss of momentum’ situations where price retraces deeper and deeper before ‘rolling over.’

Nevertheless, I thought this was an interesting example for you to review.



Inside a Momentum Divergence

Apr 21, 2008: 12:01 PM CST

I use momentum divergences as a large part of my trading, and I thought I’d take you inside a momentum divergence so you could understand the concept better.

First, let’s start with a definition.

Price can be defined as the aggregate value of all participants in a market as they express their hopes, desires, fears, and other considerations as they establish positions (whether as hedged positions or outright directional positions).

Momentum can be defined as the speed or force of prices traveling in a given direction.

Thus, price may be moving higher, but doing so at decreased speed or decreased force (or urgency). If this situation develops, we would consider this to be a ‘momentum divergence,’ in that momentum is registering an opposite reading to price direction.

One may also think of it as throwing a ball into the air. As the ball reaches the apex (the highest point), the ball slows down its speed accordingly before stopping and then reversing… slowly traveling down at first but then gathering speed as it heads closer to the ground.

In this example, I am showing a positive momentum divergence via Harley Davidson (HOG) at the beginning of 2007. Notice that price is trending lower, and we can see this through a series of lower lows and lower highs. It’s best to view momentum divergences in comparison with swing highs and swing lows in price, combined with the overall direction.

Notice on March 12th how price makes a lower low on a pronounced and strong price swing down, which registers in our momentum oscillators as making a lower low as well. For this example, I’m demonstrating the 3/10 Oscillator, ROC (Rate of Change), and MACD Histogram.

A counterswing up occurs until around March 19th, and then a new downward impulse occurs. However, this particular downward impulse – although it took prices lower – failed to do so with the strength (or magnitude or length) of the previous price swing.

I drew two hashed lines to show the length of the downward price swing and how it set-up the classic divergence. With price making a lower low, but doing so on less speed or force than the prior price low, a positive momentum divergence forms, which is picked up by our oscillators.

Each of the oscillators (and there are more we could use) makes a higher low while price makes a lower swing low. This warns us that the sellers are losing force (or ‘power,’ conviction, momentum, etc) and that a reversal in price may be setting up. If anything, divergences warn us to take profits if we have them in a position.

It is important to note that divergences alone do not signify trend reversals – they merely indicate a weakening posture of the dominant force (be it buyers or sellers) and that the next counterswing could be stronger than prior counterswings. Sometimes divergences do indeed precede trend reversals, but it’s best to use them as warning signs and allow price to complete a reversal before repositioning.

I’ll be discussing how to use divergences in more detail in future posts. Be sure to check back for more information.



Markets – Truly a Leading Indicator?

Apr 21, 2008: 10:17 AM CST

Barry Ritholtz at the Big Picture recently asked the question: “Are Markets a Leading or Lagging Indicator” which addressed the commonly held notion that markets lead economics (or financial conditions as they develop).

Barry states, “There are so many varied inputs into equity markets — sentiment, trend, liquidity, momentum, valuation — anyone of which can be dominant at any given moment.  Merely assuming markets are giving you a 6 month heads up into the future, based on recent action, is often unwarranted.”

He further addresses data from the housing market (and ‘credit crunch’) market declines and takes us back to 2000 when the market rallied into a recession and then bottomed near the start of the economic recovery.

Ritholtz concludes that markets can both lead and lag, which challenges conventional wisdom. “But getting the correct interpretation involves careful review of the charts, sentiment reads, liquidity, momentum, market internals, and other data.”

In other words, it’s not as simple as reading a stock market peak and declaring “the economy is about to decline” or observing a potential market bottom and declaring “the worst is over.”

Markets are increasingly affected by globalization and do appear to becoming more correlated as information reaches so many trading desks across the world simultaneously.

Also, with the proliferation of hedge funds as well as computerized algorithmic trading, the classic ‘purpose’ for investment (or trading) has deteriorated from what it was 20 or 30 years ago.

While funds do still invest on their belief about the future prices of equities, computerized trading programs and the open access to more market participants distorts these views.

Also, with the acceptance and rise in popularity of technical analysis methods, more traders are analyzing prices strictly due to mathematical indicators and visual chart patterns which seek to exploit certain aspects of market psychology of participants. Such trading creates unexpected and often unintended price movements which have very little to do with equity valuation or fundamental analysis. This further removes the link between the stock market and the economy.

This is a fascinating concept and I am glad Barry is addressing the point and sharing a few of his views.

As with most things in the stock market, nothing is as simple as it seems at first glance.

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