Smart Money: Investing & Money Tips

The Weekly Report For January 9th-13th

By admin on January 14, 2012

Commentary: The stock market kicked off 2012 with a gap higher, extending the rally that occurred in late December. While the markets gapped higher on Tuesday as traders returned from the holidays, they closed weakly and spent a couple of days digesting the gains. Friday saw the markets gapping higher again on a better than expected unemployment report which was faded right at the start. The markets did finish close to their highs for the week though, despite the lackluster intraday action. If the markets can quietly consolidate in this area, it could set the stage for a push higher in the coming weeks.

The S&P500 as represented by the S&P 500 SPDRS (NYSE:SPY) ETF is now testing a very important level. The $129 level is where the rally in October ended. After a few months of consolidation, SPY has finally come back to test this level for a breakout. SPY has been setting progressively higher lows as it follows its 50-day moving average higher. The price action for SPY has been positive over the past few weeks as it first reclaimed its 200-day moving average and then pushed higher. Setting and closing at a higher high ($129.42) would be a very positive development for SPY, and could signal an upcoming test of last years highs. (For related reading, see Day Trading Strategies For Beginners.)

The DJ Industrial Average as represented by the Diamonds Trust, Series 1 (NYSE:DIA) ETF actually cleared its October highs already and could be acting as a leading indicator. While DIA is comprised of only 30 stocks and can be influenced by a move in only a few stocks, the fact that it is already close to last years highs is very positive. Traders should keep an eye on the $122 in case DIA pulls back as this level should attract buyers. However, if DIA continues to act well, it could challenge last years highs in short order.

The Nasdaq 100 as represented the Powershares QQQ ETF (Nasdaq:QQQ) ETF actually had a very good start to the year. While it also suffered from a lackluster close after its gap on Tuesday, it had a decent follow through the rest of the week as it closed higher every single day. QQQ ended the week solidly in the green and cleared its December highs. It also failed to fill its open gap which was a nice display of strength. It is a positive sign that QQQ is resuming its role as a leader, and it is actually still pretty close to all time highs. If QQQ can continue to lead the way, it would bode well for the rest of the markets.

While the smallcaps as represented by the iShares Russell 2000 Index (NYSE:IWM) ETF didn’t fare as well as QQQ, the index ETF did finish higher for the week. IWM is still technically underperforming its peers, as it remains the only one of the four index ETF’s still below its 200-day moving average. Smallcaps typically outperform early in the year, so traders should keep a close eye on how they perform relative to the other index ETF’s. If the market is truly healthy, then this group should start gradually performing better than DIA and SPY at a minimum. This weeks highs are the first level to keep an eye on, as IWM failed to approach it after the gap on Tuesday. IF IWM can close above this level, it should set the stage for a push into the high $70’s.

While the markets didn’t exactly set the world on fire after the strong gap on Tuesday, there are a lot of positives to take away from this week’s price action. The markets did close higher for the first week of the year and QQQ performed very well. Technically, the markets are a little on the overbought side, so further consolidation would actually be healthier than a surge higher. However, they are not so overbought as to prevent a push higher and that remains a possibility. That being said, for several months this market has punished the chasing of a breakout or breakdown. Nothing occurred this week to call this pattern into question. The few gaps higher were faded, and the markets quietly consolidated. Traders need to remain cautious despite the positive action on the surface. (For related reading, see Mastering Short-Term Trading.)

Charts courtesy of stockcharts.com

Read, learn, discuss, and share all about trading at TradersLaboratory (TL), the leading online trading forum for day traders, swing traders, and active investors

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By Joey Fundora

At the time of writing Joey Fundora did not own shares in any of the companies mentioned in this article.

Source : ChartAdvisor.com

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Disclaimer…The subject matters expressed above is based purely on technical analysis and personal opinions of the writer. it is not a solicitation to buy or sell.

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How The Mega-Tech Stocks Set-Up For 2012

By admin on January 1, 2012

Commentary: As the year draws to a close, the major tech stocks - IBM, Apple, Google and Microsoft – made headlines this year, all for different reasons. Three of the companies have outperformed the broader market, represented by the S&P 500 SPDR (NYSE:SPY) ETF which is down 0.52% YTD, and one of these tech giants has not. Heading into next year, let’s take a look at how the charts are setting up, and which of the mega-caps is worth owning going forward.

International Business Machines (NYSE:IBM) has so far been the star performer of the mega-capitalization technology stocks. Up 25.27% YTD to $184.75, from $147.48, the stock has been well-supported throughout the year by its 200-day moving average. With on-balance volume rising and a steady trend higher in the price, if the price continues to push above the 50-day moving average it will be a ‘buy’ signal. Stop loss orders can be placed near the 200-day moving average or around $175, which is just below the recent swing lows. A push above the 50-day moving average is likely to trigger a re-test of the recent high at $194.90, and if that is exceeded, the target is $210.

Apple (Nasdaq:AAPL) has the largest capitalization of the technology stocks and has had a solid year so far, up 22.38% to $403.33, from $329.57. The stock is currently climbing higher after a fall from the October high at $426.7. The next resistance area is $410, and if cleared, it sets up a likely retest of the October high. A move above the high provides a profit target of $450. From August through December, the stock was well-supported above $353; therefore, a drop below this is bearish. The long-term upward trendline that began in early 2009 currently intersects at $363 (close to 200-day moving average) and should also be watched, as a drop below could trigger selling. Declining and diverging on-balance volume is signaling underlying weakness. (For more, see What does it mean to use technical divergence in trading?)

Google (Nasdaq:GOOG) has managed to eke out a small gain this year, outperforming the broader market. The stock is up 4.76% YTD to $633.14 from $604.35. It has been a volatile year for Google, with the price of the stock moving $169.94 – only to end up nearly flat for the year. That volatility could bode well for the stock now, though. If the January high of $642.96 can be exceeded, the stock could move aggressively higher, challenging the $716 resistance level seen back in late 2007. On the other hand, a drop back below $610 is likely to be short-term bearish. Further support is at the 200-day moving average and longer-term upward sloping trendline support is just below $500. (For more, see Support & Resistance Basics.)

Microsoft (Nasdaq:MSFT) has been the underperformer of the group, down 6.97% to $26.03, from $27.98. The stock had been moving within a tighter and tighter range throughout the year, creating a symmetric triangle chart pattern that extends back into mid-2010. The breakout of the triangle could largely impact the long-term direction of the stock. A rise above $27 will break the pattern to the upside, providing a long-term target of $36. There is significant resistance between the breakout price and $31.58 (2010 high) though, and should be noted. On the other hand, a drop below $24 is long-term bearish, as the pattern would break to the downside, providing a target of $15. The downtrend in the on-balance volume indicator points to declining buying interest in the stock. If a breakout of the pattern occurs, stop loss orders can be placed just outside the pattern on the opposite side of the breakout. This is currently about a $2 risk per share.

The Bottom Line
International Business Machines and Apple have had a great year, Google has outperformed the market and Microsoft has been the laggard. These stocks each present unique opportunities going forward, as the chart of each company sets up very differently. There is potential upside in these stocks if the price can push through resistance or create an upside chart pattern breakout, but the support levels must also be watched. There are warning signals present in some of these stocks and a breach of support means more selling could occur. IBM is setting up well, and Google has potential if it can break through resistance. Apple is more neutral, but it looks good if it can clear resistance, and the long-term direction of Microsoft will likely be largely swayed by the triangle breakout direction. (For more, see Analyzing Chart Patterns.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Charts courtesy of stockcharts.com

At the time of writing, Cory Mitchell did not own shares in any of the companies mentioned in this article.

Read, learn, discuss, and share all about trading at TradersLaboratory (TL), the leading online trading forum for day traders, swing traders, and active investors

Have a Great Day!

By Cory Mitchell

Disclaimer…The subject matters expressed above is based purely on technical analysis and personal opinions of the writer. it is not a solicitation to buy or sell.

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The Weekly Report For December 26th – December 30th, 2011

By admin on December 25, 2011

The markets have bounced nicely off their November lows and now seem poised for a move higher. As you can see from the charts below, prices are currently testing the resistance of November highs and several long-term indicators are starting to point to a shift in the trend.

The strongest chart of the group is the SPDR Dow Jones Industrial Average (NYSE:DIA). Buying pressure sent the price above the key $122 resistance level and there is still plenty of room for the RSI indicator to ticker higher without getting into overbought territory. The crossover of the 50-day moving average above the 200-day moving average also suggests that the long-term momentum is on the side of the bulls. Short-term traders will watch for a move toward the 2011 high of $126.26.

When looking at the S&P 500, as represented by the S&P 500 SPDRS (NYSE:SPY) ETF, the story is a bit different. Overall, the momentum has been in the upward direction, but the bulls haven’t been able to send the price above the nearby resistance level. Traders will keep a close eye on the $126.46 level because a move above will likely lead to further buying pressure toward a target price of $128. The long-term moving averages are also setting up for a bullish crossover and look promising as we head into 2012. (For more, see Moving Averages: Introduction.)

The Nasdaq 100, as represented the Powershares QQQ ETF (Nasdaq:QQQ) ETF, continued to lag the other large-cap indexes and is currently trapped below its 200-day moving average. It will be interesting to see if the bulls will be able to send the price above the nearby resistance and to see if the momentum will be able to continue in early 2012. A close above the 50- and 200-day moving averages will be a ‘buy’ sign for long-term traders.

The small caps, as represented by the iShares Russell 2000 Index (NYSE:IWM) ETF, closed right on its 20 and 50-day moving averages. It held fared a little better than SPY and QQQ by closing well off the prior gap and near its key averages. This is one group that could take a leadership role into the new year, so its relative strength should be paid attention too regardless of how minor in magnitude. It’s possible that IWM will drift back towards $70, but it’s critical that IWM holds up in this area and forms a higher low. Any sustained weakness under this week’s lows would imply a trip back down under the November lows.

The Bottom Line
The bottom line is that there are several long-term bullish signals are lining up on the charts and we could see a nice move higher as we head into 2012. We have been expecting strength towards the end of the year and it is encouraging to see the prices of several major indexes move above key resistance levels. The small-cap indexes remain vulnerable in their current positions and much will be decided in the next week. If the bears step back in, then November lows will become the target. However, any bounce from these levels could catch short sellers off guard and lead to a continued move higher. (For more, see Technical Analysis: Introduction.)

At the time of writing, Casey Murphy did not own shares in any of the companies mentioned in this article.

Charts courtesy of stockcharts.com

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Casey Murphy
Senior Analyst, ChartAdvisor.com

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The Weekly Report For December 5th – December 9th, 2011

By admin on December 7, 2011

Commentary: We mentioned the likelihood of an oversold bounce last week that could even ignite a year-end rally, but I’m not sure anyone could have expected the bounce in the markets this week. Of course it came on the heels of a coordinated effort to provide support for the European financial crisis. One can always question the lasting effects of market intervention, but the bottom line is that this week’s news sparked a very sharp rally and may be the beginning of a more substantial rally. The end of the year is typically a strong period and there is a chance that the markets correction is over. There is a lot that will need to happen, but this week’s strength was a step in that direction.

One of the key outcomes of this week’s rally was the potential of a higher low being formed in the market indexes. In looking at the S&P 500, as represented by the S&P 500 SPDRS (NYSE:SPY) ETF, notice that the pullback that began in late October ended well short of the October lows. This is setting up the opportunity for a higher low, but SPY will need to rally above the October highs in order to confirm this. Otherwise, it’s possible that SPY trades sideways before eventually breaking the November lows and then heading towards $107. Ultimately, there is a wide range in which SPY can trade in the near term, so traders need to account for this. SPY can easily retrace some of the recent bounce and still not damage the chances for further upside. The two key levels to watch are the November lows near $116 and the October highs near $129. That is a very large range, but breaking out of either of those ranges would have a significant implication.

Much of the same analysis can be applied to the Diamonds Trust, Series 1 (NYSE:DIA) ETF as well. DIA came roaring back to life this week after dropping under its 200-day moving average last week and hitting $112 per share. It is likely that DIA will endure some profit taking after such a strong bounce and with a huge gap underneath towards $116, it may act as a magnet. However, as long as DIA remains above the November lows near $112, the possibility of a higher low being set would be intact.

The Nasdaq 100, as represented the Powershares QQQ ETF (Nasdaq:QQQ) ETF, had been underperforming recently, but this week’s bounce helped bring them back on par with its peers. QQQ is back above its key moving averages and near the congestion area that formed in October and November. If QQQ can stabilize near these levels, it could set the stage for a breakout attempt above the key $59 level.

One group to really keep an eye on is the small caps. This group typically outperforms early in the year, so this sector may start perking up soon. The group, as represented by the iShares Russell 2000 Index (NYSE:IWM) ETF, also had a very sharp bounce from last week’s lows and is back trading near the trading range that was established the past several weeks. Much like the other indexes, IWM is susceptible to near-term profit taking, but it also has plenty of room underneath for a typical pullback.

The Bottom Line
This market has not been easy to game the past two months. It is quite apparent that traders are still on edge after the calamity that occurred in 2008 with the U.S. financial markets. There is still fallout around the globe, and any hints of similar trouble are causing market participants to flee first and ask questions later. As such, volatility has exploded, and the markets are very susceptible to news-driven fluctuations. Looking closely at the index ETF’s, they all stopped near trend lines that were marking recent rally attempts. The markets are likely to suffer through some near-term profit taking, but with the end of the year typically being strong as funds chase performance, it’s likely that the markets will find support before new lows are set. Of course, anything is possible, (and traders should not trade solely based on seasonality) but this week’s strength (and news) may have been the catalyst bulls were waiting for.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Read, learn, discuss, and share all about trading at TradersLaboratory (TL), the leading online trading forum for day traders, swing traders, and active investors

Have a Great Day!By Joey Fundora

Disclaimer…The subject matters expressed above is based purely on technical analysis and personal opinions of the writer. it is not a solicitation to buy or sell.

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Some Stocks Weathering The Storm

By admin on November 24, 2011

Commentary: After an impressive October, the stock market was poised for a strong holiday run. However, November has been anything but strong, as the general markets have been mostly lower over the past two weeks. As Thanksgiving approaches, the market is at a crossroads, faced with continuing to slide lower or putting in a higher low after a routine pullback. Short term, the markets are already oversold and could be ready to bounce soon.

If the theory of an oversold bounce occurring holds up, then looking for stocks that have weathered the recent downturn would be a good approach. Sanderson Farms, Inc. (Nasdaq:SAFM) is one such stock. The meat products stock has held up through the past few weeks as it consolidates an October breakout. It has not only held above the $48-breakout level, but has also maintained an even tighter range the past few days, just above $50. SAFM could be close to clearing this range and may end up making a run at its all-time highs near $60. (For more, see The Anatomy Of Trading Breakouts.)

While HMS Holdings Corp (Nasdaq:HMSY) has come down from its recent highs, it also has maintained itself above its recent breakout and the pullback has been orderly. HMSY started to turn back higher this week, although it may still have more consolidation ahead of it. The mid $27s may be an area to focus on as a possible support level in case HMSY continues to drift back. (For more, see Peak-and-Trough Analysis.)

Pier 1 Imports, Inc. (NYSE:PIR) has been following a very similar pattern to HMSY. It cleared a resistance level in late October as it broke above the $12.50 area. It continued to run up to near $14 before beginning to pullback. It has drifted back to its breakout level and could be finding support near this area. If the markets can find some support soon, it may lead to PIR ending its pullback and resuming the prior breakout.

Another stock that is consolidating in an orderly fashion, despite the recent weakness in the markets, is ANSYS, Inc. (Nasdaq:ANSS). ANSS cleared a descending trendline in October as the markets roared to life, and it has held the majority of the breakout as the markets have regressed. ANSS is currently trading in a tight flag near all-time highs and is certainly worth watching on a break of the flag.

The Bottom Line
It’s always difficult to consider buying stocks during periods where the market is weak. However, by focusing on stocks that have maintained strength, traders can tilt the odds in their favor. While its certainly not a guarantee that the stocks will end up resuming their breakouts, the fact that they have an underlying bid holding them up is a positive. Ultimately, their fate likely lies in what the general markets do next. If the pattern of buying weakness in October resumes, then these stocks may be poised to resume their breakouts. If the markets continue to slide, then all bets are off the table. (For more, see Trade Broken Trendlines Without Going Broke.)Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Charts courtesy of stockcharts.com

By Joey Fundora

Joey Fundora is an independent trader located in South Florida. Joey focuses on using technical analysis techniques to uncover supply and demand imbalances in equities. To see more of his work, visit his site on Stock Chart Analysis.
At the time of writing Joey Fundora did not own shares in any of the companies mentioned in this article.

Disclaimer…The subject matters expressed above is based purely on technical analysis and personal opinions of the writer. it is not a solicitation to buy or sell.

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The Weekly Report For November 14th – November 19th, 2011

By admin on November 16, 2011

Commentary: You wouldn’t know it by looking at the day-to-day movement in the indexes, but the stock market basically continued to consolidate this week. Tuesday saw a large gap down with Italy now in the spotlight, followed by persistent selling all day that threatened to derail the recent rally. However, the markets started to recover on Thursday and then gapped and ran higher on Friday to close out the week on a positive note. In the end, nothing more than consolidation occurred, and the indexes remain between their recent highs and lows as they move sideways.

The S&P 500, as represented by the S&P 500 SPDRS (NYSE:SPY) ETF, actually ended the week in the green as it made a run at its 200-day moving average on Friday afternoon. SPY held above the lows set last week as it pulled back to test the prior breakout. This is showing some strength, as buyers stepped in ahead of those lows. Overall the consolidation is starting to narrow in range as SPY moves sideways. It may take a little more time before SPY emerges from this consolidation, but the move should be a strong one based on how it is consolidating. Any strength that carries SPY above $129 could lead to new yearly highs, while a break down below $122.50 would introduce the idea of a bull trap.

The Diamonds Trust, Series 1 (NYSE:DIA) ETF is showing some relative strength to SPY in that it held support at its 200-day moving average after briefly dipping under the level early in the week. DIA has now successfully defended the $116-$118 area on two separate occasions and this is the key level to focus on moving forward. DIA may continue to compress in the coming days, but the pattern looks healthier than SPY, so it will be interesting to see if it leads its peer. (For more, see What Is Relative Strength?)

The Nasdaq 100, as represented the Powershares QQQ ETF (Nasdaq:QQQ) ETF, also spent the week defending its 200-day moving average. Despite the recent volatility, QQQ has not really been in danger of falling under this recent consolidation, and buyers have been aggressively defending the $56 level. The $59 level remains the key area to watch, and a breakout above this level would lead to multi-year highs.

While the small caps, as represented by the iShares Russell 2000 Index (NYSE:IWM) ETF, have remained under their 200-day moving average since August, the recent consolidation closely resembles its peers. IWM is starting to compress into a triangle-type pattern as it consolidates while remaining above prior resistance. While its not guaranteed, triangles are typically continuation patterns so the likelihood is for further upside follow resolution of the pattern.

The Bottom Line
In the end, another week went by with the markets aggressively buying a dip. While the volatility certainly seemed extreme early in the week, it is worth noting that it was actually of a smaller magnitude than the three day move at the end of October. In essence, the market is consolidating, and it may continue to do so next week. This may mean a boring week is ahead of us if the pattern of compressing prices continues. However, at some point soon, the market will emerge from this trading range, and the move may be stronger than usual. While it may be lower, the recent trading action is leading me to believe it will be higher. Many individual stocks are looking much better than just a few months ago as market participants continue to get more aggressive. The markets continue to be news driven in the near term, but every new crisis has been getting absorbed as market participant’s price in the new information. If this pattern continues, it could lead to a strong market through the end of the year. (For more, see Analyzing Chart Patterns: Introduction.)

Charts courtesy of stockcharts.com

At the time of writing, Joey Fundora did not own shares in any of the companies mentioned in this article.

Read, learn, discuss, and share all about trading at TradersLaboratory (TL), the leading online trading forum for day traders, swing traders, and active investors

Have a Great Day!By Joey Fundora

Disclaimer…The subject matters expressed above is based purely on technical analysis and personal opinions of the writer. it is not a solicitation to buy or sell.

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Bullish Charts To Watch

By admin on November 10, 2011

Commentary: The flagis a consolidation pattern that occurs in a strongly trending stock. The name is derived because the pattern resembles a flag on a pole. The pole is the result of a trending move in a stock and the flag results from a tight, rectangular, sideways consolidation. Flags can occur in both up trending (bull) and down trending (bear) stocks. The flag can be a horizontal rectangle, but is also often angled down away from the prevailing trend. The shape of the flag is not as important as the underlying psychology behind the pattern.

The reason a flag forms is that despite the strong preceding move, the stock refuses to give up any ground as it consolidates. Market participants are flocking to the stock and as a result, it trades in a very tight range. Because it is basically pent up energy, the breakout from a flag often results in a powerful move in the direction of the prior trend. (For more, see Analyzing Chart Patterns: Flags And Pennants.

Recent market conditions have resulted in many stocks forming bull flags as the markets pauses after the strong rebound from its October lows. Under Armour, Inc. (NYSE:UA), for instance, is in the process of forming a flag after breaking out from a several month long consolidation. The $80 level had been acting as stiff resistance until finally giving way a few weeks ago. UA has been trading in a very tight range since the breakout as it drifts back towards the $80 level. This is a flag type consolidation, and any breakout above this pattern could lead to a sharp rally to new all-time highs. (For more, see The Anatomy Of Trading Breakouts.)

For more on this topic, check out Support & Resistance Basics.)

Tractor Supply Company (Nasdaq:TSCO) is another stock consolidating in a flag pattern after clearing significant resistance. TSCO cleared a descending trendline that was marking prior rally attempts in mid October. It has been flagging since then, and trading near all-time highs. This is positive behavior in that bulls are refusing to give up much ground, despite the strong rally from the August lows.

While Vera Bradley, Inc. (Nasdaq:VRA) is not quite at new highs, it is flagging after breaching key resistance. The $41 level had been holding VRA back since it broke down in June. However, VRA successfully broke through the level, possibly forming an inverse head and shoulders reversal pattern in the process. VRA has settled into a flag pattern as it consolidates between approximately $45 and $43. Any strength that leads to a breakout from the flag could easily carry VRA to new highs.

The Bottom Line
Because most stocks follow the general markets, patterns will often appear in several stocks at the same time. The flags that are appearing across multiple stock charts are clearly revealing a market that is finding willing dip buyers. If the markets continue to press higher, then it will be almost inevitable that these stocks follow through above their flags. While this doesn’t guarantee that they will trade to fruition, the conditions continue to remain favorable for further upside.Charts courtesy of stockcharts.com

By Joey Fundora

The Weekly Report For November 7th – November 11th, 2011

Commentary: Many market participants that missed the strong rally off the October lows have been patiently waiting for the markets to pullback a little, and this week offered the first true dip since the bounce began. We mentioned last week that the market was due to take a breather, but the mid week reversal the markets experienced was pretty sharp, and occurred on the backdrop of renewed issues with Greece . It is hard to actually buy a dip, especially when it occurs so swiftly and sharply. However, the mid-week drop did end up becoming a buying opportunity and the markets ended up finding support at prior resistance areas. This weeks lows are now a key area to watch in case the markets come back to test for support again.

The S&P 500 as represented by the S&P 500 SPDRS (NYSE:SPY) ETF kicked off the week with a gap lower that turned into a landslide. By Tuesday, SPY had given back most of the gains from the prior two weeks. While the pullback was very sudden, SPY did find support near prior resistance near $122. The markets will rarely serve up trades on a silver platter, and this week was no different. Now that SPY found support near a key level, that level becomes an important area to monitor. It is possible that the markets will come back for a retest of support near $122 in the coming week and traders should keep a close eye on the level. A close under this level could imply a move down towards $120.

The Diamonds Trust, Series 1 (NYSE:DIA) ETF also pulled back towards prior resistance this week near $116. While the 200-day moving average near $118 has been an important area to watch, the $116 area was the level that attracted buyers. This now becomes a key area to monitor moving forward, as this low should offer support. It may take more time consolidating, but DIA appears to have found a near term bottom.

The Nasdaq 100 as represented the Powershares QQQ ETF (Nasdaq:QQQ) ETF continues to basically consolidate under key resistance near $59. While there has certainly been an increase in volatility over the past few weeks, QQQ has not given up much ground overall. This is a positive, and QQQ remains one of the key indicators for the health of the markets. Any strength that carries QQQ over $59 would be worth acting on, as it could signal a key breakout. Looking below, the $56 level has held as support on a few occasions, and QQQ should remain above this level in a benign environment.

The small caps may finally be shaping up. The group as represented by the iShares Russell 2000 Index (NYSE:IWM) ETF has been lagging all summer, but finally showed some strength last week. This week, IWM held near key support along with the other market index ETF’s and also rebounded along with its peers. The lack of underperformance is a positive sign and IWM is worth watching to see how it acts in the coming days. Any strength that carries it above $77.50 could gain momentum and could lead to much higher prices.

The Bottom Line
The pullback in the market indexes this week was certainly not an easy trade to take. However, many individual stocks held up much better than the indexes, and did provide reasonable entries. We mentioned a few stocks that remained near all time highs earlier this week in an article on buying pullbacks. It was certainly not a given that the markets would stabilize near support, but once some individual stocks started showing strength, it spilled over into the general markets. The key question is whether the markets will head higher from here, or top out. Of course I don’t know the answer, but we’ve mentioned the past few weeks that market sentiment has shifted towards buying weakness. This is in stark contrast with a couple of months ago when the markets could not hold on to any gains for more than a day and a half. Until this behavior changes, the likelihood remains that the markets will continue to see higher prices.

Charts courtesy of stockcharts.com

At the time of writing, Joey Fundora did not own shares in any of the companies mentioned in this article.

Read, learn, discuss, and share all about trading at TradersLaboratory (TL), the leading online trading forum for day traders, swing traders, and active investors.

Have a Great Day!By Joey Fundora

At the time of writing Joey Fundora did not own shares in any of the companies mentioned in this article.

Disclaimer…The subject matters expressed above is based purely on technical analysis and personal opinions of the writer. it is not a solicitation to buy or selI.

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The Weekly Report For October 31st – November 4th, 2011

By admin on November 2, 2011

Commentary: Despite some high profile stocks taking it on the chin this week, the overall stock market managed to follow through higher in an impressive show of strength. After a mid week dip that served to trap a few bears, the markets gapped higher on Thursday and powered through the end of the week. The market indexes are now quite extended and have pushed higher than many market participants expected in a very short time. Some of the market indexes are approaching resistance levels, and it would not be surprising to see the markets take a little breather soon. We mentioned last week that it appeared as if the markets had put in their lows for 2011 and this week did nothing to disprove that notion.

The S&P 500 as represented by the S&P 500 SPDRS (NYSE:SPY) ETF backed off the 200-day moving average mid week, but was able to push through this level by the end of the week. Incredibly, SPY has rallied over 20 points in less than a month and now stands back in its prior base. While many have suspected this move to simply be a short covering bounce, the recent strength has to be respected. That being said, SPY is very overbought and could see some sideways movement or possibly some profit taking near these levels. If SPY were to reverse near this level, the key support area to monitor would be near $122.50. This level was holding SPY back before the recent strength and should now be a support level.

The Diamonds Trust, Series 1 (NYSE:DIA) ETF also powered through its 200-day moving average after feigning a failure earlier this week. This week�s strength caught many bears off guard, as the mid week reversal appeared to have legs behind it. The $118 level may now be a key support level to watch as a former resistance area. Any weakness in the coming days may find buyers waiting at this level.

The Nasdaq 100 suffered through some volatility this week as high profile stocks like Netflix, Inc. (Nasdaq:NFLX) and Amazon, Inc. (Nasdaq:AMZN) suffered through post earnings declines. However, by the end of the week, the Powershares QQQ ETF (Nasdaq:QQQ) ETF was back at new weekly highs and is amazingly poised just under multi-year highs. The fact that this index has been able to shrug off some high profile stock�s profit taking reveals wide participation in this rally. This bodes well for future strength. The $59 level remains a key resistance level to watch and could cause QQQ to pause soon.

The small caps had a strong week as well as the iShares Russell 2000 Index (NYSE:IWM) ETF finally joined its peers in clearing its September highs. IWM rallied sharply, but did manage to pause under its 200-day moving average. This is still showing some relative weakness to its market peers, and the $77.50 level may act as resistance in the near future. This was a prior support level and is coinciding with the 200-day moving average. A close above this level would go a long way towards improving the technical structure for IWM.

The Bottom Line
The markets continued to surprise market bears with its strength towards the end of the week. The inability for the mid week reversal to gain momentum was revealing of the underlying strength supporting this move. Regardless of what is fundamentally pushing this move, the strength has been readily apparent. We also mentioned last week about the recent change in character from selling rallies to buying dips. This was once again very apparent and may be the pattern to watch moving forward. With the markets extremely extended, it doesn�t make sense to chase this market at these levels. However, the market structure has certainly improved to a point where dips should be expected to find support. (For more, see Technical Analysis: Introduction.)

Charts courtesy of stockcharts.com

Have a Great Day!

By Joey Fundora

At the time of writing Joey Fundora did not own shares in any of the companies mentioned in this article.

Disclaimer…The subject matters expressed above is based purely on technical analysis and personal opinions of the writer. it is not a solicitation to buy or sell

Posted in Charts | 14 Responses

Simple Ways To Invest In Real Estate

By admin on October 7, 2011

Buying real estate is about more than just finding a place to call home. Investing in real estate has become increasingly popular over the last fifty years and has become a common investment vehicle. Although the real estate market has plenty of opportunities for making big gains, buying and owning real estate is a lot more complicated than investing in stocks and bonds. In this article, we’ll go beyond buying a home and introduce you to real estate as an investment.�

Basic Rental Properties
This is an investment as old as the practice of landownership. A person will buy a property and rent it out to a tenant. The owner, the landlord, is responsible for paying the mortgage, taxes and costs of maintaining the property. Ideally, the landlord charges enough rent to cover all of the aforementioned costs. A landlord may also charge more in order to produce a monthly profit, but the most common strategy is to be patient and only charge enough rent to cover expenses until the mortgage has been paid, at which time the majority of the rent becomes profit. Furthermore, the property may also have appreciated in value over the course of the mortgage (according to the U.S. Census Bureau, real estate has consistently increased in value since 1940), leaving the landlord with a more valuable asset. (To learn more, read Paying Off Your Mortgage and Understanding Your Mortgage.)

There are, of course, blemishes on the face of what seems like an ideal investment. You can end up with a bad tenant who damages the property or, worse still, end up having no tenant at all. This leaves you with a negative monthly cash flow, meaning that you might have to scramble to cover your mortgage payments. There is also the matter of finding the right property – you will want to pick an area where vacancy rates are low (due to demand) and choose a place that people will want to rent.

Perhaps the biggest difference between a rental property and other investments is the amount time and work you have to devote to maintaining your investment. When you buy a stock, it simply sits in your brokerage account and (hopefully) increases in value. If you invest in a rental property, there are many responsibilities that come along with being a landlord. When the furnace stops working in the middle of the night, it’s you who gets the phone call. If you don’t mind handyman work, this may not bother you; otherwise, a professional property manager would be glad to take the problem off your hands – for a price, of course. (For further reading, see Tips For The Prospective Landlord.)

Real Estate Investment Groups
Real estate investment groups are sort of like small mutual funds for rental properties. If you want to own a rental property, but don’t want the hassle of being a landlord, a real estate investment group may be the solution for you. A company will buy or build a set of apartment blocks or condos and then allow investors to buy them through the company (thus joining the group). A single investor can own one or multiple units (self-contained living space), but the company operating the investment group collectively manages all the units - taking care of maintenance, advertising vacant units and interviewing tenants. In exchange for this management, the company takes a percentage of the monthly rent.

There are several versions of investment groups, but in the standard version, the lease is in the investor’s name and all of the units pool a portion of the rent to guard against occasional vacancies, meaning that you will receive enough to pay the mortgage even if your unit is empty. The quality of an investment group depends entirely on the company offering it. In theory, it is a safe way to get into real estate investment, but groups are vulnerable to the same fees that haunt the mutual fund industry. Once again, research is the key.

Real Estate Trading
This is the wild side of real estate investment. Like the day traders who are leagues away from a buy-and-hold investor, the real estate traders are an entirely different breed from the buy-and-rent landlords. Real estate traders buy properties with the intention of holding them for a short period of time (often no more than three to four months), whereupon they hope to sell them for a profit. This technique is also called flipping properties and is based on buying properties that are either significantly undervalued or are in a very hot market.

Pure property flippers will not put any money into a house for improvements – the investment has to have the intrinsic value to turn a profit without alteration or they won’t consider it. Flipping in this manner is a short-term cash investment. If a property flipper gets caught in a situation where he or she can’t unload a property, it can be devastating because these investors generally don’t keep enough ready cash to pay the mortgage on a property for the long term. This can lead to continued losses for a real estate trader who is unable to offload the property in a bad market.

A second class of property flipper also exists. These investors make their money by buying reasonably priced properties and adding value by renovating them. This can be a longer-term investment depending on the extent of the improvements. The limiting feature of this investment is that it is time intensive and often only allows investors to take on one property at a time.

REITs
Real estate has been around since our cave-dwelling ancestors started chasing strangers out of their space, so it’s not surprising that Wall Street has found a way to turn real estate into a publicly-traded instrument. A real estate investment trust (REIT) is created when a corporation (or trust) uses investors’ money to purchase and operate income properties. REITs are bought and sold on the major exchanges just like any other stock. A corporation must pay out 90% of its taxable profits in the form of dividends to keep its status as an REIT. By doing this, REITs avoid paying corporate income tax, whereas a regular company would be taxed its profits and then have to decide whether or not to distribute its after-tax profits as dividends.

Much like regular dividend-paying stocks, REITs are a solid investment for stock market investors that want regular income. In comparison to the aforementioned types of real estate investment, REITs allow investors into non-residential investments (malls, office buildings, etc.) and are highly liquid – in other words, you won’t need a realtor to help you cash out your investment. (For further reading, check out What Are REITs?, Basic Valuation Of A Real Estate Investment Trust (REIT) and The REIT Way.)

Leverage
With the exception of REITs, investing in real estate gives an investor one tool that is not available to stock market investors: leverage. If you want to buy a stock, you have to pay the full value of the stock at the time you place the buy order. Even if you are buying on margin, the amount you can borrow is still much less than with real estate. Most “conventional” mortgages require 25% down. However, depending on where you live, there are many types of mortgages that require as little as 5%. This means that you can control the whole property and the equity it holds by only paying a fraction of the total value. Of course, your mortgage will eventually pay the total value of the house at the time you purchased it, but you control it the minute the papers are signed.

This is what emboldens real estate flippers and landlords alike. They can take out a second mortgage on their homes and put down payments on two or three other properties. Whether they rent these out so that tenants pay the mortgage or they wait for an opportunity to sell for a profit, they control these assets despite having only paid for a small part of the total value. (For more on taking out a second mortgage, read The Home-Equity Loan: What It Is And How It Works and Home-Equity Loans: The Costs.)

Conclusion
We have looked at several types of real estate investment. However, as you might have guessed, we have only scratched the surface. Within these examples there are countless variations of real estate investments. As with any investment, there is much potential with real estate, but this does not mean that it is an assured gain. As with any investment, make careful choices and weigh out the costs and benefits of your actions before diving in.

by Andrew Beattie

Andrew Beattie is a former managing editor and longtime contributor at Investopedia.com. He operates the Wandering Wordsmith blog, and can be reached there.

Source: www.investopedia.com

Disclaimer…The subject matters expressed above is based purely on technical analysis and personal opinions of the writer. it is not a solicitation to buy or sell.

Posted in Uncategorized | 4 Responses

Commodity Prices And Currency Movements

By admin on September 15, 2011

Predicting the next move in the markets is the key to making money in trading, but putting this simple concept into action is much harder than it sounds. Professional forex traders have long known that trading currencies requires looking beyond the world of FX. The fact is that currencies are moved by many factors – supply and demand, politics, interest rates, economic growth, and so on. More specifically, since economic growth and exports are directly related to a country’s domestic industry, it is natural for some currencies to be heavily correlated with commodity prices. The top three currencies that have the tightest correlations with commodities are the Australian dollar, the Canadian dollar and the New Zealand dollar. Other currencies that are also impacted by commodity prices but have a weaker correlation are the Swiss franc and the Japanese yen. Knowing which currency is correlated with what commodity can help traders understand and predict certain market movements. Here we look at currencies correlated with oil and gold and show you how you can use this information in your trading. (For background reading, see The Most Popular Forex Currencies.)

Tutorial: Top 10 Forex Trading Rules

Oil and the Canadian Dollar
Over the past few years, the price of commodities has fluctuated significantly. Oil, for example, surged from $60 a barrel in 2006 to a high of $147.27 a barrel in 2008 before plummeting back below $40 a barrel in the first quarter of 2009 and rising to above $80 in 2011. Similar volatility can be seen in the price of gold, which hit $1600 an ounce in June 2011 and then a new high of over $1,800 an ounce a few months later in August 2011. With many countries around the world in recession, the trend of commodity prices can mean the difference between a deeper downturn and a faster recovery. Knowing which currencies are affected by what commodities will help you make more educated trading decisions. (Find out how the everyday items you use can affect your investments in Commodities That Move The Markets.)

Oil is one of the world’s basic necessities – at least for now, most people in developed countries cannot live without it. In February 2009, the price of oil was nearly 70% below its all-time high of $147.27 set on July 11, 2008. A decline in oil prices is a nightmare for oil producers, while oil consumers enjoy the benefits of greater purchasing power. This is a complete 180-degree change from the situation at the beginning of 2008, when record-high oil prices put a big smile on the faces of oil producers while forcing oil consumers to pinch pennies. There are a number of reasons to explain the fall in oil prices, including a stronger dollar (oil is priced in dollars) and weaker global demand. As a net oil exporter, Canada is severely hurt by declines in oil, while Japan – a major net oil importer – tends to benefit.

Between the years 2006-2009, for example, the correlation between the Canadian dollar and oil prices was approximately 80%. On a day-to-day basis, the correlation can break, but over the long term it has been strong because the value of the Canadian dollar has good reason to be sensitive to the price of oil. Canada is the seventh-largest producer of crude oil in the world and continues to climb up the list, with production in oil sands increasing regularly. In 2000, Canada surpassed Saudi Arabia as the United States’ most significant oil supplier. Unbeknownst to many, the size of Canada’s oil reserves is second only to those in Saudi Arabia. The geographical proximity between the U.S. and Canada, as well as the growing political uncertainty in the Middle East and South America, makes Canada one of the more desirable places from which the U.S. can import oil. But Canada does not service only U.S. demand. The country’s vast oil resources are beginning to get a lot of attention from China, especially since Canada stumbled upon a new stash of oil after a reclassification of its Alberta oil sands to the “economically recoverable” category. (Read more in Peak Oil: What To Do When The Wells Run Dry.)

Figure 1 shows the clearly positive relationship between oil and the Canadian loonie. In fact, it should come as no surprise that the price of oil actually acts as a leading indicator for the price action of the CAD/USD. Since the traded instrument is the inverse, or USD/CAD, it’s important to note that based on the historical relationship, when oil prices go up, USD/CAD falls and when oil prices go down, USD/CAD rises.

cad usd, canadian dollar, oil, commodity

Figure 1: A look at the correlation between the price of oil and the price action in
the CAD/USD from January 2005 to March 2009

Source: FXCM

Oil and the Japanese Economy
At the other end of the spectrum is Japan, which imports nearly all of its oil (compared to the U.S., which imports approximately 50%). As of 2011, it is the world’s third-largest net oil importer behind the U.S. and China. Japan’s lack of domestic sources of energy, and its need to import vast amounts of crude oil, natural gas and other energy resources, make it particularly sensitive to changes in oil prices. Japan also lacks the flexibility to switch to nuclear power because it is a huge net importer of uranium for its nuclear power plants. As of 2008, the country’s dependence on imports for primary energy stood at more than 84%. Oil provided Japan with 49% of its total energy needs, coal with 20%, nuclear power 13%, natural gas 14%, hydroelectric power 3% and renewable sources a mere 1%. Therefore, when oil prices skyrocket, the Japanese economy suffers. (Hedge against rising energy prices and diversify your portfolio; read ETFs Provide Easy Access To Energy Commodities.)

An Attractive Oil Play: CAD/JPY
Looking at this from a net oil exporter/importer perspective, the currency pair that tops the list of currencies to trade to express a view on oil prices is the Canadian dollar against the Japanese yen. Figure 2 illustrates the tight correlation between oil prices and CAD/JPY. More often than not, oil prices tend to be the leading indicator (as with USD/CAD) for CAD/JPY price action with a noticeable delay. As oil prices continued to fall during this period, CAD/JPY broke the 100 level to hit a low of 76.

cad jpy, canadian dollar, yen, oil, commodity

Figure 2: A look at the correlation between the price of oil and the price action in the CAD/JPY from January 2005 to March 2009

Source: FXCM

Going for Gold
Gold traders may also be surprised to hear that trading the Australian dollar is just like trading gold in many ways. As the world’s third-largest producer of gold, the Australian dollar had an 84% positive correlation with the precious metal between 1999 and 2008. Generally speaking, this means that when gold prices rise, the Australian dollar appreciates as well. The proximity of New Zealand to Australia makes Australia a preferred destination for exporting New Zealand goods. Therefore, the health of New Zealand’s economy is closely tied to the health of the Australian economy, which explains why the NZD/USD and the AUD/USD have had a 96% positive correlation over the same time period. The correlation of the NZD/USD with gold is slightly less than that of the Australia dollar but is still strong at 78%.

nzd usd, new zealand dollar, gold, commodity

Figure 3: A look at the correlation between the price of gold and the price action in the NZD/USD from January 2005 to March 2009

Source: FXCM

A weaker, but still important, correlation is that of gold prices and the Swiss franc. The country’s political neutrality and the fact that its currency used to be backed by gold have made the franc the currency of choice in times of political uncertainty. From January 2006 until January 2009, USD/CHF and gold prices had a 77% positive correlation. However, the relationship broke down somewhat in September 2005 as the U.S. dollar decoupled from gold price movements. (For further reading, see The Gold Standard Revisited and What Is Wrong With Gold?)

Trading Currencies as a Supplement to Trading Oil or Gold
For seasoned commodity traders, it may also be worthwhile to look at trading currencies as an alternative or a supplement to trading commodities. In addition to being able to capitalize on a similar outlook (e.g. higher oil), traders may also be able to earn interest if they are on 2% margin or higher with most brokers. When trading currencies, you are dealing with countries, and countries have interest rates, of course. For example, a trader who may have bought the AUD/USD in March 2009 would be able to earn up to 3% in interest income if Australian interest rates remained at 3.25% and U.S. interest rates remained at 0.25% for the entire year. The 3% comes from taking Australia’s central bank rate, which is the amount earned, and subtracting the nearly 0% rates paid for shorting the U.S. dollar. These are unleveraged rates, which mean that with 10 times leverage, for example, net of any exchange rate changes, the interest income would be that much higher. Leverage also makes the trade riskier, which means that if the trade turns against you, losses will be larger.

Along the same lines, if you shorted AUD/USD to express a short gold view, you would end up paying interest. If you’re a commodity trader looking for a bit of a change from the usual pro gold trade (for example), commodity currencies such as the AUD/USD and NZD/USD provide good opportunities worth looking into.

Conclusion
If you want to trade commodity currencies, the best way to use commodity prices in your trading is to always keep one eye on movements in the oil or gold market and the other eye on the currency market to watch how quickly it responds. Due to the slightly delayed impact of these movements on the currency market, there is generally an opportunity to overlay a broader movement that is happening in the commodity market to that of the currency market. Bottom line: It never hurts to be more informed about commodity prices and how they drive currency movements. (For more insight, read The Currency Market Information Edge and Forex: Wading Into The Currency Market.)

Source :

by Kathy Lien, <br>FREE Forex Report – <a href=”http://www.investopedia.com/forex/five-things-that-move-currency-market/land1.aspx?ad=2903″>The 5 Things That Move The Currency Market</a>

Kathy Lien is an internationally published author and the director of currency research at FX360.com, the research arm of GFT. Her trading books include: “Day Trading the Currency Market: Technical and Fundamental Strategies to Profit form Market Swings” (2005);
“High Probability Trading Setups for the Currency Market” E-Book (2006); “Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game” (2007)

Lien also runs an FX Signal Service, BKForex Advisor, with Boris Schlossberg – one of the few investment advisory letters focusing strictly on the $2 trillion/day FX market.

Disclaimer…The subject matters expressed above is based purely on technical analysis and personal opinions of the writer. it is not a solicitation to buy or sell.

Posted in Uncategorized | 17 Responses

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