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Jeff Cooper calls them Tails.
Here are some notes from my trading diary.
May help, the next time Elvis is sighted.
Bearish Reversals of the type seen in Apple Computer 2 weeks ago are
widespread today. Apple chart attached from that day, and new chart
as of 4/12 close.
Lately these have been good fodder for the bears.
Here are a few recent example signals of exactly the same pattern from my
trading notes. Those interested can look at free charts on BigCharts or
LiveCharts.
Gap up open, higher high (often a new high to trap the breakout canslim
types) and then a sharp reversal into the close on heavier volume (relative
to prior day) which follows through - in some cases, for weeks.
12/14 America Online AOL
12/30 Microsoft MSFT
01/10 America Online AOL (not a new high bar but all other price-volume
characteristics met)
02/04 The Gap Stores GPS
03/03 Sun Microsystems SUNW
03/06 Texas Instruments TXN
03/07 Motorola MOT
03/08 May Heating Oil (HO K0) also a wide range outside day reversal
03/22 Dell Computer DELL
03/23 Apple Computer AAPL
03/24 Chase Manhattan Bank CMB
03/27 Cisco Systems CSCO (also a low histvol reversal)
03/28 Sun Microsystems SUNW (also a wide range outside day reversal bar in
low histvol)
04/04 Bank of America BAC
04/06 IBM, IBM
04/10 Cisco Systems CSCO (also a wide range outside day reversal bar)
04/10 Sun Microsystems SUNW (also an outside day with a down close)
This list is not because I trade only tech - but it shows that signals tend
to cluster together for like businesses (eg Dell and Apple, Cisco and Sun,
Motorola and TI on simultaneous days etc).
So the occurrence of one such tail makes me watch that company's competitors
actively for similar setups over the next couple of days.
Today's closing signals are likewise clustered.
They trigger short entries tomorrow on trade below today's lows, with a $1
money management stop above today's midpoint:
Financials:
Citibank, on heavier volume.
Chase Manahattan, on heavier volume.
AIG, on heavier volume.
Retailers:
Wal Mart, on heavier volume
Home Depot, on twice average daily volume.
Liz Claiborne, on heavier volume.
Indices:
Dow Jones, volume not verified.
Looks like the distribution of "value" or "old economy" or "currently
favored momentum" has begun in the earnest.
And the tech party goes on as the last holdouts slice thru their 50 day emas
on rising volume and wide range bars.
Examples are CSCO, INTC, EMC.
I wonder what bullish picture the media will paint today. The Motorola
coverage left me totally confused since I tend to watch CNBC only late
nights or early AMs. The way they were pushing "Motorola up $2 in after
hours" the evening of the announcement made me laugh. They were using a
"special" closing price where no trades were done.
Ah well.
Bullishly, when the faves get thrown to the lions is when we've recently
(past 3 years) been closer to bottoms than tops. The faves being the Intels,
Cisco, EMCs of the world. These have brief 3-4 day selloffs, measuring
between 20% and 29% from top to bottom - but by then most of the damage
elsewhere is done.
That, for me, would be capitulation.
Its amazing how clearly the market speaks, sometimes.
Gitanshu
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