Stock Forex Market Trading Blog, Daily Trading Blogs for Traders

NobleTrading Market Update, February 8, 2010

noreply@blogger.com (NobleTrading) — Mon, 08 Feb 2010 14:21:00 +0000

The Week Ahead: The markets continued a four week slide, but began to rebound from a low point reached after the employment report was digested showing a still deeply damaged job market. Tech stocks led the way off the low. A relatively quiet reporting period could provide a respite for stocks. Watch Tuesday's Wholesale Trade Inventories, Thursday's Retail Sales and Business Inventories, and Friday's University of Michigan's Consumer Sentiment reading.

Stocks to Watch: Auto parts makers were weak compared to the indexes after American Axle & Manufacturing (AXL) provided a disappointing outlook for the year in their Q4 earnings release. TRW Automotive (TRW), Dana Holding (DAN), and Arvinmeritor (ARM) all fell in sympathy. Airgas (ARG) soared to nearly an all time high after a $60 cash tender offer by rival Air Products (APD) which correspondingly dropped. Key earnings reports come from Disney (DIS), Coca Cola (KO), and Pepsi (PEP) later this week.

Special Note: If a near term rebound is starting, then an upside resistance target would be an internal long term trend line on the Dow Industrials that was broken in 2008 at the 9600 level. A steep sell off occurred after to the March '09 low of 6670. The 10 1/2 month rebound retested this line now at the 10,400 level for this year. Having brief success pushing through this resistance in early January, the DOW has once again smashed through this line on increasing volume. An upward push to retest this resistance line (similar to the retest in October '08) would be normal before the bear trend resumed.

Market commentary provided by Barry Ward, registered principal, NobleTrading.com, Inc.

Check out NobleTrading's new earnings calendar, upgrades and downgrades, and analyst coverages.

Click Here To Open An Account

NobleTrading Direct Access Trading

NobleTrading.com Offers Online Stock Trading, Online Options Trading
Stock Trading, Stock Market Trading,
Online Futures Trading, Online Forex Trading
Worldwide Brokerage Service, Day Trading Brokerage

How Dogs of the Dow Works?

noreply@blogger.com (NobleTrading) — Fri, 05 Feb 2010 13:00:00 +0000

Dogs of the Dow investing strategy tries to beat normal market returns via a passive investing strategy that takes only a little time. Although it is regarded as a contrarian investing strategy where investors move against the market, it is not like that always. A Dogs of the Dow investor simply invests equal amounts of money in 10 Dow Johns Industrial Average stocks having the highest dividend yield at the start of a year.

The Dogs of the Dow strategy holds that the high dividend ratio of a stock indicates that the stock is cheap (oversold), and the faith of the company management on the company's future performance. Thus investing in them holds a dual benefit: the above average price increases once the market realizes the true potential of the stock, and relatively high dividend yield. With dogs, there is no need of extensive market understanding or technical analysis. The steps involved in the strategy are,

After the market close of the last day of the year, 10 stocks with the highest dividend yield are identified from 30 DJIA stocks. Now there are many sites/resources which provide this list.
The investor invests equal amounts of money in each stock.
At the start of the next year the same process is repeated.
Selling of old stocks and buying new, investors can sell off those stocks that are out of the Dogs list and buy those that have got into the list.
The investor should sell-off the stocks they are holding after one year and one day; thus he can qualify for long-term capital gain tax benefits.

Now there are some variations of the Dogs of the Dow strategy available for getting certain custom benefits. Besides, it is not mandatory to readjust the portfolio on the first day of each year.

NobleTrading.com Offers Online Stock Trading, Online Options Trading
Stock Trading, Stock Market Trading,
Online Futures Trading, Online Forex Trading
Worldwide Brokerage Service, Day Trading Brokerage

Bearish Ladder Top Pattern

noreply@blogger.com (NobleTrading) — Thu, 04 Feb 2010 13:08:00 +0000

Ladder top is a bearish trend-reversal pattern indicating the reversal of an existing uptrend. It is a five candlestick pattern which is less popular than bullish ladder bottom pattern and is somewhat similar to bearish deliberation candlestick pattern. Bearish ladder top is a moderately reliable pattern.

The requirements of bearish ladder top pattern include,

The pattern should form at the top of a strong uptrend.
The first three days are bullish days noticeable with long white/colorless candlesticks that close above the previous ones. This formation is similar to three white soldiers pattern which is bullish and formed at the bottom of a downtrend.
The fourth day is also bullish with a small real-body candlestick with a long lower shadow; it is a hanging man candlestick.
The fifth day is a bearish day, noticeable with a long bearish (dark or colored) candlestick which opens below the real-body of the fourth day candlestick.

Ladder top candlestick formation occurs when bulls lose control over the markets. The bullish candlestick on the first three days indicates that the bulls are controlling the market but the hanging man candlestick creates doubts on their minds. Traders start to sell-off their positions but the increased buying activity at the end of the day helps to close the day on a new high. The bearish candlestick on the fifth day indicates that the bears are taking control of the market and a new downtrend is beginning.

With ladder top candlestick pattern, trades should wait till the price crosses the low of the fifth candlestick.

NobleTrading.com Offers Online Stock Trading, Online Options Trading
Stock Trading, Stock Market Trading,
Online Futures Trading, Online Forex Trading
Worldwide Brokerage Service, Day Trading Brokerage

Trading with Linear Regression Curve

noreply@blogger.com (NobleTrading) — Wed, 03 Feb 2010 13:32:00 +0000

Linear regression curve is a useful indicator created on the basis of linear regression. It is a curve line that best fits the prices of a time period. In short it can be considered as small linear regression trendlines with hidden ends that are connected to one another at their center portions or can be taken as a moving average of linear regression trendlines. For a better understanding, also read linear regression channels.

Linear regression curve gives the fair value of the stock or other security. This can be used to easily identify long-term and short term price trends, and price deviations. With linear regression curve, traders can use custom time periods to get custom signals. Traders can also generate trading signals.

Signals can be generated when price moves a certain percentage away from the curve. Buy signals can be generated when price moves some points below the linear regression curve and sell signals when it moves above the curve. The idea is that the price will eventually return to the curve (fair value).
Traders can also time their trades. Buy signals can be generated in a good uptrend only when the price moves below the curve. Similarly sell signals can be generated in a downtrend when the price moves above the curve.

Like most other indicators, linear regression curve gives better results when used in conjunction with other indicators.

NobleTrading.com Offers Online Stock Trading, Online Options Trading
Stock Trading, Stock Market Trading,
Online Futures Trading, Online Forex Trading
Worldwide Brokerage Service, Day Trading Brokerage

Benefits of Exchange Traded Grantor Trusts

noreply@blogger.com (NobleTrading) — Tue, 02 Feb 2010 13:27:00 +0000

Although traded like exchange traded funds, grantor trusts differ greatly from ETF in their portfolio management and performance. They offer many advantages over ETFs but also have many disadvantages; and thus are not suitable for all types of traders. For a better understanding, read Grantor Trust Exchange Traded Funds.

Advantages of Exchange Traded Grantor Trusts

They let you invest in specific commodities without buying futures contracts or owning the commodity.
They directly distribute dividends. Shareholders will receive dividends immediately after a stock in the portfolio pays dividends.
They have low expense ratios because there is no expense involved in rebalancing or managing the portfolio.
The shareholders also retain the voting rights for companies' stocks held in the basket.
They let you invest in specific sectors or markets for a long term without many additional expenses.
They are tax efficient because the portfolio is fixed. Investors can time their taxes by timing the selling of shares.

Disadvantages of Exchange Traded Grantor Trusts

The fixed portfolio can be a problem. As they track commodities/specific sector stocks, there is more downside risk.
Overtime mergers and acquisitions can make the portfolio more concentrated towards a specific stock.
Dividends are not reinvested, limiting the chances of maximizing the profit opportunities.
Many grantor trusts operate for a fixed time and have a limited life.
As the portfolio is fixed, they are not suitable for short-term and market timing strategies.

NobleTrading.com Offers Online Stock Trading, Online Options Trading
Stock Trading, Stock Market Trading,
Online Futures Trading, Online Forex Trading
Worldwide Brokerage Service, Day Trading Brokerage

NobleTrading Weekly Newsletter, February 1, 2010

noreply@blogger.com (NobleTrading) — Mon, 01 Feb 2010 14:29:00 +0000

The Week Ahead: Strong GDP numbers and rising consumer sentiment were not enough to prevent a 3.5% decline for the month of January. This is the markets worst month since last February and bears watching closely from here. Investors will sift through 3 reports on Monday: Construction spending, Personal Income, and the ISM Manufacturing Index. On Tuesday auto sales and pending home sales are reported while the main report on Wednesday is the ISM Non-Manufacturing Index. A productivity report and factory orders is due Thursday, but the main event is Friday's jobs report.

Stocks to Watch: Berkshire Hathaway (BRKB) rose to a new 52 week high after its historic stock split and addition to the S&P 500. Gannett CO. (GCI) the newspaper publisher reported ad revenue declining but is looking for a strong political ad season with big elections later this year and upbeat auto ad revenue as well. Arch Coal (ACI) broke down sharply on a disappointing 2010 guidance. Sandisk (SDNK) likewise broke sharply lower after its earnings report. Look for Exxon Mobile (XOM) to report Monday and Cisco (CSCO) on Wednesday.

Special Note: The three major indexes DJIA, S&P 500, and Nasdaq all broke through and closed below there 5 month moving averages on expanding volume. The volatility has clearly picked up. The 10 month moving average currently rising through 9450 on the DOW usually acts like a magnet for prices after the 5 month average is breached. Despite near term bounces, the area surrounding the mid 9000's could be the next area of support for a more substantial rally. Incidentally, foreign currencies and commodities including gold have all fallen sharply the last two months as stocks play catch up.

Market commentary provided by Barry Ward, registered principal, NobleTrading.com, Inc.

Check out NobleTrading's new earnings calendar, upgrades and downgrades, and analyst coverages.

Click Here To Open An Account

NobleTrading Direct Access Trading

NobleTrading.com Offers Online Stock Trading, Online Options Trading
Stock Trading, Stock Market Trading,
Online Futures Trading, Online Forex Trading
Worldwide Brokerage Service, Day Trading Brokerage

Mutual Funds - Advantages and Disadvantages

noreply@blogger.com (NobleTrading) — Fri, 29 Jan 2010 15:31:00 +0000

Since their introduction, mutual funds have been a very popular investing vehicles; especially for those who do not have time, enough resources and knowledge for active trading.

Advantages of Mutual Funds

Diversification: a typical mutual fund invests in 50 to 300 securities and thus has reduced overall portfolio risk. Generally, this level of diversification at individual levels needs huge amounts of money.
Portfolio management: by investing in a good mutual fund, you are actually hiring some professional portfolio managers to look after your portfolio. They buy and sell stocks and make necessary portfolio adjustments for you.
Easy to handle: mutual funds are relatively easy to buy and sell. They have low minimum investments like $2,500 or $5,000 and can be traded once per day at the closing net asset value of NAV.
Dividend reinvestment: the income from the funds can be used to purchase more shares of the fund.

Disadvantages of Mutual Funds

Not suitable for active traders: The facts that they are traded once per day as per NAV and have some sales charges make them unsuitable for active trading.
High expense ratios: mutual funds typically have higher expense ratio than index funds and ETFs. More over the fees including in buying and selling them can make them less profitable.
Management issues: the performance of the fund manager greatly determines the performance of the fund. Thus unnecessary trades, wrong market timings and poor replacements can affect fund performance.
Taxes: the capital gains from mutual fund investments are usually subjected to taxes at individual level.

NobleTrading.com Offers Online Stock Trading, Online Options Trading Stock Trading, Stock Market Trading,Online Futures Trading, Online Forex Trading Worldwide Brokerage Service, Day Trading Brokerage

Williams %R Indicator

noreply@blogger.com (NobleTrading) — Thu, 28 Jan 2010 13:46:00 +0000

Williams %R, or simply just %R, is a momentum indicator popularly used by traders to find overbought and oversold levels. The indicator is similar to the %K of Stochastic Oscillator; the difference is that %R compares close to the highest high of a period opposing the lowest low as in stochastic oscillator. The formula is,

Williams %R = [{Close(t) - High(n) } / {High(n) - Low (n) } ] * 100

Where 't' represents today and n represents the number of periods.

Unlike most other indicators, Williams %R indicator has a negative scale; the values range from 0 (highest value) to -100 (lowest value). A close nearer to the highest high period will take the indicator nearer to 0 (overbought) and a close nearer to the lowest low of the period will take the indicator nearer to -100 (oversold). The typical period is 14, but traders can adjust it to make the indicator more or less sensitive.

Generally, values ranging from 0 to -20 are considered overbought and those from -80 to -100 are considered oversold. But often overbought does not mean it's the time to sell, or oversold does not mean it's the time to buy, because in strong trends the prices can remain in one range for an extended period of time. Traders should trade in the direction of the trend. During the periods of strong uptrend, traders can buy when the indicator falls to oversold values; and during strong downtrends, traders can short when the indicator shows overbought readings. Bullish and bearish divergences are also good signals, crossing of -50 from below or above.

NobleTrading.com Offers Online Stock Trading, Online Options Trading
Online Futures Trading, Online Forex Trading
Worldwide Brokerage Service, Day Trading Brokerage

Bond Unit Investment Trusts

noreply@blogger.com (NobleTrading) — Tue, 26 Jan 2010 13:24:00 +0000

Bond unit investment trusts or bond UITs are one of the two types of UITs holding bonds in their portfolio. They invest in government and corporate bonds and shares are made available to the investors. The shares, termed units, are fixed in number and represent a small fixed portion of a large diversified portfolio. To know more, read 'Unit Investment Trusts or UITs'.

Different bond unit investment trusts have different portfolio combinations. Some invest in government bonds, some in corporate bonds and others in both. Some trusts invest their money in domestic bonds; others also invest in foreign bonds. Some invest more in tax-exempt bonds and others in taxable bonds. Thus the risk and return differs considerably and investors can choose whichever suits their goals.

Bond UITs have a fixed portfolio and a fixed maturity date ranging from just some months to over 25 years. The maturity date usually corresponds to the maturity date of the bonds invested. Payments are made monthly, quarterly or semi-annually. The principal is paid off to the investors as the bonds mature. Investors can also sell their units in secondary markets at market price prior to the bond UIT maturity date.

Bond UITs are good long-term investment options. The advantages include fixed and predictable income, some tax advantages, highly diversified investment, low minimum investment, no maintenance fees, etc. The downsides include: they are not suitable for short-term investments, no outperformance, and not suitable for investing the urgent money.

NobleTrading.com Offers Online Stock Trading, Online Options Trading
Online Futures Trading, Online Forex Trading
Worldwide Brokerage Service, Day Trading Brokerage

NobleTrading Weekly Update, January 25, 2010

noreply@blogger.com (NobleTrading) — Mon, 25 Jan 2010 15:44:00 +0000

The Week Ahead: Ben Bernanke's confirmation for a second term is losing some support by key Senators but may not be enough to block his second term approval this week. The Fed will hold a two day meeting starting Tuesday culminating in a interest rate decision on Wednesday afternoon. On Monday existing home sales will be released followed by Tuesday's Consumer Confidence report. Wedenesday brings new home sales data. Thursday look for the Durable Goods report. Friday the market gets a peak at the advanced Q4 GDP number for the economy.

Stocks to Watch: Apple Computer (AAPL) will announce earnings after the close on Monday and may introduce a tablet computer, but the stock did break below its 50 day moving average on increasing volume. Texas Instruments (TXN) will also announce at Monday's close as semiconductors have generally been weaker than other tech stocks. Harley Davidson (HOG) is searching for growth oversees in India as a year or more slowdown is expected before a turnaround. Exelon (EXC) declined on a Q4 earnings fall versus a year ago and worries that climate legislation could be in doubt.

Special Note: After reaching new 2010 highs last Tuesday, the Dow Industrials gave up 2 1/2 months worth of gains by Friday. This change of character was confirmed by the weekly MACD indicator as a crossover of the indicators two moving averages to the downside occurred for the first time since a buy signal crossover to the upside last March. The volatility should bring enhanced trading opportunities, but with a sell signal given rally's may be cut short abruptly as investors look to lock in profits from the past year.

Check out NobleTrading's new earnings calendar, upgrades and downgrades, and analyst coverages.

Click Here To Open An Account

NobleTrading Direct Access Trading

NobleTrading.com Offers Online Stock Trading, Online Options Trading
Online Futures Trading, Online Forex Trading
Worldwide Brokerage Service, Day Trading Brokerage

Bearish Flag Chart Pattern

noreply@blogger.com (NobleTrading) — Thu, 21 Jan 2010 12:58:00 +0000

Bearish flag or bear flag is a bearish chart pattern formed in a strong bearish trend indicating the continuation of the downtrend after a small pause. This is considered as a highly reliable chart pattern and often formed in strong downtrends; in fact, one can often see more than one bear flag in a strong downtrend. Bearish flag pattern resembles bearish pennant chart formation, but here the price consolidation is between two parallel trendlines forming a rectangular flag shape as against converging to form a triangular or pennant shape.

A bear flag has two parts, a pole or mast, and a flag. The pole precedes the flag and is formed when the price sharply (near vertically) declines; usually because of some negative news/report or negative fundamentals. The flag is the price consolidation phase where the price moves within a short range. The flag can be either horizontal or slightly upwards; the second one more common. The formation then breaks out to continue the existing downtrend and the price is drawn to new lows.

Trading volume tends to decline during the formation of bearish flag pattern but the breakouts are noticeable with increase in trading volume. If there is no volume drop in flag formation or no volume rise in breakout, then the reliability of the pattern is greatly challenged. In addition, if the volume increases during flag formation rather than decreases, then there is also a chance of trend reversal. Traders can go short once the breakout is confirmed and the immediate price target should be the downward length of the pole from the breakout point.

NobleTrading.com Offers Online Stock Trading, Online Options Trading
Online Futures Trading, Online Forex Trading
Worldwide Brokerage Service, Day Trading Brokerage

Bullish Flag Chart Pattern

noreply@blogger.com (NobleTrading) — Wed, 20 Jan 2010 13:21:00 +0000

Bullish flag or bull flag is a bullish trend continuation chart pattern indicating the continuation of an existing bullish trend after a small pause. The pattern is a very reliable one and is highly welcomed by day traders and swing traders; in fact often one can see more than one bull flag in a strong uptrend. Bullish flag formation resembles bullish pennant chart pattern, but the difference is that here the price forms two parallel trendlines or a rectangular shape opposed to the price convergence in pennant formation.

The bullish flag formation has two components - a pole or mast, and the flag. The pole is formed when the price rises sharply to a new high; and is usually fundamentally triggered. The flag is the consolidation phase where the price rises and falls within a short range. The flags can be horizontal, formed because of strong support and resistance levels, but are often slightly declined. Then the prices breakout to continue the uptrend and the prices advance to new highs.

Volume tends to decline as the flag forms but the breakouts are noticeable with considerable rise in trading volume. If there is no significant volume increase in breakout, the reliability of the pattern is greatly challenged. The pattern usually stays for a short-term, and is usually completed within four weeks. Lengthier patterns are also less reliable. Traders can buy stocks once the prices breakout. The immediate target price can be the upward length of the pole from the breakout.

NobleTrading.com Offers Online Stock Trading, Online Options Trading
Online Futures Trading, Online Forex Trading
Worldwide Brokerage Service, Day Trading Brokerage

NobleTrading Weekly Newsletter, 19 January 2010

noreply@blogger.com (NobleTrading) — Tue, 19 Jan 2010 14:20:00 +0000

The Week Ahead: A fourth quarter earnings report from J.P. Morgan still left lingering doubts about an economic recovery as losses on credit cards and mortgages deepened and may be an indicator of future bank earnings to come. Key reports to watch are Wednesday's Producer Price Index and Housing Starts as well as Thursday's Jobless Claims figure and the Leading Indicators for the economy.

Stocks to Watch: Look for the rail stocks to report earnings such as CSX Corp. (CSX) on Tuesday while Union Pacific (UNP), and Burlington Northern (BNI) report on Wednesday. IBM will also report numbers this week. Johnson and Johnson (JNJ) was hit with an expanded product recall and was also accused of paying bribes to help sales of its anti-psychotic medicine. Leap Wireless (LEAP) shot up 10% on 4 times normal volume on rumors that the company may be for sale. Interactive Data (IDC) is also reviewing alternatives as its stock rose 14%.

Special Note: Friday's downturn was especially harsh coming on the heels of an upbeat Intel earnings report. The selling was broad based as evidenced by the advance/decline ratio and up volume versus down volume. Furthermore, the high on Thursday was not confirmed by the Nasdaq, Dow Transports, Dow Utilities, or the broader based Value Line and DJ Wilshire 5000. Look for the uptrend line that started from last March to be breached at approximately the 10525 level. If so, this would be real evidence of a trend change in the market.

Check out NobleTrading's new earnings calendar, upgrades and downgrades, and analyst coverages.

Click Here To Open An Account

NobleTrading
Direct Access Trading

NobleTrading.com Offers Online Stock Trading, Online Options Trading
Online Futures Trading, Online Forex Trading
Worldwide Brokerage Service, Day Trading Brokerage

Unit Investment Trusts or UITs

noreply@blogger.com (NobleTrading) — Mon, 18 Jan 2010 15:27:00 +0000

Unit Investment Trusts or UITs are investment companies which buy and hold a portfolio of stocks or bonds, and make their shares, termed 'units', available to investors. Like closed ended funds, UITs have a fixed number of units and have low management fees as the shares are not redeemed or created often. Like mutual funds, UITs have a portfolio of diversified investments like many corporate bonds or stocks.

Unit investment trusts are offered to investors via initial public offerings or IPOs, and have a typical price of $1,000 per unit. They are managed by either a RIC (Regulated Investment Trust) or a grantor trust. Many UITs allow investors to buy and sell the shares in secondary markets after the IPO. The portfolio is already defined and fixed; there is no buying or selling of portfolio assets after the portfolio creation. Thus the investment objective is kept intact and the management costs are kept to low levels. The only exception is that some portfolio adjustments may arise because of corporate mergers, acquisitions and bankruptcy.

Unit investment trusts have a fixed life span. For bond UITs it is usually the maturity date of the bonds in the portfolio. On the termination date, the remaining portfolio is dissolved and paid to the unit holders according to the number of units they hold. The advantages of investing in UITs include diversification, low maintenance costs and fixed portfolio. Before choosing unit investment trusts, investors should carefully consider the portfolio assets and invest in one which most fulfils one's investment objectives.

NobleTrading.com Offers Online Stock Trading, Online Options Trading
Online Futures Trading, Online Forex Trading
Worldwide Brokerage Service, Day Trading Brokerage

Economic Decoupling Theory - Present Status

noreply@blogger.com (NobleTrading) — Fri, 15 Jan 2010 13:46:00 +0000

The market performances of the past two years have shown that the widely popular 'Decoupling Theory of Emerging Markets' has proved to be wrong. As per the theory, the emerging economies, especially the BRIC economies, have broadened and deepened enough so that they were insulated from US recession. But in reality many of these economies were worse hit than the US economy during the recession period. For more in this regard, read decoupling theory of emerging markets.

Experts now come up with many reasons for the failure of the decoupling theory.

The theory was a premature one; and even the basic assumption was not all that right. Perhaps the emerging markets have not yet broadened and deepened enough to decouple.
Although the GDP growth for these nations has shown increase recently and new trade relationships have been developed, the US is still their primary trading partner. So decoupling from the US economy is not easy.
The popularity of decoupling theory itself tempted many US and developed nation investors to invest hugely in emerging markets. When investors withdraw their money, these economies shrink.
The proponents of the theory neglected the effect of one other major well performing theory - the theory of globalization, where one economy is tightly coupled to another.

One possible reason for the popularity of the theory was the good performance of emerging markets during the first phase of US recession where the economic slowdown was entirely domestic because of the crash in the housing sector.

NobleTrading.com Offers Online Stock Trading, Online Options Trading
Online Futures Trading, Online Forex Trading
Worldwide Brokerage Service, Day Trading Brokerage

Trading in a Choppy Market

noreply@blogger.com (NobleTrading) — Thu, 14 Jan 2010 12:43:00 +0000

Trading in choppy markets, where prices move up and down without any major trends, requires strategies different from those used while trading in trendy markets. The traditional buy and hold and long-term investment strategies may not be very profitable. To know more, read what is a choppy market?

Buy-low sell-high (buy support and sell resistance) is often the best strategy for choppy markets. Prices often go up and down without forming any major trends; traders can better explore small price differences by having high position sizes and utilizing leverage. Short selling can also be profitable; traders can sell high and buy low.
Trading with oscillator indicators can be a good strategy. Statistics shows that indicators like Relative Strength Index or RSI and Stochastic Oscillator offer better buy and sell signals in choppy markets than trending ones.
Long term traders and investors should limit their trades and invest after proper screening. More trades means more trading cost and less profit. Traders should do proper fundamental analysis before investing as shifting from one hot stock to another won't be a profitable strategy.
When trading in choppy markets, all types of traders should set small profit targets and strict stop-losses.

NobleTrading.com Offers Online Stock Trading, Online Options Trading
Online Futures Trading, Online Forex Trading
Worldwide Brokerage Service, Day Trading Brokerage

Bearish Pennant Chart Pattern

noreply@blogger.com (NobleTrading) — Wed, 13 Jan 2010 14:59:00 +0000

Bearish pennant is a bearish trend continuation chart pattern showing continuation of a prevailing downtrend after a short-term trend continuation. This chart formation is very similar to bearish flag formation, the difference is that in pennant, the consolidation phase after the pole is triangular or pennant shapes as against flag or parallel shapes in flag formation. Bearish pennant formation also resembles symmetrical triangle formation, descending triangle formation and rising wedge formation; but this is a shorter term pattern.

Bearish pennant pattern is formed when there is a consolidation phase, because of indecision in existing downtrend. The trend lines converge to form a pennant shape which then breakout to continue the downtrend. Like flag formation, the volume tends to decrease as the pattern develops. The breakout is noticeable with great increase in volume. The duration of the pattern can be 1 to 3 weeks.

Traders can go short after the confirmation of breakout. The target price should be the height of the pole from the breakout price. Bearish pennant chart formation is less reliable when there is no significant change in volume as the pattern forms, no increase in volume on breakout or when the pattern takes more than 4 weeks to develop. There is also a chance of trend reversal if there is an increase in volume rather than a decrease.

NobleTrading.com Offers Online Stock Trading, Online Options Trading
Online Futures Trading, Online Forex Trading
Worldwide Brokerage Service, Day Trading Brokerage

Advantages of Dogs of the Dow Strategy

noreply@blogger.com (NobleTrading) — Tue, 12 Jan 2010 13:04:00 +0000

Past performance statistics and simplicity has made Dogs of the Dow a favorite investing strategy for many investors. It can be regarded as an investing strategy with many merits and some demerits. To know more, read Dogs of the Dow investing strategy.

Advantages of Dogs of the Dow

It is a very simple investing strategy that doesn't need much market knowledge, data mining and technical analysis.
It is a passive investing strategy that requires very little time.
The strategy has less downside risk and good reward potential as one is investing in low priced stocks that constitute one third of DJIA in terms of number.
It removes fear, greed and anxiety from investing.
The strategy is also tax savvy and helps investors to get good quarterly dividends.
The strategy offers very good diversification, especially when it constitutes below 25% of a portfolio.
It minimizes the trading costs involved in investing.
The past history of the strategy is very good as most of the time the strategy has managed to beat the average early Dow return.

Disadvantages of Dogs of the Dow

The past performance of the strategy does not guarantee future performance.
The strategy is based on dividend yield, which is not a standard indicator like P/E ratio or price-to-book ratio.
Although not yet noticed, companies can adjust their dividends to get into or get out of the Dogs list. This can harm the strategy goals.
The strategy does not suit active traders/investors and it demands great patience.
Market cycles and economic changes can affect the returns.
As the strategy involves buying and selling at year start, the investors are not likely to benefit fully from interim price benefits.

NobleTrading.com Offers Online Stock Trading, Online Options Trading
Online Futures Trading, Online Forex Trading
Worldwide Brokerage Service, Day Trading Brokerage

NobleTrading Market Update, January 11, 2010

noreply@blogger.com (NobleTrading) — Mon, 11 Jan 2010 14:41:00 +0000

The Week Ahead: A busy economic calendar could bring many cross currents to stock prices after an upward advance in week one of the new year. After Tuesday's Trade Balance numbers, the Fed's Beige Book will be released on Wednesday. Retail sales figures will be closely watched on Thursday as well as Business Inventories in the post holiday season. Friday precedes a three day holiday weekend, but ends with the CPI report, Industrial Production, Capacity Utilization, and the Univ. of Michigan Consumer Sentiment survey.

Stocks to Watch: Earnings reports begin this week with Alcoa (AA) on Monday. Steel stocks: US Steel (X ), Ak Steel (AKS), Nucor (NUE), and Worthington Ind. (WOR) continued to accelerate on bullish analyst calls for a pick up in production on firming prices. Palm Inc. (PALM) announced at the Consumer Electronics Show that it will sell smart phones through Verizon Wireless and shot up 11% on 3 times normal volume. Best Buy (BBY), despite a 9% increase in consumer sales, sold off as mostly lower profit margin items were purchased.

Special Note: Seasonal bullish forces maintained the upper hand in stocks out of the gate in 2010 with the S&P 500 leading the way with 12 of the last 14 days advancing. Wall Street analysts and strategists at Barron's and Bloomberg are once again unanimous on the prospects for an up year despite the 60-80% advances off the March '09 lows for the major indices. This kind of complacency is already factored into the Volatility Index (VIX) which has already entered a major area of support meaning the risk for downside volatility is high.

Commentary provided by Barry Ward, Registered Principal, NobleTrading.com, Inc.

Check out NobleTrading's new earnings calendar, upgrades and downgrades, and analyst coverages.

Click Here To Open An Account

NobleTrading Direct Access Trading

NobleTrading.com Offers Online Stock Trading, Online Options Trading
Online Futures Trading, Online Forex Trading
Worldwide Brokerage Service, Day Trading Brokerage

What is a Choppy Market?

noreply@blogger.com (NobleTrading) — Fri, 08 Jan 2010 12:49:00 +0000

Choppy market is a market condition devoid of any clear direction or trend. The prices move up and down without forming any major trends. Choppy market is a term derived from the phrase choppy seas where the waves prevent the boats from moving large distances in a direction. Choppy markets can be formed due to many reasons like lack of any significant news or economic development, no significant changes in international relationships, stable politics/economy/rates/growths/etc.

Choppy markets usually occur after an extended bullish or bearish trend, and the prices remain on their high or low levels for an extended period of time without moving significantly higher or lower. The period of a choppy market can be from just a few weeks to even years. The phenomenon is more evident in specific sectors or stocks than a broad market.

Choppy markets are not the best times for investors and less-experienced traders to profit from the market; but are very good occasions for active traders who buy lower and sell high. The trading volume, the highest high, lowest low, day highs and lows, daily price ranges, etc can be used to find a good trading strategy. Choppy markets are also good for automated trading and for using various trading indicators. The lack of any significant trend can also help beginners to better educate themselves and test their trading strategies.

NobleTrading.com Offers Online Stock Trading, Online Options Trading
Online Futures Trading, Online Forex Trading
Worldwide Brokerage Service, Day Trading Brokerage

Bullish Ladder Bottom Pattern

noreply@blogger.com (NobleTrading) — Thu, 07 Jan 2010 13:51:00 +0000

Ladder bottom is a bullish trend-reversal pattern indicating the reversal of the existing downtrend. It is a five candlestick pattern which is somewhat similar to bullish concealing baby swallow pattern. Bullish ladder bottom is a moderately reliable pattern.

The requirements for the bullish ladder bottom pattern include,

The pattern should be formed at the bottom of a significant downtrend.
The first three days are noticeable with three long bearish (black/colored) candlesticks which close below the previous candlesticks. This formation is identical to three black crows candlestick pattern.
The fourth day is also bearish with a small real-body and long upper shadow; it is an inverted hammer candlestick.
The fifth day is a bullish day noticeable with a long bullish (white/colorless) candlestick which opens above the real-body of the fourth day candlestick.

Ladder bottom candlestick formation occurs when bears lose control over the existing downtrend. The bearish candlestick on the first three days indicates that the bears are controlling the market but the inverted hammer on the fourth day indicates that shorts are covering their positions and the trend is getting weak. The bullish candlestick on the fifth day indicates (a) the bulls have gained control over the market and (b) the beginning of a new uptrend.

The reliability of the Bullish ladder bottom pattern increases with increase in trading volume of fifth trading day, with higher closing of the fifth day candlestick and with significant reversal of previous downtrend. Before taking a position, traders should confirm the trend reversal which can be a bullish candlestick, a gap above opening or higher close on the next trading day.

NobleTrading.com Offers Online Stock Trading, Online Options Trading
Online Futures Trading, Online Forex Trading
Worldwide Brokerage Service, Day Trading Brokerage

Reducing Trading Costs with ECN Credits

noreply@blogger.com (NobleTrading) — Wed, 06 Jan 2010 14:32:00 +0000

Active traders can reduce and save their trading costs by slightly altering the entry and exit points, choosing the right order type and routing it to the right ECN. The strategy is widely followed by institutional traders; and retail traders can also practice that. Although the cost saving per trade can be low, it can add-up for a period.

Most of today's stock trading is done through Electronic Communication Networks or ECNs. Many ECNs offer credits to traders for adding liquidity and charge debit (fee) for removing liquidity. For example, ARCA offers 0.0023 ($2.3 for 1000 shares) credit for adding liquidity and the trading charge is 0.003 ($3 for 1000 shares) if the liquidity is removed. For a stock with ask and bid prices of $10.10 and $10.11 respectively, the trader gets credited when he sells at $10.11 or buys at $10.10 (for adding liquidity to the market), and debited when he sells at $10.10 and buys at $10.11. Now for a $5 per trade brokerage fee, the total charge for executing a trade is $2.7 ($5 - $2.3) if you received the ECN credit and is $8 ($5 + $3) if you have not received the ECN credit.

Different ECNs have different credit/debit structures and they also change it with time. Some ECNs do not charge for removing liquidity or they charge very low, making them ideal candidates if you want to trade by removing liquidity; and for trades that add liquidity you can use an ECN which offers high ECN credits. But focusing too much on ECN credits can harm your trades, especially on trending markets where traders cannot wait longer to 'get filled'. There are also many other trading fees which count in the total portfolio return.

NobleTrading.com Offers Online Stock Trading, Online Options Trading
Online Futures Trading, Online Forex Trading
Worldwide Brokerage Service, Day Trading Brokerage

Dogs of the Dow Investing Strategy

noreply@blogger.com (NobleTrading) — Tue, 05 Jan 2010 13:56:00 +0000

Dogs of the Dow is a very popular investing strategy that includes investing in 10 DJIA (Dow Johns Industrial Average) stocks with highest dividend yield at the start of a year. The portfolio is readjusted at the start of every year to include the 10 stocks with highest dividend yield; these stocks are known as the 'dogs'. Dogs of the Dow strategy was formulated in 1972 but was popularized by Michael O’Higgins in 1991 through his book 'Beating the Dow'.

Dogs of the Dow investing strategy aims at outperforming normal indexes like S&P 500 and Dow Johns itself. Looking at the history, most times the strategy outperformed the indexes by a healthy average. The period from 1973 to 1996 was most successful, when the dogs outperformed Dow by around 6%. The fact that DJIA is comprised of 30 well established and respected companies of the world and you are investing in 10 cheapest stocks among them makes this a sound investing strategy with reduced downside risk.

Dogs of the Dow is a very passive investing strategy; it can take may be one or two hours to invest and to make portfolio adjustments. The strategy also takes out technical analysis, emotion and market timing from the equation. The stocks to be invested are already defined and one just has to follow the rules. But like everything else, the past performance of the strategy does not guarantee future benefits. The strategy is so popular now that it places high pressure on those 10 dogs involved to do better.

NobleTrading.com Offers Online Stock Trading, Online Options Trading
Online Futures Trading, Online Forex Trading
Worldwide Brokerage Service, Day Trading Brokerage

Stock Market Weekly Update, January 4, 2010

noreply@blogger.com (NobleTrading) — Mon, 04 Jan 2010 13:34:00 +0000

The Week Ahead: The new year opens with the Nasdaq leading the way with a 43.89% gain in 09' led by Amazon.Com, Apple Computer, and Google. The S&P 500 gained 23.45% and the Dow Industrials returned 18.82%. Economic statistics generally have improved from year ago levels after the federal stimulus money with the exception being the continued downtrend in the employment numbers. Construction jobs have been hit hardest and likely will still be problematic in 2010. This Friday's Employment report could be the first positive reading since late in 2007.

Stocks to Watch: Conagra (CAG) is suing Dean Foods (DF) for trademark infringements, but neither stock was impacted much as both have had steady chart patterns for the past year. YRC Worldwide (YRCW), a trucking company announced a successful debt for equity exchange, but this is considered dilutive as the stock continued its poor performance. Wimm Bill Dann Foods (WBD), a Russian dairy products company was upgraded by CitiGroup despite its huge run-up the past 13 months. Intelli-Check (IDN) rallied strongly on prospects for its defense ID device.

Special Note: The January barometer will be in focus this month. Basically as January goes so goes the year, but it did not work in '09. A better predictor could be the decennial pattern when the last year of a decade rallies. Typically the first year of the new decade is a down year as evidenced by 7 of the past 11 decades in the Dow Industrials. Even more interesting is that of the last 11 decades, the first year or '0' year prices have exceeded the low of the '9' year 8 times or 73% of the time going back to 1900. It last occurred in 1980. Is it due to happen in 2010?

Commentary provided by Barry Ward, Registered Principal, NobleTrading.com, Inc.

Check out NobleTrading's new earnings calendar, upgrades and downgrades, and analyst coverages.

Click Here To Open An Account

NobleTrading Direct Access Trading

NobleTrading.com Offers Online Stock Trading, Online Options Trading
Online Futures Trading, Online Forex Trading
Worldwide Brokerage Service, Day Trading Brokerage

What is Asset Play Trading?

noreply@blogger.com (NobleTrading) — Thu, 31 Dec 2009 13:10:00 +0000

Asset play refers to stocks of companies which have more combined asset than its market capitalization. In short, it is the undervalued stocks in relation to the total asset owned by the company. Trading asset play stocks is a very attractive value investing strategy as traders can profit when the market realizes the true value of the stocks and then the stocks are correctly valued.

The market can have many asset play stocks because of many reasons.

The market very often trades on news and technicals rather than fundamentals.
The performance of an industry or a sector can affect the total valuation of stocks related to the industry/sector.
Often the media ignores some smaller, less popular companies making small profits but have sound fundamentals.

Finding an asset play opportunity can be difficult, investors should be aware of the true asset value of the company and total number of shares outstanding. The asset valuation standards and the asset value itself change from time to time.

Asset play is a risky investment strategy that requires good timing, money management and research. Investing in just any undervalued stocks can be risky, as for profiting the market needs to realize the true value of the stock; and the market can interpret the true value differently from the investor's point of view.

NobleTrading.com Offers Online Stock Trading, Online Options Trading
Online Futures Trading, Online Forex Trading
Worldwide Brokerage Service, Day Trading Brokerage