Technical Analysis

Historical studies have shown that chart patterns are consistently repeated over time. Technical analysis is the art of recognizing specific patterns that are key to growth investing.

Buying Stock on Pullback and Upside Reversal

I recently used a pullback followed by an upside reversal to buy shares in two stocks. One of the buys was within a base, which I used as an early entry. The second was a buy to add to an existing position.

It’s worth noting, I am not recommending either stock. My intention is to show how I used a pullback and reversal for two past trades.

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Facebook in 2013 and AAXN, CHGG and TWLO

Ajay Jani mentioned on Twitter it may be worthwhile to revisit Facebook’s move back in 2013 and compare with stocks over the past couple of weeks that have had similar gains in price and volume. The goal is to gain insight into how Facebook progressed after its big move up. Maybe this will foretell how stocks with similar price and volume signatures may play out in the coming weeks.

To begin, we’ll look at two charts of Facebook, paying attention to the price, volume and its upward trend. We’ll follow this with a look at three stocks, AAXN, CHGG and TWLO.

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Power Trend and How to Spot it on a Chart

In this week’s Stock Market Update, Mike Webster pointed out that the Nasdaq is now in a Power Trend. In this post we’ll look at what characteristics make up a Power Trend and we’ll also dive into three examples, two from dates in the past as well as the specifics of the current Power Trend.

Here are the primary considerations for a market to be considered in a Power Trend.

  1. Low above the 21-day for 10 consecutive days
  2. 21-day above the 50-day for five days
  3. 50-day in an uptrend

Once the 21-day crosses below the 50-day that is a sign the trend may be coming to an end. Mike also mentioned there are “circuit-breaker rules” that can end a PT before the 21-day to 50-day crossover.

It should be noted, I am using the Nasdaq for all the charts that follow.

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2020 Nasdaq Correction Versus 1998

Following is a visual summary I created based on Mike Webster’s discussion on IBDLive, highlighting the similarities of the 1998 Nasdaq market correction and today’s market.

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Webby’s Anti-Helter-Skelter Screen

This is my new ANTI – Helter Skelter screen.

I hope the volatility can mellow one of these days. Keep an open mind & build a watchlist. @MarketSmith @IBDinvestors

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