Trading the Lines

//Trading the Lines

Hawk’s Scan Sentry Report January 23

Welcome to Hawk’s Scan Sentry Report. This is Sunday night with equities analysis from Jan Arps’ Scan Sentry Toolkit for the week beginning January 23.

This week I want to talk about a technical analysis technique that you probably already know about, and may already use… that is trendlines.  If you ask 10 traders to draw a trendline on the same chart you will likely get 10 different lines… or more.  Well, as far as I’m concerned there is one ‘proper’ way to draw an up-trendline and that is to connect the most recent swing low with the next most recent lower swing low and project to the right. If there is no lower swing low, then a horizontal line at the most recent swing low will substitute for your uptrend line.  The same principle in reverse is true for downtrend lines. You connect the most recent swing high with the next most recent higher swing high and project to the right.

Once you have identified your trendlines they will typically work as support and resistance. The price may cross them and then take off in a new direction indicating a breakout, or the price may test them and then return to moving in the direction of the trendline indicating a pullback in a trend. Trendline pullbacks and breakouts can both be good entry points. Of course, if you are already in a position and the close penetrates the trendline which is going in your direction, you may want to exit your trade. However, I will usually use the Arps Trender as my exit line instead of the trendline because the Arps Trender is much more sensitive to the sideways motion of the price when it is consolidating.

Many (but not all) of the trades I’m looking at this week have been identified by our automatic trendline tools which help me identify the breakouts and pullbacks across the trendline. Let’s take a look at a sampling of this week’s watchlist.

_____Longs_____

SLV

(The silver ETF is a volatile stock, but I like the trendline breakout following the bullish pivot divergence. Also SLV is getting very close to a bullish Triple Trender alignment).

KCG

(A nice trendline breakout with plenty of buying bressure identified by the Radar1 Fear/Greed indicator. All three Triple Trenders are bullish now).

OSUR

(Although this trendline breakout may pullback into the $10.00 range, I think that this stock has some longer term bullish potential).

_____Shorts_____

POR

(Another one of my favorite set-ups… a pullback into a recently synchronized Triple Trender preceeded by bearish divergence indications in the Radar1 Fear/Greed indicator).

WPI

(This has broken down below the up-trendline, then pulled back up to test it and broken down again. Note the bearish ‘Trend’ or continuation divergence 6 bars ago).

May the trend be with you,

Hawk

Jan Arps’ Traders’ Toolbox is not an investment advisory service nor a registered investment advisor or broker-dealer and does not purport to tell or suggest which securities customers should buy or sell for themselves. Examples presented on this site are for educational purposes only.  It should not be assumed that the methods, techniques, or indicators presented in these examples will be profitable or that they will not result in losses. There is a high degree of risk in trading.  Readers using this information are solely responsible for their actions and trade at their own risk. Readers should always check with their licensed financial advisor .

2018-01-08T08:02:27+00:00January 23rd, 2012|Hawk's Picks|