Written and copyright © 2010 by Thomas N. Bulkowski. All rights reserved.

Thursday 2/4/10. Blog Suspended For Several Days! Film at 11:00!

I am working on a project that requires my full attention for several days, so I am suspending blog posts and emails until it's finished. While waiting, have a look at the following links.

Site Map: Lists almost every page on the website.

Quiz: Take one of 158 quizzes, perhaps one based on an actual trade. Comes as a compressed file that contains a Word document.

My trades: These pages take you through some of my trades. These are different than the quizzes.

Research studies: 45 studies on how the markets behave, or misbehave.

Tutorials: 40 tutorials are just waiting to teach you what you need to know to make money in these markets

Trading class: This is a wimpy attempt at a trading class by cobbling together various web pages that novice traders need to know.

Trading setups: Perhaps there is a setup that you can use.

Event patterns: Learn about a dozen event patterns before one takes your stock for a ride.

-- Thomas Bulkowski

Wednesday 2/3/10. What’s Hot Wednesday

Largest winners and losers over the past week, from the close on 01/26/2010 to 02/02/2010 and year to date.

Below are the top 10 stocks with the best performance during the past week out of 574 stocks. Stocks from this list may suggest what stocks or industries will do well in the future.

Below are the 10 worst performing stocks during the past week out of 574 stocks. Stocks from this list suggest companies or industries that may be having difficulty and might be future short sale candidates.

Below are the top 10 stocks with the best performance year to date out of 574 stocks. Knowing which securities are trending higher makes selecting stocks for momentum trades much easier, especially if some share the same industry.

Below are the 10 worst performing stocks year to date out of 574 stocks. These stocks might represent a good momentum trade from the short side. If some stocks also share the same industry, then the industry may be weak, so concentrate your search there.

Below are the top 10 exchange traded funds (ETF) with the best performance this past week out of 94 ETFs. A hot ETF may suggest an industry or commodity that is doing well, so look there for individual stock picks or just trade the ETF for a momentum play.

Below are the 10 worst performing ETFs over the past week out of 94 ETFs. These funds may represent companies or industries that are suffering. Avoid going long in those stocks or buying any stocks from those industries.

Below are the top 10 exchange traded funds (ETF) with the best performance year to date out of 94 ETFs. Concentrate your individual stock picks from industries that are doing well, or trade the ETF for a momentum play.

Below are the 10 worst performing ETFs year to date out of 94 ETFs. These represent the stocks or industries you will want to avoid buying or want to concentrate selling short.

Below is a list of market index performance over the past week.

Below are the top 10 country exchange traded funds with the best performance this past week out of 23 ETFs. These may highlight emerging markets that are ready to soar.

Below are the top 10 country exchange traded funds with the best performance year to date out of 23 ETFs. Finding several countries from a similar region that is performing well helps identify which international mutual fund or ETF may continue to do well in the future.

-- Thomas Bulkowski

Tuesday, 2/2/2009. Tutorial Tuesday: How Far Will Market Move?

An email from Tanxia posed this question and it makes for a good review: How do I estimate how far price will go?

Trendlines offer clues as to how far price is going to rise (down sloping trendlines) or tumble (up-sloping ones). Let’s take the case of an up-sloping trendline to gauge how far price is likely to drop.

The figure to the right shows an up-sloping trendline with price breaking out downward at point B.

From the breakout, find the prior minor low trendline touch. I show it as point A. Measure the widest distance between those two points (re, A and B), measured vertically. In this case, that’s the distance from C to D. Multiply that distance by 63% because that’s how often this method works when a full height is used, and project the result downward from the breakout price (B) – the point where price pierces the trendline.

For example, if the high at C is 10 and directly below that at point D, the trendline is at 8, the difference is 2. Multiply this by 63% to get 1.26. Suppose the breakout at point B is at 9. That would give a price target of 7.74 (9 – 1.26). If the projected decline is less than 0, ignore the result.

For down-sloping trendlines, use the measure rule to predict how far price will rise after an upward breakout (a price pierce) from the trendline. The figure to the left shows a down-sloping trendline with price breaking out upward at point B. From the breakout, find the prior minor high trendline touch. I show it as point A. Measure the widest distance between those two points, measured vertically. In this case, that’s the distance from C to D. Multiply that distance by 80% because that’s how often this method works when a full height is used, and project the result upward from the breakout price – the point where price pierces the trendline.

For example, if the low at C is 10 and directly above that at point D, the trendline is at 12, the difference is 2. Multiply this by 80% to get 1.60. Suppose the breakout at point B is at 11. That would give a price target of 12.60 (11 + 1.60).

If you use the full height of the CD move in either case, the success rate is 63% and 80%, respectively. Multiplying the CD height by 63% or 80% boosts the success rate into the 90% or above region. The above links provide more information on trendlines. My Trading Classic Chart Patterns book, pictured on the right, takes an in depth look at trendlines. The analysis proves what others don't, that long trendline work better than short ones, the more touches a trendline has is important, and so on.

Do I use the trendline measure rule or other measure rules for chart patterns and candlesticks? No. Why not? Because it's too complicated and every situation is different. I prefer to use underlying support or overhead resistance. I can do that just by looking at the chart without need for a calculator. For candlesticks, I have my program setup to not only identify each candlestick, but to project price targets based on the measure rule for them. I use that sometimes to help estimate how far price is going to move in the very short term.

The measure rule is discussed in each chapter of my two encyclopedia books for the associated chart patterns and candlesticks.

-- Thomas Bulkowski

Monday 02/01/2010. Market Monday: The Week Ahead

In an email today (Sunday), Gary wanted me to pass along this tip for traders facing hesitation when buying. "At first, buy and then get out quickly (either at the very first profit or, as always, at a stop loss). The point here is to at least do the real trade beyond paper and to gain confidence with low risk repetitions."

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A Brief Look Back

The following are economic reports that moved the markets last week. The numbers refer to the close-to-close move in the Dow industrials.

For the week...

Economic Reports

The following information is derived from yahoo!finance and times are local to the east coast. The "Dow Moved" column is the close-to-close price change of the Dow industrials on the release day from the prior trading day, the last time the report came out.

Options Expiration

No options expire this week.

CPI: Chart Pattern Indicator

As of 01/29/2010, the CPI had:

The chart pattern indicator is bearish with 2 of 3 full triangles showing (). Additional triangles are a measure of strength with solid triangles meaning a more reliable signal than half triangles.

Other

Earnings season is underway. The sessions could be more volatile.

I found 1 pipe bottoms last week, which is neutral. Large numbers of pipe bottoms often signal the start of a short to intermediate-term move up before price curls back down, forming an unconfirmed double bottom. I think of it as the signal for the first bottom of a potential double bottom.

The following industries, of 52 that I follow, were the best (1) and worst (52) performing.

My Prediction

Pictured to the right is the Dow utilities on a daily scale. A busted broadening top appears and I say busted because price broke out downward from the pattern and then reversed. When that happens, it usually (but not always) suggests a strong move in the new direction.

The congestion area circled at A I see as lending support to the utilities. Thus, I don't expect much of a drop, but the index could continue lower for a few days. I expect it to rebound as the five red lines indicate.

The reason I expect a sharp reversal and not a rounded one is from the shape of valleys B, C, and D.

In research on the shape of tops, I found that sharp peaks often follow sharp peaks and rounded turns follow rounded ones. I'm assuming that analysis applies to bottoms, too.

-- Thomas Bulkowski