June 14, 2010

By Elliott Wave International

Some people like to get outside on the weekends, maybe playing tennis or working in the yard. Some people like to visit their friends or cook a big meal or go out to see a movie. And some people who are passionate about their work — such as Elliott Wave International’s futures analyst Jeffrey Kennedy — like to stare at hundreds of price charts on their computer screen to find patterns that point to trade setups.

We used to worry for his health but not anymore, because he’s been doing it for years and he comes up with some neat stuff. A case in point is his discovery of a two-bar pattern that he named the Popgun. Find out more in this excerpt from the Club EWI eBook, called How to Use Bar Patterns to Spot Trade Setups.

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Excerpted from How to Use Bar Patterns to Spot Trade Setups by Jeffrey Kennedy

The Popgun
I’m no doubt dating myself, but when I was a kid, I had a popgun – the old-fashioned kind with a cork and string (no fake Star Wars light saber for me). You pulled the trigger, and the cork popped out of the barrel attached to a string. If you were like me, you immediately attached a longer string to improve the popgun’s reach. Why the reminiscing? Because “Popgun” is the name of a bar pattern I would like to share with you this month. And it’s the path of the cork (out and back) that made me think of the name for this pattern.

The Popgun is a two-bar pattern composed of an outside bar preceded by an inside bar. (Quick refresher course: An outside bar occurs when the range of a bar encompasses the previous bar and an inside bar is a price bar whose range is encompassed by the previous bar.) In Chart 1 (Coffee), I have circled two Popguns.

So what’s so special about the Popgun? It introduces swift, tradable moves in price. More importantly, once the moves end, they are significantly retraced, just like the popgun cork going out and back. As you can see in Chart 2 [not shown], prices advance sharply following the Popgun, and then the move is significantly retraced. In Chart 3 [not shown], we see the same thing again but to the downside: prices fall dramatically after the Popgun, and then a sizable correction develops.

How can we incorporate this bar pattern into our Elliott wave analysis? The best way is to understand where Popguns show up in the wave patterns. I have noticed that Popguns tend to occur prior to impulse waves – waves one, three and five. But, remember, waves A and C of corrective wave patterns are also technically impulse waves. So Popguns can occur prior to those moves as well.

As with all my work, I rely on a pattern only if it applies across all time frames and markets. To illustrate, I have included two charts of Sirius Satellite Radio (SIRI) that show this pattern works equally well on 60-minute and weekly charts. Notice that the Popgun on the 60-minute chart [not shown] preceded a small third wave advance. Now look at the weekly chart [not shown] to see what three Popguns introduced (from left to right), wave C of a flat correction, wave 5 of (3) and wave C of (4).

There’s only one more thing to know about using this Popgun trade setup: Just be careful and don’t shoot your eye out, as my mom would say.

In this comprehensive collection, Jeffrey provides each pattern with a definition, illustrations of its form, lessons on its application and how to incorporate it into Elliott wave analysis, historical examples of its occurrence in major commodity markets, and ultimately — compelling proof of how it identified swift and sizable moves.

Best of all is, you can read the entire, 15-page report today at absolutely no cost. You read that right. The "How To Use Bar Patterns To Spot Trade Setups" is available with any free, Club EWI membership.

This article was syndicated by Elliott Wave International. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts lead by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

In today’s short video, we take a look at Nike stock and project what we see in the future for this market.

As you know, we’ve discussed energy fields in the past and just how important they are to markets and Nike is no different. There is a huge energy field under this market capable of carrying it much, much higher. In the video I discuss a specific target zone for this stock.

As always, our videos are free to watch and there are no registration requirements. I would really like to hear back from you in regards to your thoughts on this video. Watch this video.

All the best,
Adam Hewison
President, INO.com
Co-creator, MarketClub

In today’s short video we examine the crash of 1929 and the similarities to today’s Dow. This video is not meant to scare anyone, but to educate investors and traders of the possibilities that may exist in today’s market.

We could be, repeat, could be very close to a tipping point similar to that of 1930 when the Dow had ended a 50% correction to the upside. I invite you to watch my latest video and see what makes sense to you.

As always our videos are free to watch and there are no registration requirements. If you agree or disagree with this video please feel free to comment on our blog.

Every success,
Adam Hewison
President, INO.com
Co-creator, MarketClub

photo credit: Stillframe

A little over six weeks ago I produced a video on the relationship between Apple and RIMM.

I called it the “Battle Of The Tech Titans,” and in this short video I explained that we felt the relationship was changing between Apple, Inc. (NASDAQ_AAPL) and Research In Motion, Ldt (NASDAQ_RIMM). I detailed a strategy of approaching this market using a trading strategy that I call “pair trading” or “trading pairs.”

What trading pairs means is that you buy one market while going short the other market in the same sector. Now Apple and RIMM are battling it out right now in the smart phone sector. It remains to be seen who is going to be triumphant in this battle but it would appear as though Apple may have the upper hand based on its very successful “APP” store.

Trading pairs is what many professionals do when they are unsure as to the direction of the general market but feel pretty comfortable in their analysis of the relationship between two stocks. I hope you find the video both informative and educational.

The video is free to watch and there is no need to register. I would love to get your feedback about this video on our blog.

All the best,

Adam Hewison
President, INO.com

I subscribe to a number of newsletters and info sources and get dozens of new financial product blurbs. The first thing I look for (if the information is available) is the refund rate. When the refund rate is 1% or less I get interested.

From what I can tell SupraStocks has a refund rate of about 1/10% so it passes the first test with flying colors.

The second test is the actual availability of refunds if a buyer wanted one. SupraStocks is sold through Clickbank so the refund availability is rock solid. I know from experience that Clickbank will make a refund for any reason at the customer’s request anytime during the first 8 weeks, whether the publisher wants to or not. The publisher is not even informed until after Clickbank makes the refund.

I do not know the technical indicators setting that Elliott Pearce is using in his SupraStocks software. But that’s OK too. I’m a big believer in simplicity so I’m not going to nit pick if it works for lots of people.

Suprastocks is a short term stock trading sytem. It makes specific long and short recommendations with initial stop loss points. It’s an online package so you can access it from anywhere without installing any special software on your own computer.

I also do not know if SupraStocks will work for you. Trading is such an individual and personal activity that I doubt I will ever make another specific recommendation for something I do not have years of personal experience with. Maybe it takes that long.

You can test it for 8 weeks without risking any money. The bonus package looks good too. You get to keep that even if you decide to get refunded on SupraStock.

Go to the SupraStock website.

A little ad about a stock newsletter that seems to be doing quite well in a hostile environment. I like the part where you can lease the software that makes the stock picks for $112,000/year. The cost of the newsletter is less than 1% of that.

Bill Carrigan

So far, 2008 has been a memorable year for investors. The Dow Jones industrial average is down 16 per cent. Financial component American International Group vaporized and now bellwether General Electric Co. lowered its earnings guidance for the third quarter.

Pile on the U.S. rescue plan and you have the perfect window of opportunity for investors.

This may be the best time to own stocks since the over-sold conditions of early 2003.

Perhaps a review of the crisis will help support my argument.

On Wednesday, U.S. President George W. Bush appeared in a prime-time television address warning Americans and Congress that failing to act on a $700 billion (U.S.) financial industry bailout could lead to “a long and painful recession.”

Bush administration officials warn of a looming economic disaster if Congress fails to act swiftly to fund a bailout that would be larger than the total cost of the Iraq war and the most sweeping government intervention in the financial market since the Great Depression.

The bailout talks are reminiscent of a Star Wars episode with the Dark Side (Wall Street) at the mercy of the Force (Main Street).

Main Street has a problem bailing out Wall Street executives who demand free market opportunity in good times and then beg for socialism during a financial crisis.

During an interview on CNBC’s Squawk Box, bond expert Bill Gross, founder and chief investment officer of investment management firm PIMCO, said “the package really is a pro-Main Street package,” and “it’s the first program really where taxpayers will benefit.”

If that observation is true, we as investors need to look at the stocks representing Main Street for guidance during the crisis.

The Dow is conveniently loaded with such Main Street stocks as Coca-Cola Co., Home Depot Inc., Johnson & Johnson, Kraft Foods Inc., McDonald’s Corp., Procter & Gamble Co., Wal-Mart Stores Inc. and Walt Disney Co.

When the weekly charts of these stocks are studied we find all are not only trading above their 2008 lows, several are within striking distance of new 52-week highs,

Our chart this week (available at thestar.com) is that of the daily closes of Dow component Walt Disney plotted above the daily closes of Dow component Home Depot.

Note the respective July 2008 lows on each plot and observe the current higher prices.

These higher lows are bullish and currently over one half of the 30 Dow components are displaying the same pattern.

These higher lows are also constant with a basic tenet of the Elliott Wave Principle, in that if a higher low is accompanied by increased investor fear and worse fundamentals the prior low was likely a bottom.

I would think these conditions have been satisfied for most of the Dow components.

We currently have more than half of the Dow components trading above their July 2008 lows – and we certainly have much more to worry about now than back in mid-July.

This sets up a classic condition of divergence between the current market price of stocks and the level of investor fear and anxiety. We now have higher stock prices occurring with higher levels of fear.

And there you have it, thanks to a little Elliott Wave. This may indeed be the best of times to own stocks since the over-sold conditions of early 2003.

Bill Carrigan is an independent stock-market analyst. His Getting Technical column appears Friday. He can be reached at www.gettingtechnical.com on the Internet.

Source: Toronto Star

This stock trading video is one of the most popular in the “How To Trade in 90 Seconds” series produced by MarketClub.