Switching System Update

Before beginning to split this blog into several, I wished to post an update of the performance of the automated switching system. In the future, this information will be found in a new blog containing just trading notes. The 09/14/09 quote does not indicate a sale on that date but merely posting of the opening price to calculate system performance. The system actually continues to hold the TNA ETF.

Oh Say Can You C

C has broken out of a short-term pennant on its way to a targeted 4.40, which matches the neckline of an inverted head-&-shoulders pattern it failed to break out of previously. In this case, this identification is a day late, so would be chasing, a practice that should not be indulged. It should have been purchased at this time yesterday, when the price had jut broken out of the pennant and one's stop-loss point would have be under the upper pennant line.

FAS Blowoff?

FAS has exceeded the longer-term channel shown on the hourly graph (right). This may well indicate a pending blow off, where prices peak, then plummet, on tremendous volume. Point & Figure target is at 76, but that is now within a day's movement.

If one was already holding FAS, handling the blowoff is best done by setting a stop loss immediately under the previous day's low, thus taking advantage of continued upward momentum, yet not participating in the inevitable collapse. Moving the stop loss up during intraday trading could improve one's profits, but admittedly does increase the chance of getting stopped out early.

Keep in mind, that should FAS turn down, FAZ, its mirror, will go up.

Solar: STP Breaking Out

STP is breaking out of a pennant on the hourly chart (right). Note, too, it appears to be forming a cup, but without indication of a handle, yet. The target for the pennant break out is 25.

Longer-term charting (left), shows STP has been in a flat consolidation since early May, and appears to be attempting a breakout of this, more-powerful formation. Should this breakout occur, the target is 27.

Point & figure charting targets 34.50.

FAS On Target

Yesterday, FAS achieved its target of 61 (60 per the July 23rd post). This was projected from the sideways, rectangular movement between July 15-22, commonly known as a flag. Using the adage "the flag flies at half-mast," the target was projected. The Point & Figure target from the July 23rd breakout remains at 76.

Daily chart shows FAS is completing a cup, but has yet to form a handle. As it approaches the previous 66 high, the cup will probably start. This formation supports the 76 target from Point & Figure charting.

FAS Trading Range

FAS is in a trading range between 52.00 and 53.70. It allows an entry at the bottom for the expected resumption of climb, or as a short-term profit since it seems to touch both levels daily. The beauty of it is an entry at a known point, i.e., 52.00, with a nearby stop-loss point, thus generating an excellent reward-risk ratio. For example, if entry is 52.00, the stop loss is at 51.90, and the target at 53.70, the reward:risk ratio becomes (53.70-52.00):(52.00-51.90), or 1.70:0.10, or 17:1. Outstanding, considering an acceptable minimum is 3:1.

Here is another presentation dramatically illustrating the trading range of FAS--and its mirror twin, FAZ. One can more than imagine trading one, then switching to the other, as each peak and bottom alternately.
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07/30/09; 08:45: Pre-market action on FAS shows a breakout above the previous resistance line at 53.70. The short correction apparently lasted only four days rather than the expected week. This is bullish, as is the gap up in pre-market this morning. It should try to close the gap by retesting even down to the previous resistance 53.70, now support. That's the entry point. If the gap holds, support would be 54.14, which becomes the entry point. Stop loss would be under whichever becomes the bottom.

FAS and a Market Correction

The market has entered a correction of the last two weeks of upward movement. It should be mild, last only a week or so, then upward movement will resume. Look at it as an opportunity for better position.