TODAY'S BREAKOUTS & BREAKDOWNS

We rallied, but failed toward the end of the day. What we’re seeing is a symmetrical triangle form. This is one of the ultimate forms of indecision consolidation for market participants. We may be consolidating in this range for most next week which will make it not as favorable to trade. I, myself, have gone into 100% cash going into the weekend. I’m not going to risk all my gains for this week to some possible moving news that comes out over the weekend. FYI - Friday’s low and Tuesday’s high marks the range’s boundaries. Volume has been terrible and remains weak. During a consolidation, volume dries up, so that’s how I know we’ll be zigzagging for a few days. Make note of any massive explosions or serious declines in volume.

Today we had 6 new highs and 246 new lows. This is a major improvement, but in the short-term it doesn’t matter because of the consolidation and therefore, does not have any significance right now. I was able to find 5 clean breakouts, mostly from the industrials/materials sectors. They did lead the rally for most of today and the reason why I picked them in my last article is because they displayed enormous strength yesterday which was not demonstrated in price action, but volume. I always say that volume confirms price action, but price action doesn’t have to confirm volume. I advise all traders who are very short-term to be very cautious of extremely whipsaw next week.

We’ve had many breakdowns, but this time, they were harder for me to find….a good sign for longs. Before, I could have closed my eyes and randomly picked one and it would have been a breakdown. The market is easing up and consolidating from its major loss last week so I don’t expect many breakouts or breakdowns for the next several days. Like before, I’ve added my comments on how to prevent having your stock end up on my breakdown list unless you’re short.

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TODAY'S BREAKOUTS & DOUBLE BOTTOMS

I have to say we did well today by forming a double bottom. I went 100% long into the close given the strength of the rally (which didn’t breakdown in the last half-hour). Looking at a 10-day chart (below) what’s so bullish about this is that the right bottom formed slightly higher than the left bottom and we only needed the nearest support level above Friday’s lows. Another great signal for the right bottom is that today’s particular intra-day bottom formed an Adam-and-Eve bottom. Adam’s are spikes down and Eve’s are rounded cups. Together, the Eve bottom formed the higher low that I needed to confirm entering long positions.

We did very well today forming 7 new highs and 865 new lows (that’s an accomplishment this week). We also had stronger volume than yesterday, but still weak comparing Friday’s bottom. That should be your worry going forward – volume.

I found only one clean breakout and it was AirTran Holdings (AAI). All of the airlines jumped double-digits today as oil fell below $70 today. What’s great about technical analysis is that all you need to do is look at the chart and notice the breakdown at the 40-day MA then the 50-day MA and you’ve steered clear. If not, you probably listened to all these pure-fundamental guys preaching on the way down that “it’s just gotta go back up”! The chart tells you exactly how it is and what all market participants are thinking and that’s represented by price action and volume. IF we do go back up, the chart will tell you if it will hold. AAI has one more resistance area at around $3.50 before it’s able to spike to $4.25.


Instead of featuring mostly breakdowns like I have for several days now (like I had a choice), I opted to profile several stocks that exhibited a possible “double-bottom” pattern. This is not to say they’ll all go up, but given the volume and price representation, there’s a good chance that many of these stocks will spike higher (most are in the industrials/materials sector). It could last for only a day or several weeks, who knows, but for the very short-term, I think they’ll be ok. Please use the 20-day MA as initial (major) resistance after (if) they breakout of consolidation resistance. Most importantly, remember to do your own due diligence.

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TODAY'S BREAKOUTS & BREAKDOWNS

No breakouts today, which happened to be the 2nd worst drop for the Dow in points (733!). In fact, the markets have been so erratic, I haven’t found clean breakouts for the past 2 days and just a few breakdowns, so I didn’t bother to post on them. However, early this morning at 12:03AM, I did write an article on high-reliability reversal signals because I found hundreds of them while I was going through my charts at night. This prompted me to put out a clear and immediate warning, and it was my signal to go 100% short…again.

Fundamentals don’t really matter in this market at this stage, but technicals do. Fundamentals are oblivious to fear and panic and are useless, but technicals paint a clear picture of that fear in action and therefore allows you to take your own action in response. Traders must recognize these reversal patterns, because it doesn’t matter if the market jumped 11% on Monday. Longs who haven’t sold already will lose all of those gains tomorrow! These signals are not “just stupid pictures on a chart”. I’m up over 51% for the month of October, personally, and have relied on the very same signals to lead me to make the correct trades both long and short. In fact, today was one of my best days this year. These signals are not to be ignored and I’m demonstrating how important they are right now. I hope each trader here will seriously study these patterns and be able to identify them. If you need explanations, just ask, and I’ll be more than happy to make sure you understand.

We had several breakdowns today, and I’ve been identifying critical areas on the charts in my previous articles but I feel that, by now, you should already know how to identify all of that yourselves. I am only identifying reversal signals so that traders who are unaware of what happened today can be prepared in the future to avoid getting killed on days like today. Remember, these signals serve two purposes: 1) loss prevention for longs, and 2) profits for shorts.

Don't forget to try out the Free Trend Analysis. It's FREE, so give it a shot!