TradeStation Webinar and Update

Several people asked for the archive for my recent TradeStation webinar. You can find it here:
https://www.tradestation.com/education/events/on-demand-webcasts/spotlight-on

Of course we have a new set of MACD Divergences now. To stay current, you can sign up for the full list of MACD divergences and MACD Histogram divergences daily on US stocks, ETFs and futures at divergence-alerts.com

Or to sample the scan output, check out the MACD Divergences on NASDAQ stocks posted on Wednesday and Friday by entering your name and email below. That adds you to an email list that gets notified of new divergences twice a week, plus a few promotional offers.

Commodity Negative Divergences, My Sched D, and You

Without getting too personal…
I just sent off my taxes — yes, I had to write a couple checks — but the good news is that my schedule D was much EASIER to fill out than previous years.

Before I’ve struggled to compile huge lists of trades across mulitple accounts. If you actively trade, you probably know what I mean — many hours work, and even when I’ve hired accountants for my taxes they’ve wanted ME to do the gritty work of listing all the trades!

But this year I breezed through sched D! I took fewer trades because I relied more on MACD divergence and the divergence count to target higher-potential times to buy. ( To tell you the truth, sched D is one of the reasons I went for this trading strategy.)

Now I want to share with you the means to simplify YOUR schedule D and, more importantly, FOCUS on times when trades are more likely to work out in your favor.

Check out an example from April 15, 2011 of the divergence alerts commentary. We’ve been seeing lots of different commodities — especially energy and metals but also some of the broader commodity indices — showing negative divergences on the daily charts. On Fridays, we get the weekly analysis and starting to see some of those negative divergences move up to the weekly charts.
http://divergence-alerts.com/commentary/weekly-commentary/commodity-neg-divs-bubble-up-to-weekly-macd-div-alerts/

If you would like to receive alerts like this, plus get all The Truth About MACD educational materials as bonuses, become a member before April 18, 2011 at
http://divergence-alerts.com/my-membership-options-page/

Bulls and Bears Fight Over S&P500

The stock market is often said to be a fight between the bulls and the bears.   Technical analysis aims to help traders understand market behavior by studying the price action which is akin to the tracks left by the various market animals.

In last week’s market action, we can see the bull and the bear squaring off as two powerful and infrequent “tracks” showed up on the S&P 500.

Representing the bulls, we see a MACD positive divergence on the daily chart of the S&P 500, as shown in the StockFinder screenshot on the left.

Representing the bears, we have a Death Cross on the daily chart of the S&P 500, as shown in the StockFinder screenshot on the right.

Of course, as traders the battle is of more than abstract interest — our success depends on siding with the winners as much as possible and protecting ourselves from losses when we find ourselves on the wrong side of the trade.
 
To find out more, here are three complimentary resources:
 
Focus on MACD with my Las Vegas MoneyShow video
 
Learn about Golden Cross and Death Cross in my other video archive from Las Vegas
 
As general resource, check out TraderPlanet.com   It provides market commentary, charts and quotes, news, educational videos, live webcasts and many more services absolutely free of charge.  I will be a contributing writer to TraderPlanet very soon. If you register with TraderPlanet.com, as a thank you gift, you’ll immediately receive access to their trading ebook library, where you can select among several trading topics and authors. Register here: http://www.traderplanet.com/freebooks/636

On Knowing When To Sell

SPY Sell and Hold Signals

I want to share a couple key ideas with you.  I just answered all the write-in survey questions from the recent MoneyShow and if there was one theme, it was “how to know when to sell?”

The truth is that there is no one-size-fits all answer to that question because it depends on your goals and outlook. 

This particular moment in the market illustrates that really well.  (See chart above)  Short-term strategies such as price crossing the 20-day moving average and even intermediate-term strategies such as MACD Divergence have long since given a “sell” signal. The aggressive traders among us – myself included — have sold short and are now watchful of an opportunity to cover.

 I also follow a longer-term long-only strategy for my retirement funds.  The SPY below its 200-day MA tells me not to buy.  But is it a sell signal?  No, according to the 50/200 MA pair because the 50 MA has not crossed down through the 200 MA to give the Death Cross signal.    

 How will it play out this time?  I don’t know.  What I do know is how the strategies mentioned above have performed over the last fourteen years.  That data helped me to make the decisions about which signals to follow and with what capital.

 This brings me to the other frequently-asked question at the show:  “What is BackTesting Report?”

 BackTesting Report started as a series of e-books about the historical performance of various technical indicators and trading strategies.  I began the work because I wanted to know – for my own trading – what I might get out of these strategies, and which I might use for buy/sell decisions.

 BackTesting Report has expanded beyond the reports to videos but the concept is still the same:  to provide the data  to understand the trade-offs between the various technical strategies and pick the best strategy.

What about you?  How do you know when to sell?

SPY: Divergences, Trendline Breaks and More

While the “leaders” of this market have lately been low-priced regional banks rocketing off the bottom, the stocks more typically thought of as leaders don’t seem to have so much fuel.   We seen that in the sheer numbers of stocks found by the MACD divergence detectors — negative divergences outnumbered positive divergences many times over.  

This week the NASDAQ:QQQQ and the AMEX:SPY (once again) showed us negative MACD divergences on the daily chart.   Here’s a screenshot of the SPY showing a gentle bearish divergence on the MACD lines and a more severe divergence on the MACD Histogram.

macd_divs_and_trendline_break_spy_sf_010427

You can see another interesting development in the screenshot as well.  The SPY is breaking its upwards trendline.

Since I’m not an expert in the art and science of the trendline, I went back for a quick refresh to a handy reference on trendlines: the Market Club email trading class lesson #2.    Titled ‘Finding a Friend in the Trend’, it tells about drawing and reading a trendline. 

An important point for us today is to wait for two closes below the trendline before considering it broken.  Count #1 today!

Just a couple other comments on this lesson of the course…

1. Its got a nice chart of a double bottom with a sharp V between lows.

2. One section where I have to disagree:  it says bottoms are drawn out while tops are quick.   Maybe in futures but in my experience with stocks this decade, we’ve had relatively quick bottoms and drawn out tops.   

That leaves us to consider whether today is just another minor move in a long top or is the trend turning.   Watching that trendline just might help us understand.

To get the free 10- lesson email trading course from my affiliate Market Club, click here.  For more details, see this guest post by the course’s author, Adam Hewison.

Best Stock Yesterday Indicated by a MACD Divergence

Apple (NASDAQ:AAPL) dominated the headlines yesterday with good earnings news, giving it a 6% gain on the day.  But do you know what the best stock (biggest gainer) really was?  Regional bank Dearborn Bancorp, Inc (NASDAQ:DEAR) was actually the top stock on the day with a massive 74% increase.  Today as I write this, DEAR is continuing upwards, and more regional banks are the top % gainers while AAPL holds steady.  (comments? please add your thoughts on this post)

How might you find stock picks like DEAR before they shoot to the top?  One indicator is a MACD Divergence.  This daily chart of DEAR shows a MACD Histogram divergence detected at 12/17/09, flagging a buy at $0.49.  That simulated trade is still open above $3, which is a 6x gain!

Daily Chart of DEAR
Daily Chart of DEAR

 

Weekly Chart of DEAR
Weekly Chart of DEAR

Now DEAR is an extreme example.  Not every MACD Divergence turns into a top stock.  If you’ve taken The Truth About MACD video course you know what to expect: many divergences get stopped out.  But the potential exists for a powerful reversal if you can find it ahead of time, as we can see in the DEAR example.

Which brings me to my question for you…how do you want your divergences served?

After repeated requests for a service that alerts traders to MACD divergences as they arise, we’re looking at how to make that happen and would love to get your input and insights.  Please take a moment and click your favorite checkboxes on the survey.  It will help us design a service that’s most useful to you. 

https://app.icontact.com/icp/sub/survey/start?sid=7910&cid=369225

The Thank You page for the survey will point you to sample web pages with recent divergences from the scanners.  Among the stocks from the weekly scans is EUBK, which was #13 yesterday with a 21% gain.   We’ve since updated with this week’s MACD Signals; here’s a screenshot from apr 16, (click to enlarge).

macd_div_weekly_100421

(Disclosure: I don’t have a position in DEAR or AAPL.  Even having all the divergences in front of you isn’t a guarantee of being in the best stock at the right time.  Written apr 22 and updated apr 23 2010)

MACD Histogram Divergence

macd_histogram_divergence_spy_daily_arrows

MACD Histogram Divergence or MACDH Divergence occurs when price action is not confirmed by the common MACD Histogram.    The top picture is a screenshot of a daily chart of SPY.  The price is plotted as daily bars in the top section.  In the middle, is the MACD indicator with yellow bars for the MACD Histogram (MACDH), yellow MACD line and blue signal line.   The bottom plot is volume.

The MACD Histogram Divergence is marked by green price bars.  It is a MACDH positive divergence and generally considered a bullish signal.  The green arrows are drawn to illustrate the nature of the MACDH Divergence:  the price  makes a lower low while the MACDH indicator makes a higher low.   Click on the chart – twice – to enlarge it for a better view.

One interesting thing to note is that the MACD lines themselves are not showing a divergence at the same time as the MACDH divergence.   It is not necessary for the two types of divergence to occur together.   In this example, the MACD divergence happens a little later, at the 3rd new low of price.   As it happens, the price makes a longer rally from that divergence point.

A MACDH negative divergence is generally considered a bearish signal.  It is the opposite situation from a positive divergence.   A negative divergence  is said to occur when price makes a new high but the MACD Histogram indicator makes a lower high.   This is illustrated by the red arrows in the screenshot below of a daily chart of Citibank, NYSE: C

macd_histogram_divergence_c_daily_arrows

To learn more about trading with MACD, including detailed data comparing the historical performance of MACD Histogram Divergences with MACD Lines Divergences, visit the TruthAboutMACD.com and watch a free video.

MACD Divergence Signals Follow-Up

Last weekend’s post highlighted three stocks from the negative MACD Divergence scanners: AAPL, BIDU, SBUX.  Disclosure: I am now short all three as I write today.  

All three shorts are sporting open profits.   Being 3 for 3 is much better than the odds suggested by backtesting MACD/H negative divergences.   Having just recorded a video about shorting on MACD divergences for The Truth About MACD series, I’m very much aware that its too early to declare victory on these trades.

I did try to increase the odds by only shorting a negative MACD divergence when I saw other compelling evidence of a market drop.    Continuing to monitor the markets makes sense and here are more elements of my bearish case to add to those from last week:

Selling short at this point may be too aggressive and I’m not recommending it for everyone, or to anyone for that matter.  Even if you don’t want to go short, you might want to glance at the Signals pages to see if any stocks you already own are on the lists and consider carefully whether you want to own anything with negative divergences at this time.

Signals