Stock Trading Predictions & Technical Analysis: Special Announcement - Elimination of BUY CONFIRMED & SELL CONFIRMED

Friday, November 20, 2009

Special Announcement - Elimination of BUY CONFIRMED & SELL CONFIRMED

I decided today to eliminate the BUY CONFIRMED & SELL CONFIRMED signals as I find them a little confusing for some people to interpret. Basically with some SELL CONFIRMED signals with some volatile stocks, the stock could already find itself at a strong support level after falling following my SELL SIGNAL, and therefore it could bounce back up immediately from here (this could also mean that the stock may continue lower). So, I don't want to give a SELL CONFIRMED which may lead someone to sell their position at a level at which it could possibly bounce back up. Basically it's important when you read my analysis that you pay carefull attention as to where I indicated the next support and resistance levels are. If a BUY SIGNAL fails it can either become a WAIT or a SELL SIGNAL, thereafter (the same is also true). Basically when I give a SELL CONFIRMED, it simply means that my previous observation of when I called a SELL SIGNAL was confirmed as the stock price moved lower the session following my signal. Some people may take my confirmation signals as an indication that it may now be safe to buy or sell. In fact on the perspective of traders taking only long positions, when I get a SELL CONFIRMATION this actually means that it's now a WAIT; that you should wait for the next bounce back up or BUY SIGNAL to take a long position. If I give a BUY SIGNAL and the stock then moves higher, it now becomes a HOLD as the opportunity to go long has already been signaled (this is the equivalent of a BUY CONFIRMED). In some cases you could still go long after I give a HOLD signal, but in other cases some stocks who are more volatile may make their moves much more quickly, and possibly within one day.

I came to the conclusion that BUY CONFIRMED and SELL CONFIRMED should be eliminated after watching how MGM moved between yesterday and today. MGM gave us a SELL SIGNAL yesterday, and today the stock price moved lower again confirming my observation but it also stopped near a support level at which it may bounce back up from. Therefore MGM is now a WAIT, on the long side perspective. I feel it would be wrong to say MGM is a SELL CONFIRMED since it could always bounce back up from here; this is just a confirmation of my previous observation and SELL SIGNAL. Basically if you decide to act on signals I may give, it should be when I give a BUY SIGNAL or a SELL SIGNAL. Acting after the signals have been given could for some high beta stocks mean that the opportunity may already be gone. However, you can pull your own conclusion from my detailed analysis to see if it's still worth it or not take a position. Keep in mind that obviously some signals fail and other succeed. The reason I don't want to continue to say stocks are either a BUY CONFIRMED or a SELL CONFIRMED is simply because I cannot keep track of all the signals I give every day and therefore cannot confirm every observation. It is possible that some people were waiting for me to give confirmations when I didn't while the signal did succeed, and they might therefore missed an opportunity. Basically when I give a BUY SIGNAL or a SELL SIGNAL it's for you to decide based on my analysis if you want to act on it or not, or move on to something else.

Note: A WAIT signal would be the equivalent of a HOLD for traders taking short positions, but to not confuse everyone I always post my signals based on the long side perspective.

Long Side Perspective:

BUY CONFIRMED => HOLD
When I will be giving a HOLD signal this simply means that we already had a BUY SIGNAL for which the trend is still intact. In some cases you could still a long positions, in others it may be more risky but it's for you to judge based on my analysis.

SELL CONFIRMED => WAIT
When I give a WAIT signal this means that you should wait for the next BUY SIGNAL, or that a SELL SIGNAL has already previously been given. In some cases we could get 2 or more consecutive SELL SIGNAL. In other cases a WAIT may just mean that the trend is not clear and the stock may possibly be moving sideways, and therefore we are waiting for a BUY SIGNAL or SELL SIGNAL.

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TECHNICAL INDICATORS

BUY SIGNAL: Indicates the possibility of the start of a new up trend or the continuation of the current up trend. This signal may be often given in the early stages of a potential new up trend that was preceded by a down or sideways trend. Such signals do not always succeed and may fail at time.

BUY: Indicates that the current up trend is already in motion and a BUY SIGNAL was already given earlier. A BUY does not necessarily indicate that the stock will continue higher from here, but simply that the stock is trending up. The further into the trend you decide to take a long position, the more risk you have of seeing it reverse back down sooner rather than later.

STRONG BUY SIGNAL: Indicates a stronger, more significant and reliable signal than a BUY SIGNAL which usually has less chance of failing. Such signals do not always succeed and may fail at time.

STRONG BUY: Indicates that the current up trend is already in motion and that STRONG BUY SIGNAL was already given.

SELL SIGNAL: Indicates the possibility of the start of a new down trend or the continuation of the current down trend. This signal may be often given in the early stages of a potential new down trend that was preceded by an up or sideways trend. Such signals do not always succeed and may fail at time.

SELL: Indicates that the current down trend is already in motion and a SELL SIGNAL was already given earlier. A SELL does not necessarily indicate that the stock will continue lower from here, but simply that the stock is trending down. The further into the trend you decide to sell a position, the more risk you have of seeing it reverse back up.

STRONG SELL SIGNAL: Indicates a stronger, more significant and reliable signal than a SELL SIGNAL which usually has less chance of failing. Such signals do not always succeed and may fail at time.

STRONG SELL: Indicates that the current down trend is already in motion and that STRONG SELL SIGNAL was already given.

HOLD: Indicates that traders who already hold this stock, should hold on as long as the trend persists. This signal is usually given during an up trend for which it would be considered too risky to take a long position at this point.

STRONG HOLD: Indicates that the current trend has been in motion for a while and rarely deviated away from the trend. Although the stock may continue higher, there may not be enough potential up side to trigger a BUY SIGNAL. This type of indicator usually means that the stock has very strong support levels which may have been tested but not broken.

WAIT: Usually given during a sideways trend for which we are waiting for a move that would trigger a BUY SIGNAL or SELL SIGNAL. This could also indicate uncertainty and the risk that would be taken if you were to take a long position at the current level. Taking a long position after giving a WAIT indicator is considered a gamble.