Stock Trading Predictions & Technical Analysis: MGM

Wednesday, March 17, 2010

MGM - Shooting Star Top Pattern

MGM - SELL SIGNAL

Today MGM moved as high as $12.67 before pulling back down and closing slightly down at $12.26. As a result of this we got a minor SELL SIGNAL as we can now observe a shooting star top pattern which indicates that MGM should continue pulling back lower tomorrow. MGM gave up all its gains today and closed down below its opening price which is always a bearish signal. Keep in mind that MGM's major trend is still up and will remain so as long as it trades within its up trending channel. Going into the next couple of days MGM is looking to move back towards $12.00 and perhaps as low as $11.65. What is important for MGM is to remain above these levels to maintain the up trend. I personally sold my position today at $12.26 cashing in a minor gain and I am looking to get back in perhaps tomorrow or the day after around the levels I mentioned. I personally chose to take the safe path with MGM as it is a very volatile stock. Before getting back in I want to wait and see if MGM manages to bounce back up from one of these level ($12.00 or $11.65). One possible scenario is seeing MGM move back lower towards these levels to then bounce back up and close higher. Although unlikely for tomorrow, they may even be a minor chance of seeing MGM close higher after hitting lower lows. If MGM breaks the $12.00 support level tomorrow I will be looking to getting in close to $11.65, only if it bounces back up first. Some people may ask that if MGM is still in a major up trend why should you not just hold MGM into tomorrow or the upcoming days? The answer is simple, there is no way to know if the shooting star pattern indicates a top for the major up trend or the recent 2 day minor up trend. MGM could break below $11.65 and then the door will be opened to move back towards its 50 day MA around $11.31 and even towards $10.00-$10.50 if it breaks the 50 day MA. If MGM manages to stay above $11.65 and $12.00, I believe this pullback may not last more than 1 or 2 days before MGM bounces back up. In the event where this shooting star SELL SIGNAL were to fail tomorrow and that MGM would just jump higher without hitting lower lows, I would wait and see if it manages to break $13.00 before getting back in. Like I mentioned in my previous posts if MGM jumps above $13.00 and closes above this level this would trigger a STRONG BUY SIGNAL. Right now what I expect to see happen, which is the most likely scenario is seeing MGM pullback as low as $11.65 or $12.00 to then resume the up trend and move closer again to $13.00 in the following days where the ultimate test will be.

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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.