Thursday, May 27, 2010

Stock Market Update, May 27, 2010

Market rebounded today with a 35 points gain after hitting a lower low yesterday at 1,067. We are just bellow SMA200 on S&P and DOW, while NASDAQ managed to climbed above SMA200.

EMA50 still has to cross EMA100 on 30 minutes chart to give a buy signal but a few individual stocks already gave the buy signal. I am talking here about WLT, AKS, CLF, LVS, TIF, COH, IPG, LXK, ILMN, THC, PNRA, TWC and many others.

EMA50 crossing EMA100 on 30 minutes chart (which roughly corresponds to EMA1 crossing EMA2 on daily chart) is a very powerful timing method for spotting intermediary term trend changes. By using this timing method you can be on the right side of the market during all this corrections and the rallies that follow them. It gives you very few false buy and sell signals (e.g. it didn't gave a buy signal when market rebounded from 1115 to 1170, red arrow). As usual you are not going to buy exactly at the bottom and sell exactly at the top but in between these two you can make a lot of money.

As you notice on WLT chart, the sell signal was around 90 when EMA50 crossed EMA100 from above and the buy signal was generated yesterday around 75. Also notice that priced climbed above SMA240 (5 days), labeled "Avg240" on the chart. I would also want to see this moving average climbing up in the next few days to be comfortable with my bet on WLT.

The same thing needs to happen to S&P to be sure that the correction is over, first EMA50 needs to cross above EMA100 then the price needs to stay above a rising 5 day moving average.


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