SPACE Analysis
Stockscores.com Perspectives for the week ending March 28, 2016
In this week's issue:
In This Week's Issue:
- Stockscores' Market Minutes Video - How to Trade Price Volatility
- Stockscores Trader Training - SPACE Analysis
- Stock Features of the Week - Long Term Turnarounds
Stockscores Market Minutes Video - How to Trade Price Volatility
Understanding how to identify narrowing price volatility, and breaks from it, is essential to picking winning trades. This week, I show the basics and then provide my regular weekly market analysis.Click Here to Watch To get instant updates when I upload a new video, subscribe to the Stockscores YouTube Channel.
Trader Training - SPACE Analysis
The ability to analyze a stock chart is essential to trading stocks whether you take a technical or fundamental approach. The chart shows us what all market participants know about a stock.
Most market beating stocks start their strong trends with abnormal price behavior. However, not all abnormal price behavior leads to a market beating trend. The key qualifier of abnormal price action is the stock chart. We can do well if we focus on the stocks trading abnormally out of predictive chart patterns.
That makes it important to understand the Stockscores Principles of Abnormal Chart Evaluation (SPACE) . To read any chart, you need to be able to see and understand the following:
Resistance - a ceiling price on the chart, drawn across the price tops. This price level represents the maximum that investors were willing to pay for the company fundamentals in the past. A break through a price ceiling implies positive fundamental change in the company's business.
Support - a floor price on the chart, drawn across the price lows. This represents the minimum that the sellers were willing to take for the company fundamentals in the past. A break down through support implies negative fundamental change.
Optimism - when the buyers are in control of the market, the bottoms will be rising from left to right. This is a sign of optimism.
Pessimism - when the sellers are in control of the market, the tops will be falling from left to right. This is a sign of pessimism.
Price volatility - the wider the range between support and resistance, the more volatile the stock is and therefore, the more uncertain investors are about what the company is worth. When a stock is trading in a sideways, narrow range, investors have confidence that the price of the stock is a valid representation of the company fundamentals.
Abnormal Activity - abnormal breaks from low price volatility imply new fundamentals that may not be widely known. A breakout through resistance, from optimism, from low price volatility is a good signal to buy.
You can learn more about these chart reading principles in the Stockscores Foundation lesson, "The Six Elements of Chart Patterns" found in the Stockscores Education Center.
Whether you are a short term active trader considering intraday charts or a long term investor taking trade signals off of a weekly chart, these six characteristics of chart pattern reading are essential to picking winning stocks.
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This week's Market Minutes video discusses the importance of looking for breaks from low price volatility. This week, I went in search of this on the long term weekly chart. Here are two examples, make sure you watch this week's video to understand what to look for:Back To Top
1. SYNT
SYNT is breaking from a pennant pattern on the weekly chart now. It is only Monday so this break could fizzle out before the end of the week but if this break holds, SYNT has a good chance to trend higher in the months to come.
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2. CVTI
CVTI broke the downward trend in January but has been building a low volatility rising bottom over the past 6 weeks. Made a break from that flag pattern last week.
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References
Get the Stockscore on any of over 20,000 North American stocks.
Background on the theories used by Stockscores.
Strategies that can help you find new opportunities.
Scan the market using extensive filter criteria.
Build a portfolio of stocks and view a slide show of their charts.
See which sectors are leading the market, and their components.
Disclaimer
This is not an investment advisory, and should not be used to make
investment decisions. Information in Stockscores Perspectives is often
opinionated and should be considered for information purposes only. No
stock exchange anywhere has approved or disapproved of the information
contained herein. There is no express or implied solicitation to buy or
sell securities. The writers and editors of Perspectives may have positions
in the stocks discussed above and may trade in the stocks mentioned. Don't
consider buying or selling any stock without conducting your own due diligence.
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