While the Insights From The War Room are
a great tool for traders to use in their pursuit of profit in the markets, based
on emails I get, many members are not taking full advantage of another powerful
assistant to their endeavors: the java applet alerts. Some members are unaware
of what this is and how to access it. Hopefully, however, you will have a
greater understanding of what this part of the TradersWire
is -- and five ways you can take advantage of the applet -- immediately after careful study of the examples in this article.
What The Java Applet Is
The java applet is part of the only service in the world that gives you up-to-the-second price action and volume alerts, combined with real-time, actionable
trading analysis. When you click on the TradersWire icon
on the homepage, you will bring up the java applet at the bottom of your web
browser.
Via the applet you will receive
-- continuously throughout the
trading day -- alerts on the most important price-and-volume movements on a universe of
over 5,000 stocks. These include up-to-the-second alerts of:
- 10 and 20 percent pullbacks off highs and lows within the last 10
trading days
- Stocks that trade 100% of their average daily volume prior to 1 PM
eastern time
- 60-day new highs and lows
- 52-week highs and lows
- Stocks touching 50-day and 200-day moving averages (something many
institutions focus on)
- Instantaneous alerts to large buyers and sellers on the exchanges
- Program trading alerts
Now that we know what the java applet is, let's jump into some specific
strategies to utilize the alerts in your trading.
Pullback Alerts
Trading pullbacks -- pauses or temporary reversals within trends
-- can be a
high-reward, low-risk approach if used in a proper fashion. One of the safest
ways to employ the pullback strategy is to use it in strongly trending markets,
most often defined by a three-month relative strength reading of 90 and higher
for long opportunities, and of 25 and lower for shorts, or an ADX reading above
30. If you use the stock scanner to make up lists of stocks with these
characteristics to monitor, you can then watch the applet during the day for
pullback alerts, or use the search feature at the end of the day to see which
stocks triggered the pullback from high/low alerts.
Arch Coal (ACI) had a three-month relative strength
rating of 98 and an uptrending ADX of 45 on April 3 when an alert is triggered
as it trades 10% lower than the March 28 high. The stock then gains more than 4
points out of the pullback.
With a three-month relative strength rating of 23 on March 27, Adelphia
Communications (ADLAC) is a good short candidate. When the alert comes
across the applet that day as it pulls back 10% from the low of March 23, the
stock goes on the radar. Three days later the stock loses 20% when it falls out
of the pullback.
Comverse Technology (CMVT) is stuck in a downtrend, with a
three-month relative strength reading of 11 and a downtrending ADX of 36 on
March 23, when the applet alerts a 20% pullback from low. The next day the stock
resumes its meltdown, dropping almost 19 points to the April low.
100% Average Volume Before 1PM Eastern
Heavy volume can exhibit both heavy buying and selling pressure. When a stock
trades more than 100% of its average daily volume prior to 1:00 p.m. Eastern and is
also in a pattern setup, the likelihood for follow-through in the direction of
the accumulation or distribution is increased.
Micromuse (MUSE) triggers one of these alerts on
April 5 as the market is snapping back after a sell-off. MUSE forms a Slim Jim
just under the level of the intraday high, undercuts the channel slightly
without failing, then brings in more big volume on the breakout from the
pattern.
Siebel Systems (SEBL) is up on the morning of April
19 as it trades more than its average daily volume of 18 million shares by 12
noon. The subsequent breakout takes it more than 4 points higher.
Use this alert when it comes up. Search the daily and intraday
charts for pattern setups, to the long side if the alert happens when the stock
is positive on the day and look at shorting opportunities when the issue is
negative on the session.
52-Week Highs/Lows and Two-Month
Highs/Lows
New highs and lows many times are a tip off to momentum yet to
come. Traders of momentum will look for stocks making new highs as possible long
side trading chances and new lows as shorting opportunities. Since there is no
overhead resistance or underlying support, they often will move in the
short-term.
Applied Materials (AMAT) hits a new two-month high
on April 18, then trades above it the following day. When it breaks out of an
intraday cup and handle, AMAT runs for more than 3 points.
Sepracor (SEPR) hits a new two-month low and then
makes a two-day pullback off it. When the stock falls out of the short pause,
its meltdown resumes.
Gilead Sciences (GILD) gives us two shots at upside
action, as it moves for three days initially after making a new two-month high,
then explodes out of a 1-2-3-4 pullback for more than 10 points.
Touch and Re-Touch of 50-Day Moving
Average
A stock that remains above its 50-day moving average is
perceived to be in an intermediate-term uptrend, while those that remain below
it are thought to be in an intermediate-term downtrend. Institutional traders
have historically used the 50-day moving average as an intermediate-term support
and resistance level. Institutions will often buy a stock when it touches its
50-day MA, and conversely, will often unload a stock when it fails to hold above
the 50-day MA.
Genzyme (GENZ) makes a nice bounce higher off its
low, then pulls back and touches the 50-day MA. It makes one move upward out of
the first pullback, then another stab higher out of an inverted head and
shoulders when it violates the neckline of the pattern.
Comverse Technology (CMVT) is downtrending when it
recaptures the 50-day MA and fails to hold. After the first continuation short,
two additional pullbacks from lows provide substantial gains to the short side.
Buy and Sell Program Alerts
When buy and sell programs hit the tape, the java applet will
scroll an alert across the browser window. Since program trading pushes stocks
higher as arbs dump futures contracts and buy the stocks in the underlying
index, or creates selling pressure when the sell programs do the opposite, any
pattern setups on the intraday charts are likely to head in the direction of the
program trading.
THQ Inc. (THQI) is trading in a Slim Jim near its
intraday high when program buying hits the tape around 15 minutes prior to the
breakout. Programs help to push the Nasdaq almost 70 points higher in the last
half of the days trading.
These are just some of the ways to make use of the java applet
in your trading. Regular use of the alerts it broadcasts will help you to
separate the wheat from the chaff and sift through all the daily noise to find
the best fish to trade in the stock ocean.
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