You’re offered a choice of two tickets to one of two Yankee games, versus the Red Sox or the METS. Both are great opportunities but since your wife’s family is from Boston, you go with the METS (just a little humor). In a similar fashion, when choosing between a bar or candlestick chart, there is no poor selection. In my books, I use bar charts, as I slightly favor the appearance of these charts. I know that there are many BCIs who prefer candlesticks and I certainly respect that preference. The one chart that I would ask you not to use is the line chart which provides the least amount of information. I will briefly define the line chart and explore in more detail the other two.
Line Chart:
This is a very basic chart created by connecting a series of closing prices of a particular security with a line.
Here is an example of a line chart:
Line Chart of Closing Prices
Candlestick Chart:
This chart is created by displaying the high, low, open and close for a security each day over a certain time frame. Let’s view two candlestick lines:
Candlestick Lines
Since most of our BCI community is more familiar with bar charts, let’s take a closer look at a candlestick chart:
Candlestick Chart
The following information is derrived from these lines:
- The middle portion (red arrows) is called the body and represents the opening and closing prices that day
- If the body is in black or red, the stock closed lower than its open
- If the body is white or green, it closed higher than its open
- The lines above and below the body are called shadows (upper and lower) and represent the session’s high and low prices (blue arrows)
- Note: A weekly candlestick is based on Monday’s open, the weekly high-low range and Friday’s close
- The candlestick to your left (white) closed higher than the open
- The candlestick to your right (black) closed lower than the open.
- So….white or green is good and black or red is bad (take that Harvard University!)
Bar Chart (my favorite):
Like the candlestick chart, this price chart consists of session high and lows as well as the opening and closing prices. It is also referred to as the O-H-L-C bar.
Here is an example of a bar from such a chart:
Bar or O-H-L-C Bar
As you can see, the information is similar. To establish the relationship between the opening and closing prices on the Bar Chart, we look at the horizontal lines to the right and left of the vertical. In candlestick charts, we look for the color difference of the body of the candlestick. Most sites will also color code the OHLC bars red or black:
- Red: Depicts a lower close than the previous day’s close
- Black: Depicts a higher close than the previous day’s close.
Common Features:
- Display high, low, open and close prices
- Neither chart reflects the sequence of events between the open and close
- Provide much more information than the line chart
How they differ:
- In candlestick charts, the relationship between open and close is depicted by the color of the body, whereas with bar charts that relationship is shown by horizontal lines projecting from the vertical.
- The bar chart places greater emphasis on the closing price of the stock in relation to the PRIOR periods close. The candlestick version places the highest importance of the close as it relates to the open of the SAME day. This is the main reason I prefer the bar chart but the difference is negligible.
Chart Comparison:
Since so many BCIs use the www.stockcharts.com site, let’s view both chart patterns as created from this site:
ANR- Candlestick
ANR- Bar Chart
Conclusion:
Both the candlestick and bar charts offer much more information than the line charts. Some chartists prefer the color feature of the candlestick bodies while others prefer the emphasis on closing price comparison with the previous period offered by the bar charts. You can’t go wrong with either one. My advice is to select the chart you like and use it consistently so reading a technical chart will take only a few seconds.
ANR: A stock with high volatility:
Many of you (and I) had this stock for the March contracts. Are you still dizzy from the wild ride? This is a great learning lesson for the pros and cons of a highly volatile stock: On the one hand we generate a handsome 1-month return. On the other, we have to deal with severe up and down price movements. Let’s look a t a 1-month chart:
ANR: 1-Month Chart
So let’s see: Down, up, sideways, up and down. Conservative investors should consider their health over a predictably volatile stock. Although I AM a conservative investor, I do use more volatile stocks for a certain percentage of my portfolio when the general market tone is at least slightly bullish. One way of knowing how a stock performs in relation to the market is to look at its beta. This will inform you as the historical movement of that equity as it relates to the S&P 500. This infortmation can be accessed on the IBD site as well as finance.yahoo and many other sites. Premium members are given this information on the weekly stock screen and watch list report:
ANR- Beta Information
Notice that in the yellow, highlighted area, I have circled the number 1.94. This means that this stock is expected to have price changes equal to nearly 2x that of the general market. If the market goes up or down 5%, this stock is expected to go up or down 10%. Only you know your risk tolerance, so use this information to tailor your investment decisions to your specific needs.
Event Update:
1- I will be presenting a 1-hour presentation for the Long Island Stock Traders Meetup Group on April 8th:
6:45 PM to 9:15 PM
There are two presenters and I will begin @ about 7:45
There is no charge to attend.
Plainview Old Bethpage Library
999 Old Country Rd
Plainview, NY
East 1/3 mile on right
2- I have been retained by The Learning Annex to host a basic seminar on Covered Call Writing. It will take place in NYC on April 22nd from 6:45 to 9:30. To register, you will be dealing directly with the Learning annex and not The Blue Collar Investor Corp., although I will be the only speaker at the event. Those planning to attend, use the coupon code “SPRING” and receive a $10 discount. Here is the link to register:
http://www.learningannex.com/live_classes/134
3- I will also be giving a live seminar in June on Long Island. Information on that will be posted once the details are confirmed.
Market Tone:
Market Tone: S&P 500 & The VIX
The red and green arrows show a slight downturn in the S&P 500 and a slight increase in the Volatility Index. These are potential signs of weakness near term but the overall charts are still bullish. I will increase the percentage of I-T-M strikes in my portfolio going forward to the April calls.
Summary:
IBD: Confirmed uptrend
BCI: Mildly bullish
My team and I are are deeply grateful for your incredible response and positive feedback to our premium site. We will continue to work very hard to maintain your trust and confidence.
My best to all,
52 responses so far ↓
1 admin // Mar 20, 2010 at 12:42 pm
Premium Members:
The recent “glitches” on the IBD web site have been cleared up. We anticiapte NO DELAY in publication or this week’s “Stock Screen and Watch List” report.
Alan
2 Dave D // Mar 21, 2010 at 1:37 am
Hi Alan…
I HAD to send you this email… There are a few thngs MUST tell you!
First and foremost, THANKYOU for creating ths weekly watchlist premium site!!! Thankyou so much! Let me expain… At first, I was just going to join for a month and check it out… After that, I was then most likely going to go back to the old school way of doing things (at least im being honest)…Today though, I learnt my lesson… Being the very beginnng of the expiery month I decided to see how long it would take to create my watchlst the way YOU and YOUR TEAM have done so… Well, it took about 6 long hours (I couldnt imagine dong that once a week)… You have me converted Alan… This is definetly worth it… You have me on board… ITS A MASSIVE MASSIVE TIMESAVER!
A few questions
2. When will stocks that are NOT in the IBD 100 appear on the watchlist?
3. I noticed that VRX was not on the most recent stocks that passed due to smart select ratings… According to IBD, its smart select ratings are all green? Why is this?
Thanks Alan
Dave D (Australia)
3 admin // Mar 21, 2010 at 1:50 am
Dave,
You are right on the money…my team puts in a huge amount of time garnering, collating and formatting the info that goes into each report. Your remarks are VERY much appreciated as are all the others I have received from our premium members. My responses:
1-A few non-IBD stocks are screened each week and found after the screening of the IBD 100 (screen section) and at the end of the IBD running list weekly.
2- The SmartSelect Rankings (as is our Premium Report) is dynamic and updated daily. If a stock does not pass the screen 1 week, that is reflected in the report. This week, it will show passage of this screen. This way the info is as fresh as possible.
Alan
4 admin // Mar 21, 2010 at 10:24 am
PREMIUM MEMBERS:
I just uploaded a NEW article entitled: “An Example of How to use The PremiumReport”. It is the 2nd one from the top under “Member Resources”. There are many ways to use this report based on your needs. This will walk you through the steps of one of these ways.
More info on becoming a premium member:
http://www.thebluecollarinvestor.com/membership.shtml
Alan
5 Rohit // Mar 21, 2010 at 11:22 am
Hello Alan,
First of all thank you and your team for the premium site and the very informative articles on your blog. Great Work.
While I am waiting for this week’s premium report, for setting my april portfolio, I came across WIT. This stock meets all the fundamentals and technical criteria from the BCi system. I am not sure about the Slow Stochastics. The ITM and OTM both yield 2.1 % monthly returns.
Thanks
Rohit
6 admin // Mar 21, 2010 at 1:29 pm
Rohit,
Your are correct that the I-T-M strike generates 2% with good protection. Recheck your figures on the O-T-M strike.
The “Stockcharts” chart shows the slow stochastics to be slightly bearish as it dipped belowe the 80% (black line) and reads 77.59. The red line is the 3-day simple moving average of the oscillator. We focus on the black line as it relates to the 20%/80% and its general direction.
Alan
7 TonyH // Mar 21, 2010 at 2:02 pm
Hi Alan,
I’ll just ask here… Is the most current report uploaded.? The most recent one I can see is dated 03-12-09 (Rev_B).
(I am wondering if I was suppose to do anything additional when I initially signed up for the charter premium membership?)
8 admin // Mar 21, 2010 at 2:53 pm
Tony,
All reports will be published PRIOR to market open on Mondays (except holidays). We are currently putting the finishing touches on the current report. Most reports will be uploaded on Sunday.
No further action is needed on your part.
Alan
9 James // Mar 21, 2010 at 3:54 pm
Alan,
May I suggest you put that notice on the report page right above the reports so that you don’t keep getting that question? Might avert some of them.
James
10 admin // Mar 21, 2010 at 6:30 pm
PREMIUM MEMBERS:
The current Stock Screen and Watch List is now uploaded to the premium page and available for your inspection.
Alan
11 Dave D // Mar 22, 2010 at 3:25 am
HUM
Check this stock out… Passes all system requirements… Stock looks ike it may be ready to launch as its had a Bullish Up Day with high volume…
If one sold the April 48 Call, we could make a 2.3% ROO, and still have decent Downside protection of 4%… Also, its BETA is 0.7 which is fairly conservative…
This looks like a pretty good deal…
12 admin // Mar 22, 2010 at 6:34 am
Premium members:
In last nights published report, 2 letters in the ticker, PWRD were reversed. It had since been corrected.
Alan
13 Don B // Mar 22, 2010 at 8:11 am
Alan & Dave –
I find HUM interesting, but puzzling, in its relationship to our Premium Stock Screen list. It shows up in the weekly on 2/26, but not since. Now it is on our Running List as a one-week entry. And why is it not on the Passed All Screens list on page 1?
Fundamentally; Health care is now run by Uncle Sam – we must be extra careful IMHO. Thanx.
Don B.
14 DaveP // Mar 22, 2010 at 12:58 pm
Hi Alan,
A lot of the options that I priced today had an ROO of less than 2%. Any idea why they are so low this month?
Thx,
Dave
15 Barry Bergman // Mar 22, 2010 at 1:09 pm
Dave,
Check the VIX…low volatility….low premiums.
Barry
16 admin // Mar 22, 2010 at 1:36 pm
Don (#13),
HUM was not on the IBD 100 list and that is why you do not see it listed in this week’s IBD screening. However, it was on the list and passed our screens a few weeks ago and did make the running list that week.
One way of allowing our members to consider such stocks that are on the fringe of the IBD 100 list (on and off) is to keep them on the running list throughout the contract cycle. The one “dot” shows how many periods within the current cylce, this stock DID make the running list (IBD 100 + passed system screens with at least mixed rechnicals).
A lot of thought went into development of this weekly report.
Alan
17 Barry Bergman // Mar 22, 2010 at 1:39 pm
The VIX closed today at 16.87…near a bottom for the VIX.
Barry
18 admin // Mar 22, 2010 at 1:51 pm
Dave,
In addition to Barry’s comment, other reasons why the ROOs on some stocks are low (let’s not tell our banks that we think 2% per month is low!):
1- Many of the stock prices are in the middle of the strike prices. That will give us either great downside or upside but lower ROOs. As they approach a strike, the down and upsides will decline and the ROOs will rise. For example, the $65 call on BUCY will return 3.9% but offer nothing else.
2- Many of the “white area” eligible stocks on this weeks running list have low betas.
3- Not applicable this month but 4-week cycles will offer lower returns than the current 5-week cycles.
To use the premium report to locate higher ROOs, look for higher beta stocks in these white areas and check for prices near a strike. This would be a bullish approach to the current cycle.
Alan
19 Barry Bergman // Mar 22, 2010 at 1:55 pm
Many times volatility increases during expiration week and decreases during the week just after expiration. Also, last week was triple witching…which usually has higher than normal volatility.
Barry
20 admin // Mar 22, 2010 at 1:58 pm
NETL: No this is not The Twilight Zone!
This stock closed Friday @ $58 per share and today @ $30! No need to reach for the Valium, it was the result of a 2-for-1 stock split. So if you owned 100 shares @ $58, your cost basis now is 200 shares @$29. If you rolled out on Friday to the $55 strike, view it now as if you rolled out to the $27.50 strike with double the number of contracts. The stock had a huge gain today.
So put away the valium and break out the champagne.
Alan
21 Dave D // Mar 22, 2010 at 2:57 pm
FUQI
This stock tumbled from the sky last week!
Does anyone know why?
Dave
22 Barry Bergman // Mar 22, 2010 at 3:15 pm
The problem was two downgrades and multiple shareholder law suits.
Barry
23 Don B // Mar 22, 2010 at 4:57 pm
Alan –
Re #16 – thanx for that enlightenment, which I really had not understood. I see that now. Yep, there just MUST have been a lot of thought involved, otherwise these reports would not be as good as they are. THANK YOU.
Don B.
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[...] Bar Charts versus Candlesticks Charts [...]
25 Dave D // Mar 23, 2010 at 2:20 am
Hi Alan,
When aiming to ‘hit a double’, you have rules regading the value of the option contract/s… (The 20/10 rules)…
Do you ever just consider the position of the price bar in relation to the ema 20… For example, if you buy the stock and it drops down to the ema 20 BUT the stock has not declined as far as the 20/10 % rule… Would you still consider buying back the option in the hope of hitting a double? How much flexibility do you allow here Alan?
Thankyou
Dave
26 Dave D // Mar 23, 2010 at 2:25 am
I ment to say OPTION has not declined as far as the 20/10% rule…
27 admin // Mar 23, 2010 at 4:20 am
Dave,
Your question is a reflection of the high level of investment sophistication you have achieved. The 20%/10% rules are really guidelines that are in place to insure profit preservation and exit strategy opportunity.
Once you are comfortable reading charts and becoming familiar with the behavior of certain equities, veering from these figures is permissable. You may want to give yourself an additional 5% and see how that works for you with certain chart patterns and stocks. But stay in the ballpark, don’t travel crosstown!
Alan
28 admin // Mar 23, 2010 at 11:12 am
EL:
Just popped back up into a “mixed technical” picture. On Jan. 28th, it beat 2nd quarter estimates by 4.9% and gave positive guidance. Revenues also increased by 11%.
Our premium report shows that this equity has been on our running list all 4 weeks for this cycle.
Checking our premium report, we see a beta of 1.12, an industry rank of 26/197 and an ER due on 5/4.
Alan
29 DaveP // Mar 23, 2010 at 11:43 am
Hi Alan,
Thanks for the article on how to use the premium report. I have a question about your personal trading style. How would you handle the case where you have not located enough portfolio stocks to fully invest your total funds in a given month?
Thx,
Dave
30 admin // Mar 23, 2010 at 3:23 pm
Dave,
With a quality watch list this problem rarely occurs. When it does, here are some ideas:
1- As long as you are properly diversified, put more money into each stock you like, and “ladder” your strikes for protection.
2- Accept lower ROOs as some cash is better than no cash at all. This should bring more equities to the table.
3- Use ETFs like the Qs and SPY
4- If all else fails, keep some cash on the sidelines until you locate some worthy “soldiers”.
Alan
31 admin // Mar 24, 2010 at 5:28 am
EZPW:
Reported a positive 1st quarter earnings surprise on Jan. 21st. Revenues rose by 44% and earnings guidance was raised to 30% over a year ago. It is valued at a favorable 11.2 x forward earnings, a Price/Book ratio of 2.1 and a 5-year average ROE of 17.3%.
Premium members will note an industry rank of 38/197 and a beta of 0.95. It has been on our running list four consecutive weeks.
Alan
32 Don B // Mar 24, 2010 at 9:37 am
Alan – very neat that you highlite certain stocks in the blog, such as today the EPZW.
Separate issue – you note the Market Tone, which is valuable. Have you considered perhaps noting such as “Technicals in an uptrend”, or “precious metals bearish”, or somesuch ??
Thanx much again.
Don B.
33 admin // Mar 24, 2010 at 2:42 pm
Don,
We are working on expanding the premium site to include some of the ideas our members have suggested. One example is the inclusion of some form of ETF analysis.
Every suggestion is noted and discussed with my team. To maintain the quality of information you have come to expect, implentation may not be immediate but I have every expectation that the information will expand based on the needs and recommendations of our members.
Regarding my highlighting stocks like EZPW: These are usually stocks that have caught my attention from positive ERs and/or an unusual number of analysts jumping on board. Some, like this one, are on our premium report, while others are not.
Alan
34 BOB BELTON // Mar 24, 2010 at 3:27 pm
Hi Alan,
In checking out the VIX (Closed today at 17.55) I would like to pose a hypothetical question.
Purchase 100 shares at 17.55
STO April 10 call for 9.70.
(the VIX has not been in this low range for over a year.)
If it closes over 10.00 in April I would be assigned at 10.00
Assignment 10.00 plus premium of 9.70=
19.70.
19.70 less cost of 100 shares @17.55 =
2.15 or $215 dollars
$215/1755=12.25% for less that 4 weeks.
This seems too good to be true, is there anything that I am leaving out, or do I have it figured out math wise.
35 Dave D // Mar 24, 2010 at 5:51 pm
Hi Alan,
EL has been in a very srtrong and consistent uptrend with the 20 day ema just consistently moving upwards…
BUT, the other indicators are overbought and ‘ever so slightly’ trending downwards…
What is your perspective of this technical picture? Is it a mixed signal, one that is still ‘in the game’?
Thanks
Dave
36 Dave D // Mar 24, 2010 at 5:56 pm
BOB BELTON, that looks lke a good find! If this is a genuine deal (and not too good to be true), even though it doesnt meet the BCI screening test, I would seriously consider taking this deal on! The amount of downside protection is phenominal with a great return!
I look foward to Alans response…
Dave
37 Rohit // Mar 24, 2010 at 7:50 pm
Hello Alan,
Question on Post #18.
“Generally” if 4-week cycles offers lower returns than the 5-week cycles, then couldnt we always make sure that the stocks are bought and options sold before 5 weeks of the next month’s expiration and then apply the exit strategies rules for the 5-week cycle?
Thanks
Rohit
38 admin // Mar 25, 2010 at 7:05 am
Bob (#34),
Your math is perfect however……to my knowledge, you cannot buy “the VIX”. You can buy and sell options on the VIX. When you look it up via the ticker, you see the level, not the price of a VIX ETF share. You can trade VIX options but not do a true CC trade. Sorry to burst the bubble. Usually, if it seems too good to be true, IT IS!
Alan
39 admin // Mar 25, 2010 at 10:50 am
Dave (#35 regarding EL),
As of 3-25, here is how I read this chart based on the parameters as set up in figure 28, page 85 of “Cashing in on Covered Calls”:
1- Moving average uptrending, with short term above longer term and price bars at or above the 20-d ema: POSITIVE
2- MACD Histogram below zero: Negative
3- Stochastic Oscillator just went from overbought to slightly below the 80%: SLIGHTLY BEARISH
4- Volume has been low since these negative signals appeared: LESS CREDENCE TO NEGATIVE SIGNALS.
Overall: If I own the stock I will keep it. If looking to start a new position, I will try to find a stronger stock. If this is the best of what I have to chose from, I will opt for I-T-M strikes.
PREMIUM MEMBERS: I just uploaded this chart in the “member resource area”. Use these references:
Moving avgerages: red arrow
MACD histogram: blue arrow
Stochastic Oscillator: Green arrow
Volume: Black rectangle
Alan
40 admin // Mar 25, 2010 at 11:00 am
Rohit (# 37),
Great question! There are 8, 4-week cycles per year. If we were to convert them artifically into 5-week cycles, we would then have to unwind our positions 1-week early in the previous cycle. The time value spent in buying back the option will negate the additional time value derrived from the 5th week of the next cycle. Plus we are undertaking greater risk as we manage our positions an extra week.
Since the time value does not decline dramatically the 1st week of a 5-week cycle, I oftentimes will not start new psoitions until late in the first week, thereby reducing my risk and not losing much on my returns (but losing a little, admittedly).
The point I was making regarding the different cycles was that you may notice SLIGHTLY higher returns during the four longer cycles and wanted you to know why.
Alan
41 admin // Mar 25, 2010 at 1:16 pm
“Banned Stocks”
I recently received two email questions as to why I have this list of “banned” stocks”. My response:
Companies that report same store monthly retail sales are subject to volatile price moves after the monthly announcement. This equates to having an earnings report every month. Although the price action can be in either direction, it is not to our advantage to sell a call option and limit the upside while still being susceptible to a major move south. I mention this on pages 137-38 of “Cashing in on Covered Calls”.
Alan
42 BOB BELTON // Mar 25, 2010 at 1:49 pm
PLEASE DISREGARD THE PREVIOUS QUESTION. IT IS NOT POSSIBLE TO BUY 100 SHARES OF THE VIX. INDEX OPTIONS CAN BE BOUGHT OR SOLD BUT ONLY WITH GREAT RISK. COVERED CALLS ON THE VIX IS NOT A POSSIBLE OPTION
43 admin // Mar 26, 2010 at 8:38 am
LULU:
This is an example of a high-risk stock with great return potential. A recent ER moved this equity BACK into consideration. It was previously bumped off with a Scouter Rating of 4. The ER moved it back into consideration with a “5″ ranking.
Despite being post-ER, we can still generate a 3% , 3-week return due to the high beta (1.75). With a recent run-up in price, I would consider this investment high-risk. I point it out to demonstrate the relationship between beta and option returns even after an event (ER) has passed.
Alan
44 James // Mar 26, 2010 at 9:45 am
PWRD was one of the two stocks that passed ALL the BCI screens this week.
On the 22nd I:
BTO 100 @ 41.74
STO 1 @ .55
Unfortunately I was sick the last couple of days and didn’t get to take a look at this one but found today that it met the 20% rule so I
BTC 1 @ .10.
Using the Elite Calculator to completely unwind my position would be a loss of 9.10%. While I am not apposed to takeing losses to limit them, I am still only paper trading so I am curious about your thought on this situation.
James
45 Chris // Mar 26, 2010 at 10:18 am
Alan,
I wanted to share this with the group and see if anything like this has happened to any one else. In addition I would like to hear comments from others.
My father opened an account at TradeKing, for which I would make some trades for him.
TradeKing just closed his account because I was making some trades for him.
Thus he has to move all his assets to another brokerage firm. He told tradeking that I would stop making trades, however they just wanted to close the account.
Chris
46 admin // Mar 26, 2010 at 10:31 am
James,
An announcement that this company was acquiring another was not looked upon favorably by the market. At this point, in situations like this, I keep a close eye on the stock. It could represent a “double” situation if there is a nice bounceback early next week. If no signs of strength, we dump it.
Good job buying back the option.
Alan
47 admin // Mar 26, 2010 at 10:32 am
Chris,
I do all the trading in my mother’s account. USAA required a “limited power of attorney” be executed.
Alan
48 Don B // Mar 26, 2010 at 4:10 pm
Chris – #45
I went to set up an account with Fidelity in order to trade for my son-in-law. While I have not actually done so yet, they did tell me that they can create an account in someone’s name while another person can be designated to trade the account. They would have set up an IRA for him – and they will always actually make the transfer.
I had spoken to USAA about a brokerage acct as I have had a mutual fund with them since forever. I felt that when all is said and done, their 5.95 fees are just as much as the Fidelity 7.95 fees, due to what gets a commission and what does not.
Since your Dad has to set up a new account, my suggestion is for him to speak to both and draw his own conclusions. I have found that very detailed questions to these brokerages usually pays off, since many will answer the initial without much detail. You know the devil is in the details. Anyway, good luck.
Don B.
49 TonyH // Mar 26, 2010 at 6:28 pm
Alan,
Could you explain your understanding how the price/volume change of “after hours” trading should be received within the BCI system, specifically regarding technical analysis?
For example, if you look at AAPL today, it gained $4.25 with an average daily volume of 23M shares during the trading day. I would make that a positive read on today’s gain… However, after the “after hours” trading AAPL lost $4.39 on only 125k volume.
Is this a negative sign or something else? Correct me if I am wrong, but the chart for AAPL for today will always show a white candle, whereas, the “after hours” price should make it a red candle with a longer upper shadow? Further, wouldn’t this discrepancy in the price change reflect differences in our tools: the EMA’s, MACD’s and STO’s? Does this price difference give support to a possible gap down on the next trading day?
Maybe I am over-thinking this, but any advice would be helpful as I am still learning the art of technical analysis.
-TonyH
50 admin // Mar 27, 2010 at 4:36 am
Tony,
After hours trading, as you pointed out, occurs on very weak volume. Chartists tend to give little credence to changes in technical parameters that take place on low (really low, in this case) volume.
The charts we pull up on stockcharts.com and other sites will reflect the closing price for the trading day up to 4 PM EST.
I will always look to the after hour news to see if there should be any concern leading into the next trading day. If none, perhaps there was some profit taking or near-term market negativity or just closing positions to have the ability to enter new ones. Without news, we see 23M bullish trades and then 125k bearish ones an hour later.
Bottom line: I give little credence to after hours trading when there is no associated news events.
Alan
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