Welcome to
"StockBreakthroughs Newsletter"
March 9, 2008.
Market Recap
The only thing that is bullish right now is the oil price. The surprise decline in crude inventories undoubtedly gave the bulls an impetus to take prices to another all-time record close of $104.52 a barrel and even $104.95 in electronic trading after the floor session was closed.
Ever since I wrote an article about oil prices on September 18, 2004 and a newsletter on March 26, 2005, the price has basically doubled since then.
But this doesn't surprise me at all. If you've read my other newsletters in the past where I touched on the subject, I always said that we will have to accept tha fact to see oil prices above $100 Dollars soon. The days where oil costs $20 a barrel are over unless someone opens his drawer and takes out an alternative where we don't need oil anymore.
Economic data showed that Americans have less money to spend than a year ago (and not only in the U.S. but here in Germany too. So Americans, you're not alone!), that the U.S. economy is losing jobs and that home foreclosures are at an all-time high. And that was just Thursday and Friday.
The Federal Reserve believes it is necessary to inject $200 billion into the banking system (tax payers money by the way! But the same is happening in Europe too) over the next month to keep the financial system from being overwhelmed by a deepening credit crisis that appears to have pushed the U.S. economy into recession.
To top it off, while watching the credit market problems engulf the economy, the nation was also treated to the spectacle of multi-millionaire chief executives defending their enormous pay packages to Congress.
All that, and the discussion hasn't even touched on stocks yet. U.S. stock markets had a bad week and dragged equity prices lower in many parts of the world. The Dow Jones fell 146.70 points on Friday, a 1.22% drop that left the index at 11,893.69. For the week, the Dow was off 3%. The technology heavy Nasdaq Composite closed Friday at 2,212.49, a loss of 8.01 points or 0.36%. For the week it dropped 2.6%. The broader Standard & Poor's 500 Index fell 10.97 points, or 0.84%, on Friday to close at 1,293.37. For the week the index was down 2.8%.
The German DAX was also down for the week dropping 77.32 points on Friday and the British FTSE followed this trend dropping 66.50 points.
From a technical point view things are getting pretty boring. There isn't anything much different to last week or even the weeks before that. The up and down swings have continued just like they did in the past. Even that the Dow dropped below it's psychological support line of 12.000 points isn't anything new. This happened in mid January this year.
One chart is interesting though and that's Apple (AAPL). It's weird, but everytime the broad market goes down, AAPL goes up and vice-versa. Looking at this chart you will notice that AAPL has been in a channel between $120 and $130 for a month now.
Source: www.bigcharts.com
So for those that like trading on breakouts like myself, this could be an interesting one.
With channel breakouts,look for movements up/down out of the channel on significantly higher than average volume [confirmation of channel break out]. To exit channel break outs, you are reminded of three cardinal rules of trading:
1) limit your downside risk;
2) don't limit your upside potential; and
3) protect profits.
So, if after the break out, prices move back into the channel, exit the trade. As the trade makes profit, use a trailing stop. You are looking for 20-25% trailing stop.
And the longer a trade is in a channel, the more significant the channel break out usually is.
Yours in Successful Trading,
Information, charts or examples contained in this lesson are for illustrational and educational purposes only. They should not be considered as advice or a recommendation to buy or sell any security or financial instrument. We do not and cannot offer investment advice. For further information please read our disclaimer at: