9 Rules for Trading Divergences

There are nine cool rules for trading divergences. Learn 'em, apply 'em, and make money. Ignore them and go broke. 1. In order for divergence to exist, price must have either formed one of the following: Higher high than the previous high Lower low than the previous low Double top Double bottom Don't even bother looking at an indicator unless ONE of these four price scenarios have occurred. If not, you ain't trading divergence,...

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MOVING AVERAGES: TRADING PATTERNS

Running Cup and Handle The cup-and-handle (1) is typically a major reversal pattern that often precedes large rallies. It is formed when a stock sells off, bottoms, and then begins to rally, creating a "cup." After the rally, the stock drifts lower, forming the "handle" of the pattern. According to William O'Neil, who popularized the pattern, the best cup-and-handle candidates are stocks that already have staged a strong rally. One way to...

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200-Day Moving Average

STOCKS ABOVE THEIR 200-DAY MOVING AVERAGE In today's article I will discuss another key item that I use to gain a comprehensive picture of the state of the overall market--the percentage of stocks now trading above their own 200-day moving average. (To avoid repeating this long phrase, I'll just refer to this indicator as "% above 200.")The concept here is simple. The 200-day moving average...

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How to find breakout stocks

There are many ways to find breakout stocks. My method consists of two discrete scans, which each must pass before I buy a stock. Many investors depend on technical analysis alone, while others depend on fundamental analysis. I depend on both. The two parts of my method scan for technical and fundamental soundness.1) Technical scannerThis is the first scanner to run. The scan consists of finding all stocks that are breaking out to new 52-week highs on very high volume. The technical scanner is necessary because I only want to invest in stocks that...

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