Thursday, January 21, 2010

Notables from Wednesday, January 20th

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Let's start with a composite picture of the GGT New Long ETFs that are only CONTRA ETFs, as of today (click on the image for a larger view):





Captured above are the Contra ETFs which appear as a New Long on January 20th.  Before we get excited that GGT is signalling a change in the market, there are a number of warning signs in the graph.
  • The top ribbon indicates a weekly measurement of something the HGSI software calls Bongo.  The signal is determined by the value relationships of 3 different Wilder RSI's and a moving average.  When this is red it is a major caution signal.
  • The window entitled 65d Slope EMAs shows values that are completely negative.  While by itsself this is not a death nail, the red line in this window represents the 21d EMA of the slope of the 65d EMA of price, and it's still pointing down.  A negative absolute value on all these EMAs, coupled with a downward-pointing 21dEMA of 65d EMA slope, prevents me from moving into contra ETFs.
  • The 50d EMA is well below the 200d EMA, and both are still pointing down, e.g., losing money.  Not good until we start seeing some convergence.

Given this red, there are some positive indicators on the graph:
  • The 2nd ribbon from the top is Accumulation/Distribution.  It has moved from the poorest reading to the next poorest, e.g., it is starting to show accumulation.  This means prices will continue to improve if they become in higher demand.
  • The 3rd ribbon from the top is Elder's Force Index, 13-day.  This is now showing green, which means the 13d EMA of (volume * price change) is above 0.  This is good and reflects what we're seeing in the Acc/Dis window.
  • The Bollinger Window (%B and Bandwidth) is showing a breakout.  This is bullish for contras.
  • The 65d Slope EMA window, while showing absolute negative values for different EMAs on the 65d Slope, has both the 8d and 13d pointing upward.  If we get the 21d to point upward this would show sustained momentum for this group of contras and could give us a very good entry point for the intermediate term.
  • The bottom window shows a light blue kahuna, which indicates a significant change in the Bollinger window and is ususally a good sign.
So, caution is advised on Contra ETFs, but they need to be on your radar.

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My pick for today is Dress Barn, DBRN, above $24.98.   Here's the chart (click on the image for a larger view):



DBRN is set up nicely for entry above $24.98, with a stop loss at $22.78 and a first goal of $27.23.  Ideally, entry above $24.98 and volume above 137K by 10:00, 275K by 10:30, or 370K by 11:15 would give added confidence to the trade.  Note the apparent resistance right around $25.5, and breakthough with a close above this level would be bullish.

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Remember, you are responsible for your own trades.

Regards,

pgd