Here is a recap of the stock triggers from the Tradesight Stock Report and Real-Time Messenger for Tuesday, August 31, 2010. This includes all triggers.

Off of the report, SPRD worked nice:

SNDK short worked:

ASIA worked but triggered right out of the gate:

CSTR went enough for a partial:

In the Messenger, GS gave me a small winner, but finally gave up on it:

COST went enough for a partial, that’s it:

Mark’s BRCM worked:

Rich’s V worked:

GOOG didn’t work:

Overall, a very nice day to close out August.

It’s been a slow week or two in the markets with volume on the light side and afternoon activity much flatter than normal. That doesn’t mean any one day can’t give you a surprise, and fortunately, Mark Likos spotted a classic ES setup today and called it for our subscribers.

The market gapped down in the morning and was mostly flat over lunch. It rallied up after lunch to fill the gap, hitting the Pivot (dark blue line), which was just above and inside of our Value Area Low:

What does this set up for us? When a market fills a gap, it is the resolution of a necessary technical move (80% of gaps fill the same day). When they stall out at the Pivot, they are identifying that level (the “Balance of Play” from the prior session) as important. Those two items basically set a very specific wall and complete the energy move of the gap fill. This means that the market is now free to head either direction, but in this case, a move to new highs gives you a break above the Pivot now that the gap is filled, and it gives an entry into the open part of the Value Area. So, Mark called the long above that level, and the move worked perfectly to the other light blue line, which marks the high of the Value Area:

These are the types of high-probability setups that we like to keep our subscribers focused on, even though they haven’t been happening as much in August. Don’t forget, wait for the market to do what you need, because it isn’t going to move how you want. Clean setup, one of the best of the week, and thus, a clean winner.

The SP lost 4 on the day, making a new low close on the move. Price is now below and moving away from the 50 and 200 daily moving averages. The recent MACD sell signal has been validated by the close under the zero line. 1061 is a Fibonacci level and also prior support. Treat this level as a pivot under which the momentum could accelerate.

Naz also made a new low close on the move. 1800 is near term support with 1750 next. Fibs have been added to the chart. Note that the MACD has closed below the zero line.

The multi sector daily chart shows the relative weakness in the SOX.

The OSX was the best sector posting a small range inside day.

The BKX closed right at the lower edge of the trading range. This is the lowest close since February.

The BTK closed just above the key 50 and 200dmas. Look to this index for leadership if the market turns higher from here.

The SOX is gaming the lower boundary of the trading range. The leading index was weaker than both the broad market and Naz on the session.

Oil continues to slowly breakdown.

Gold continues to show good relative strength during a seasonally weak time of year.

This is the chart to watch. Until the SOX shakes off its relative weakness, selling rallies in stocks will be easier than buying the dips.

We had a nice winner today in our top long stock idea off of the report, ATHN:

But, that really doesn’t tell the whole tale of how Tradesight helps you make money based on the market environment. Click on this link to get a presentation review of today’s trading. Just press the Play button on that screen. The presentation is about ten minutes and walks you through how our Stock and Futures services can help you make money.

One of the tools that we follow closely is the Make or Break projection lines in e-Signal. This tool can be used to give you powerful targets on any trading symbol based on the most recent swing high and swing low. The tools plots price and time targets that are support or resistance if they are achieved.

Sometimes, you can have MoB lines in both directions that are spaced far enough apart that both can hit. Let’s take the example of the GBPUSD back in March. In this daily chart, I’ve drawn the MoB lines off of the swing high at A, which projects out as you can see, and the swing low at B:

In this case, it is potentially possible that both lines could be hit. The ideal calculation is that the price will hit during the bar itself (not before or after), with a real focus between the two black lines. Since these lines are spaced out, it would be possible, though certainly not necessary, that both could hit. Remember that the point of a MoB is a “potential” target if the market heads that way, not a likelihood that it will head that way.

As we moved into April, take a look at where price went:

GBPUSD smacked right into the MoB between the two black lines, as projected. And as the month continued, it used that line as specific resistance:

The question becomes, will that resistance point finally break, or will the trend resume? It is also important to note that the lower MoB was a thicker, making it a stronger projection. Here’s the movement in May:

Right to the lower MoB…and…during the ideal time target between the black lines. Very interesting when you consider all of the news over the last month that a level projected in March could be hit so precisely.

The rest of the month through today was spent using that MoB as support:

So now that we have new swing highs and lows, where are the new MoB projecting going forward? This is a little more interesting of a story. Have a look:

This time, both of the projections play out against the same timeline. The LOWER projection is much smaller and shorter, and obviously easy to hit. The upper line in general could be hit and would represent a change in trend if it were over the longer haul. But it isn’t likely possible (although it is theoretically possible) to hit both in their ideal time projections, which makes this a battle.

We also are on the verge of a 13-bar sell signal on the US Dollar Index, which would be a powerful reversal signal if it fires in the next week or so. That would definitely increase the odds of a change in trend and point to that upper line hitting. We will continue to monitor.

You can follow us on Twitter for more details by clicking here, or take a free or full trial to our various trade calling and education services here.

It is very important when trading Forex to understand the importance of the “start of the day” even though it is essentially a 24-hour market. In the equity and futures worlds, when you calculate key indicators such as the Pivot series and Market Profile (Value Areas), you use the prior day’s data from start to finish. In order to do the same in Forex, you have to establish what point is the end of the day and start of the next day so that you properly use the data from the trailing 24 hours.

Many charting platforms can be misleading because they allow people to set the timeframe axis of their chart up for their own timezone, and then they end up with calculations that are based on “midnight to midnight” in their zone. Many people also force their charts onto EST, which does not provide a good “midnight to midnight” day in Forex. If you do it that way, you’re splitting the day in half.

The proper time for end of session/start of session is global rollover, which is 5 pm EST. Asia has not yet started, Europe is asleep, and the US banking day is over. This is the point of the lowest volume. It is also the point that banks in the intermarket system shut down to “settle” their trades from the prior 23 hours and 55 minutes or so. When you realize that technical evaluations and calculations need to be based on fixed factors such as a “day” of data, it becomes very important to recognize that this specific point is the start/end of a day. It also means that Forex can really be mapped into 5 clean daily bars as it opens at 5 pm EST on Sunday and closes at the same on Friday.

Tools that you use need to be able to make this adjustment to be valid. For example, we have an Average Daily Range tool that plots a range each day that is the six month average on each of our key Forex pairs. For those of us on the West Coast of the US, we need to be able to set that tool to start at 2 pm, which is 5 pm EST. By doing so, the tools starts drawing at that point and goes for 24 hours.

The chart below shows you today’s GBPUSD with the Average Daily Range lines. The top line anchors to the high of the session since 5 pm EST (2 pm PST) because we’re in the lower half of the day’s range. The lower red line is the Average Daily Range target, which is often a key support point in the market. As you can see, during the “day” when you start this tool running at the right time, the GBPUSD moved exactly to that lower line and bounced:

Had you used a different start of day, one that has less technical meaning to the market, the tool wouldn’t have worked.

You can follow us on Twitter for more details by clicking here, or take a free or full trial to our various trade calling and education services here. Our next 20-hour Forex course starts in June.

With the US Dollar Index now approaching the levels of April 2009, putting us at or near a 12-month high, it’s time to get a feel for what may lie in store for the Dollar Index in the months to come. We came into the year predicted that the US Dollar would ultimately have a positive 2010, although we stated that our prediction wasn’t meant to suggest that a sharp run-up would be what would happen. Less than five months into the year, we’ve definitely seen a sharp run-up. At the start of January, we predicted that the Dollar would hit the 82.00 level in 2010. We got there in March and were still there two weeks ago. Now we’re at 86.00.

For those that are familiar with MoB (Make or Break) lines in e-Signal, you know that these lines use chart analysis to project potential time and price targets for a symbol. One point of confusion on these levels is that some people assume that the fact that a MoB level exists, the symbol must get there or the MoB was wrong. That’s not actually the case. You can get MoB levels both below and above the market if you draw them off the most recent pivot low and high. That doesn’t mean both will hit. You’re basically getting a target scenario IF things keep moving in that direction.

But the power of the MoB is not just that it gives you a price target. It gives you a TIME target as well. In the chart below, which shows about 18 months of US Dollar daily data, the MoB blue and pink line is drawn from the high around 87.00 in April of 2009:

First of all, the thickness of the line suggests that this is a bit stronger of a target than a lot of the MoB lines that we see. Second, note that even drawing that line back a year ago, the line doesn’t start until almost the end of 2009. Also, note the two black vertical lines, which show us the most likely point in time for the level to be hit.

What we found so interesting about this chart is that the regression channel lines off of the lows from last year, which so clearly channeled this move up until we broke out more sharply the last two weeks, also push the US Dollar Index into the MoB during the key time target.

Now that you have a broad cup, a two or three month handle of consolidation would put us back into the regression channel and poised for the final move up.

You can follow us on Twitter for more details by clicking here, or take a free or full trial to our various trade calling and education services here.

Today we had a great example of what we call a “sweep” on an ES futures trade entry. In the futures market, you cannot fool around with your stops. You have to have them, and we suggest you keep them fairly tight. We use a max of 6-8 ticks on the ES, for example, as a stop. However, sometimes, you can spot a valid technical entry that triggers and stops so fast that really, all that happened was the market showed you that the area you were watching was valid for support and resistance. When that is the case, you can put the same trade with the same entry right back in.

We tend to ignore the futures and stock market in the middle of the session, which is the New York lunch period. It’s represented by the red box in the chart below. However, coming back from lunch, sometimes a trade can be as easy to spot as the high or low of basing action for several hours. We targeted a short in the ES under 1163.50, the low just before lunch. Volume came back after lunch and the market headed down. Our stop was set for 6 ticks after entry. As you can see on this chart, the trade triggered short once, then stopped out almost immediately and just barely. This means that the market has identified that levels as being important, even though we triggered and got out for a 6 or 7 tick loss. So we put the trade right back in, and it triggered again. This time, it really worked, and we closed half at 1160.00 at A and the rest at 1156.50 at B for a net 20 tick winner overall:

So we trade a 6 tick loser for a 20 tick winner, but you have to keep those stops or you’ll get slaughtered in the futures market.

Also, if you are wondering where that final exit point came from, here is the same ES chart with our key Levels drawn. The red line that is a key Gann number came in at 1156, so we closed just above that level. It was also the end of a Seeker 9-bar setup, which is terminated by the red box drawn around the Seeker setup area:

Both of these combined to leading us toward a solid exit point that was near the low of the day.

You can follow us on Twitter for more details by clicking here, or take a free or full trial to our various trade calling and education services here.

Yesterday in our Blog (found here), we discussed a few uses for the Average Daily Range levels. In particular, we discussed the GBPUSD and EURUSD. Today, we have more examples of the use of the Average Daily Range Levels on those pairs, so let’s review.

First, a recap of what Average Daily Range is: We use a 6-month trailing average, which means that we add up the ranges each trading session for the last six months and then divide by the number of days.

The EURUSD ADR is currently 138 pips. The GBPUSD is now 167 pips, up a pip from yesterday.

How did those levels get used in today’s trading?

Once again, the EURUSD traded almost exactly 138 pips of range. You can see the Upper ADR (dashed green) and Lower ADR (dashed red) lines on the chart here. Since we’re in the lower half of the day’s range, the Upper ADR is anchored to the high of the session, and the Lower ADR projects the 138 pip mark:

So specifically, the EURUSD once again recognized the range and didn’t break outside of it, just like yesterday.

Now, on to the GBPUSD. Again, the Upper ADR is anchored to the high of the session because we are in the lower half of the range. The Lower ADR is 168 pips lower. Once you get into the European and then North American session, we break below the Lower ADR at point A on the chart and make a move, just like yesterday. But today’s lesson shows us another side of how important these areas are. Just like any other Support or Resistance Level, once it breaks, it becomes the opposite:

That Lower ADR was Support, but look at how it was used as Resistance at points B and C on the chart later. These numbers are very important in trading.

You can follow us on Twitter for more details by clicking here, or take a free trial to our daily FOREX trade calling and education service here.

One of the numbers that we watch every day is the Average Daily Range (ADR) of each currency pair. We use a 6-month trailing average, which means that we add up the ranges each trading session for the last six months and then divide by the number of days. This tends to give us a remarkably important area for the currency pair during a trading session.

Currently, the six month ADR on the EURUSD is 138 pips and the six month ADR on the GBPUSD is 166 pips.

There are two important comments that we can make today about the ADRs. Last week, during the craziness that occurred on Thursday and Friday, obviously the pairs vastly exceeded their average ranges. During the banking crisis in late 2008, this went on for weeks. But here, we’re already falling back into normal ranges fairly quickly, which is one interesting story on its own.

Meanwhile, today’s trading gave us two great examples of how the ADRs are useful. It is often the case that the pair will stop around its ADR and at least get a temporary bounce. It is also true that once an ADR is broken, a bigger move will occur fairly quickly. Today, we saw both of these.

Let’s start with the EURUSD. The dashed green line is what we call the ADR High, and it anchors to the top of the day’s range if the pair is moving down. We then see the dashed red line, which is the ADR Low, which draws itself currently 138 pips below the ADR High. To properly anchor an ADR line, you start it at 5 pm EST, the start of the FX day. These charts are on Pacific Time, so the lines begin at 2 pm PST.

Clearly, you can see that the EURUSD bottomed out within a couple of pips of its ADR Low today, which is somewhat surprising only a few days after last week’s activity.

Meanwhile, we get the other angle on the ADR by looking at today’s GBPUSD. Here, the dashed red line anchors to the low of the session as the pair moves up, and the ADR High is 166 pips above (and mixed in with a couple of other key Levels that we follow).

Note that once the ADR High level is broken, the GBPUSD goes on a big run.

So we have a couple of key points here today looking at the ADR lines. One is that the EURUSD is already trading back inside its normal range just a week after the wildest action we’ve seen in a while. The other is that the ADR lines are doing what they normally do, which is creating support and resistance until they are broken and then a great trading move after.

You can follow us on Twitter for more details by clicking here, or take a free trial to our daily FOREX trade calling and education service here.