Buy and Sell Signals

[jeff46902]

The biggest aspect of trading that I seem to struggle with is recognizing BUY and SELL signals at the right times.  What are the best and most accurate technical indicators that help traders recognize these signals?  The ones I use are Volume+, MACD, and On-Balanced Volume (OBV).  Do you agree that the most information can be obtained by these signals?  What constitutes such signals to you all?

I currently hold a long position in ECIL (in at 7.61 in early May), and was pleased to see it go up to 9.40 recently.  However, a little disappointed to see it just sit around at the high 8's and low 9's for the past few weeks.  Now I see that the blue line has crossed well below the brown one on the MACD, with negative divergence.  Does this mean I should take my profit and get something else at this time?

The other stock I have is BCON, and according to the MACD, I should continue to hold it.  Do you agree with that one based on your favorite indicators?

Thanks!
Jeff

[saffeysite1]

Jeff,

One thing I learned is always take some profits.  When I started trading, I would always want a little morem then find myself chasing the stock back down, being on the wrong side of the trade.  If you like the stock, sell half and take some profits.  If it breaks higher you can always buy in when it forms a new base, because more than likely it will go higher.  The one thing I don't like about the stock is that the cup and handle is more of a "V" than a "U" shape.  It hasn't given enough time to shake out the weak hands.  My feeling is that the stock may drift lower, a bit more selling before it moves higher.

As far as BCON.  THe last candle represents indicision and with a red candle before that, would indicate a bearish trend.

Hope this helps.

Good luck

[Melf Elf]

I currently hold a long position in ECIL (in at 7.61 in early May), and was pleased to see it go up to 9.40 recently. However, a little disappointed to see it just sit around at the high 8's and low 9's for the past few weeks.

You have an excellent entry into ECIL in both timing and price.  On May 5, 2005, ECIL had a gap up breakout out of the bullish Descending Triangle off the December 2, 2004 high.  The breakout was $7.45.

On May 13 and 14, the gap was filled, ECIL found support at its 50-day Moving Average (50 DMA), and it rocketed higher from a low of $7.20 on May 14 to a high of $9.45 on June 2 for a gain of 31% from that low.

Although it feels disappointing to watch the stock just sit around for the past few weeks, it's technically very healthy for the stock to consolidate after a big run-up and to form another bullish pattern from which to launch another rally. 

From the June 2 high, ECIL has been forming a bullish pennant or a bullish flag on volume that is much less than what it was during the rally to June 2. That's bullish.  Patterns usually resolve in the direction of the prior trend, which in this case, is bullish.

There are two upside pattern targets:

Pattern #1 - Descending Triangle from December 2, 2004 - May 5, 2005 put Target: $9.64 IN PLAY.  We got only to $9.45 on June 2.  Sometimes pattern targets aren't fully achieved, but we've also got...

Pattern #2 - David's big Ascending Triangle from January, 2004 to present.  That pattern breakout put $13.43 IN PLAY as long as we remain above the breakout level.

Sometimes stocks go back below the pattern breakout, as ECIL did after the early May breakout.  It did that to do something bullish:  it filled the May 5 gap at $7.30, and it found support at the 50DMA. 

If ECIL closes a little bit below $8.89 here, it's still in a bullish consolidation, and with the two bullish pattern targets IN PLAY, I'd give it some room on the downside to tag the bottom of the current pattern from the June 2 high.  We might drift a bit lower, as Saffeysite said.

For a stop, I'd suggest a close below $8.05 for now, which was the last low on May 25 prior to the big push to $9.24.  That's alot on the downside, but with your entry, I'd give this one lots of room until you see what develops.  You can raise you stop later as we get more data, but that guarantees you a 5% profit from your $7.61 entry, and it gives you a chance at a much bigger profits if the two pattern targets are achieved.  "Let your winners run...be ruthless with getting rid of your losers."

Don't worry about MACD.  Despite the fact that it's below the signal line, it's still above the zero line.    Look at stocks that have been in long-term bullish trends,  like the builders. MACD will go back and forth over the signal line many times.  That isn't a sell signal when a stock is in a bullish trend.  Also, look at the MACD on the weekly chart.  It's above the signal line, and it's above the zero line.

Good luck with your trades, Jeff.