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Hindenburg Omen on Stock Markets

2010-08-26T12:25:00.000-07:00

Stock Trading Tips - Stock Market Hindenburg Omen ?

There is talk again of the Hindenburg Omen on the stock markets. It was first mentioned a couple of weeks ago and it appears that it has now occurred again. It is one of the conditions of the Hindenburg Omen that it should appear twice within 36 days.

It has been described as the

"most feared technical pattern in all of chartism"

..... and is an omen of bad things to come. It gets its name from the Hindenburg airship that crashed so dramatically in 1937.

There are five criteria required for the Hindenburg Omen to be formed.

On the New York Stock Exchange the daily number of new 52 Week Highs and also the daily number of new 52 Week Lows must be above 2.2% of total NYSE trades that day.
The smaller of these two figures must be greater than or equal to 69. Not an absolute requirement more of a checksum.
The 10 Week moving average must be heading up.
The McClellan Oscillator must be negative on the day.
Finally, an absolutely essential conditions is that the new 52 Week Highs must not be more than twice the new 52 Week Lows.

All five criteria have been met twice now. Some say this suggest a “a savage downturn is imminent in stocks"

The person who came up with the Hindenburg Omen, mathematician Jim Miekka, says he believes it is like a funnel cloud just before a tornado.

"It doesn't mean [the market's] going to crash, but it's a high probability."

He also says he is now entirely out of the stock market.

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Online Trading Made Easy Candlesticks

2010-02-08T18:07:00.000-08:00

Online Trading - Stock Charts and Candlestick Charts

Online Trading Made Easy

In a previous post we explained the importance of understanding the basics of stock market charts and technical analysis - Stock Market Charting for Beginners - with the charts at a critical point right now it is essential to have an idea of how to understand the charts.

One method stock traders are using increasingly is Japanese Candlesticks. This is a system of chart analysis devised in the 18th century by Japanese rice trader Homma Munehisa. They are used on the stock market today to show the high, low, close and opening price of a share. In addition the high and low prices are shown by a thin ine referred to as the wick. The open and close prices represent the body of the. You don't draw the candles yourself of course, although you can, any stock charting site or software package will show you the charts in either candlestick form or as a straight line or as a bar chart.

Candlestick charts indicate the supply and demand for a parituclar sotck or index or commodity over a given period of time and whether there were more buyers than sellers. If the candlestick is long and white then the buyers outnumbered the sellers, if the candlestick is black then sellers outnumbered the buyers over the period of time being analysed.

A long wick on the candle means that there was a lot of volatility but the closing price ended up being near to the opening price. If the wick is underneath the body the sellers were in control at the beginning of the day but the buyers gained control towards the close. If the wick is on the top then the buyers were in control at the start of the period but the sellers gained control towards the close.

A short candlestick means that there was not much volume or there was a struggle between buyers and sellers but neither won.

An important point to note is that if short candlesticks appear at the top of a long uptrend or downtrend then this may mean the trend is changing.

The video below made by www.informedtrades.com makes it all clearer.

Whether you choose to use candlestick charts or not it is very important to understand the importance of charts and one rule that it is worth bearing in mind is never to buy a stock or an index when the price is below the 200 day moving average.

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Privacy Policy

2009-12-18T09:15:00.001-08:00

Privacy Policy

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Choosing an Online Stock Broker

2009-09-25T09:07:00.000-07:00

Stock Trading for Beginners - Choosing an Online Stock Broker

The first thing beginners to online stock trading will need to do is to find an online broker. There are dozens of online brokers out there but in my humble opinion you would do well to steer clear of TD Waterhouse. I found them very unreliable. Just my personal opinion but that's what makes a company's good or bad reputation, personal recommendations.

Nowadays all online brokers provide you with the data and tools you need to make informed decisions, if they don't then you shouldn't be with them. These tools include realtime quotes, realtime trades, realtime charts, streaming news, educational materials. There stock trading platform also needs to be easy to understand and use.

Bear in mind also that many brokers are adding cell phone features to their list of features. If this is important to you then choose a broker that offers this.

Features to Look for in an Online Broker

First off, your online broker's fees and commissions. Fees can soon mount up so make sure you know what you are going to be charged for. Everyone in the financial world makes money out of their customers, that is how they survive. Your online broker is not a charitable trust. So don't believe the hype. They want your money. Of course, if they provide a better service than their competitors then they will get more clients and more money. But it is the money that is the motivating factor, not helping you have a nice day. So watch out for basic fees and additional fees.

What can you trade in? Most online brokers offer stocks, options, mutual funds and exchange-traded funds. Many brokers also offer a choice of international markets in addition to investment services or packages for education and retirement saving. As a beginner to online trading or investing you will probably just stick stocks and shares to start with.

The tools that online brokers offer can include analyst reports, investment calculators, cellphone alerts, charts, will help both beginners and experts make intelligent trading decisions. It goes without saying that the quality of this information is essential.

How easy is the broker's site to use? The site needs to be easy to use for everybody, including the totally computer illiterate.

Last but by no means least customer service. Whether you're a beginner to online stock trading or an old hand you are entitled to expect an online broker's site to be accurate and reliable. It's no use the site providing so-called 'realtime' quotes that are a minute old. Realtime must be realtime. It is also important that customer service be rapid and reliable, you don't want a broker that is just going to cover up mistakes and pretent they never happened. Unfortunately you won't know how good an online broker is until you use them, which is why it is very important to get as many recommendations from clients a possible. To do this I would suggest you check out the online financial forums and ask questions!

For more information on stock trading check out this book - Online Stock Trading for Beginners

By the way did I say that I do not recommend TD Waterhouse?

Charts in Online Stock Trading

2009-09-23T17:26:00.000-07:00

Online Trading Made Easy - The Importance of Charts in Online Stock Trading

When trading stocks there are basically two strategies you can use to decide which stocks or indices to trade. Fundamental analysis and technical analysis.

In fundamental analysis, as the name implies, you study the fundamentals of a company (i.e. company accounts and trading reports, competition etc...) to decide whether it is in good shape or not and whether its share price is unvervalued and should be higher. This is what Warren Buffett does, and he is very good at it. But it takes a lot of knowledge and work and also belief that the company accounts and trading reports etc... are accurate and believable.

The other strategy is so-called technical analysis. In technical analysis you don't need to know anything about the company or the index you just study the share price over time, and various technical indicators, such as moving averages.

Technical analysis does require some knowledge but this is knowledge you can gain quite easily from reading websites and books. Technical analysts say that all the news is already in the charts so studying the charts is all you need to do.
Stock charts are a reflection of price movements over time and the volumes of stocks traded.

Technical analysis is based on the following assumptions - prices are determined by supply and demand, supply and demand is a result of both rational and irrational behaviors, prices move in trends and these trends are generally long-lasting, changes in supply and demand can be spotted by analyzing the way the stock price behaves.

Why use technical analysis?
It is easier than fundamental analysis and faster. It does not make us of company accounts and therefore cannot be manipulated by companies, it tells you what to buy and sell and when. Technical analysis based on the behavior of crowds, if people expect a certain thing to happen upon a certain signal, then they will react in a particular way when they see that signal. If enough people react in the same way then the expected outcome is achieved and the analysis becomes self-fulfilling i.e. a stock price goes up because enough people buy the stock because they expected it to go up. Many hundreds of expert analysts use technical analysis and thus influence stock prices by reacting to the same signals.

There are many indicators that are used in technical analysis, but one of the principal indicators is the 200 day moving average. If a stock falls below its 200 day moving average this is considered a bad signal and people tend to sell the stock. If a stock goes above its 200 day moving average this is generally considered a good sign and people tend to buy.

If 80% of stocks in the stock market are above their 200-day moving averages, this is considered to be overbought and so people tend to sell the market. If less than 20% of stocks are above their 200-day moving averages, this is considered to be oversold and a signal to buy.

3 Year Chart of Lloyds with the 200 day moving average in Red - showing how the stock felk sharply once it crossed below its 200 day moving average back in 2007

6 month chart of Lloyds with 200 day moving average in red - the share price is above the moving average which is positive but it could easily fall back below it

There are many other indicators used in technical analysis such as the relative strength index, Bollinger bands etc... and any online stock trading site will allow you to include them automatically on any charts you may wish to look at.

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Stock Trading Tips

2009-09-16T14:13:00.000-07:00

Stock Trading Tips - Stock Charts DOW Theory Part 2

Yesterday's video explained the first 3 tenets of Dow Theory today's video deals with tenets 4, 5 and 6 . All 6 tenets of DOW theory are very important when it comes to stock trading, online or otherwise.

Tenet 4 states that averages must be nutually confirming

Thus a rise in the DOW Jones Industrial Average needs to be confirmed by a rise in the DOW Jones Transportation Average. Any divergence in these two indexes signals a pending change - otherwise it confirms the trend. Although this tenet is not so relevant nowadays as the US is based more on service on manufacturing.

Tenet 5 states that trends need to be confirmed by volume

This still applies today. If the price change is accompanied by volume it means lots of people are taking part

Tenet 6 states that until signals prove otherwise

"The trend is your friend till the bend at the end" It is very important when trading stocks short-term and medium-term to find signals that show that a trend is coming to an end .

According to Dow, the trend should be followed until it is obvious that it has ended. Deciding when the trend is over is of course the hard part and analysts tend to disagree.

Currently (OSeptember 2009) many were expecting the markets to fall back to re-test the March low of 6500 and some were saying it would go down to 4000 ! So far it hasn't, and has rallied back to 9700.

1702 was important on the NASDAQ, but it didn't fall back through 1702 which was seen as very bullish and a sign that markets would continue on upward, which they did !

Technical analysis i.e. understanding stock charts is absolutely essential for stock trading and to try to trade stocks without some basic understanding of stock charts would be unwise.

Dow Theory Part II by informedtrades.com

See also Stock Charts for Beginners

Stock Trading Charts for Beginners

2009-09-15T13:32:00.000-07:00

Online Trading Made Easy - Stock Market Charting for Beginners

Stock trading appears to many to be at a crucial turning point at the moment. In the past few days I have seen 3 people predict a stock market crash. Rod Huusinen says it may have already begun, Enzio von Pfeil and Bob Flower independently say it is coming in October and it will be big.
The markets however sem to be determined to keep on going up - the DOW was up another 56 points today and the S&P was upanother 3. Stock markets have been rising steadily since the lows on March 9 and the S&P has risen over 50% in just 7 months.

So who is right are the markets going to carry on up or are we headed for an almighty crash. Well, I don't know, but I am convinced that whatever happens we will see it in the charts first. If you don't know how to read stock market charts then you really need to learn a minimum, as all traders use them and more often than not base their investment decisions on them. So to attempt stock trading online without understanding what other people are doing is suicide !

With this in mind here is a short but very informative video on DOW theory to introduce the basics of stock charting - by the guys at informedtrades.com. - the basic concept to retain is that technical analysis can help you get ahead of the market whereas fundamental analysis can't, news is of little use, as it is nearly always already reflected in the share price. Unless you are the next Warren Buffett that is and are ready to invest for the long term using only your knowledge of the fundamentals of a company.

Stock Trading Technical Analysis - DOW Theory

Related posts on stock trading :-

Part 2 - Stock Charts for Beginners
Online Trading
Technical analysis
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Stock Trading Stock Market Trends

2009-05-08T11:23:00.000-07:00

Stock Trading - Understanding Stock Market Trends

When stock trading it is wise to trade with the trend. Let the trend be your friend is a quote that is often heard.

As a small investor you cannot fight the billions available daily in the stock market, so you need to identify the trend and go with it.

But how do you decide if a trend is continuing or coming to the bend at the end?

There are four rules, which will help you determine whether a stock trend is valid:

A trend needs 3 or more data points i.e. the chart needs to touch the trend line at least 3 times - two is not enough !

Look at the gradient/slope – The gradient needs to be steep but not too steep, if it is too steep there is a greater likelihood it will correct itself.

The duration of the trend is important - monthly stock charts are more significant than weekly charts which are more significant than daily charts.

The longer a trend is in place, the greater its significance and the more difficult it is to buck the trend.

Stock market trends are one of the most powerful tools available in technical analysis and need to be studied carefully if you are interested in learning about stock trading.

Stock Trading News

2009-03-26T13:35:00.000-07:00

Stock Trading News - Why Trade Stocks ?

So you want to trade stocks? You probably know that despite the recent stock market crash buying and selling stocks is a fantastic way to become rich. Stocks and shares can make you money while you sleep, provided you choose the right stocks to trade of course.

When you trade stocks and shares you are buying into investments that consistently outperform all other investments in the long-term. This is also an unprecedent time in stock market history as it has never been easier to open a stock trading account with an online stock broker and trade stocks online with all the real time quotes and prices, and real time charts that you could ever want. Just like a professional stock trader or investment manager.

Since 2007 there has been a stock market crash of historic proportions with the DOW, Nasdaq and S&P down around 50%. However, don't forget that the second richest man in the world Warren Buffett aka the Oracle of Omaha became rich purely by trading stocks, or more accurately, by investing in stocks, as he does not like trading stocks short term, he prefers to buy and hold stocks for the long-term - at least 5 years but usually a lot longer. He also re-invests any dividends.

It is interesting that Warren Buffett started buying stocks again back in October 2008 after not doing any stock trading for many years, as he considered that all stocks were way overpriced and that there were no profitable stock trades to be had. He has now changed his opinion and although he was too early by deciding to invest in the stock market again back in October he is nevertheless confident that over the long-term his stock trading investments will prove to be profitable.

Long-term buying and holding of stocks is a far more sensible option than trading in and out every day, day trading, unless you are exceptionally gifted. Oscar Carboni is a day trader of stocks who appears to get it right more often than he gets it wrong, he also offers a lot of stock trading advice online and live for free !

According to Mr Carboni we may be seeing a fundamental shift in the stock market. He has been selling stocks since October 2007 when the stock markets peaked, turned around and plummeted. Now, however, in March 2009 he has just changed his position and is cautiously buying back into stocks. Because he is a day trader he trades stocks each day sometimes more than once and closes his positions so that he does not hold on to any stocks that he has traded overnight.

There is a lot of money to be made on the stock market. How do we know this ? Because people have lost millions trading stocks ! It is clear therefore that if you can lose millions trading stocks you can also make millions on the stock market.

We may well be at a historic point in the stock markets, at the beginning of a long bull run after the worst bear market since 1929 and the great stock market crash. The current uptick could, however, also be just a short-term blip that may last a few weeks so take care if you decide that you want to get involved in stock trading.