Macromedia
Inc (NASDAQ: MACR)
Market Call™ for January 23, 2001
Contributed by Mark Seleznov, TrendTrader.com.
The purpose of this Market Call section is to
educate readers in technical analysis patterns and indicators. As with all investment
information, you need to research information and consult your financial advisor before
initiating any strategies that are contained in Market Call.
Also, you must realize that as with all trading strategies,
opinions can change quickly depending on market conditions and developments.
This column tries to present historical examples, potential set
ups, and examples of entry and exit strategies.
Failure to Fill the
Gap
Trading the trend can often be a difficult thing to do, especially in a
stock that has had a gap; but it can also be very rewarding. Most traders
believe in the ideology that stocks tend to “Fill the Gap”. This means that
stocks that open significantly above or below the previous days close at one
point in time will eventually fill that price gap. Although this is some
times true, it is generally not a strong move that fills a gap and traders
using this philosophy often get hurt when the main trend continues.
A perfect example of this is INTC. September 21st 2000, Intel gaped down
after bad news resulting in a very active after-hours session. I personally
spoke to many investors buying as much Intel as they could between $48 and
$50 a share. If you have the abitlity to look at a daily chart, you will
see how INTC continued straight down to around $35 before finally bouncing
back to the $47 range. It was here (around late October) that INTC failed
to fill its gap and headed on its way to around $30 a share. This pattern,
or failure of a pattern as it may be, can be seen both to the short and long
side.
Now let’s look at
MACR.
MACR gaped down 01/17/2001 and has had a nice retracement since. Looking at
the open on the 17th, we see the high of the gap at 36 �. I would short
MACR at any point now and put a stop in at 36 �. If you want to limit the
risk some more, wait for a pop up above 35 and then you will have a tighter
stop price, but you may miss the move.
The other option would be to wait for another indicator to give you a sell
signal and then enter the trade. We look at moving averages and MACD on our
charts. If you use these studies, wait till they give you the sell signal
and then enter the trade. You can still use the basic principle of failing
to fill the gap regardless of your preferred study. Just wait for your
study to give the sell signal in the stock and follow it as you would
normally follow your trading plan.
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Call Information
Mark A. Seleznov is a General
Securities Principal and Managing Partner of Trend Trader, LLC, a NASD, SIPC broker/dealer firm located in
Scottsdale, Arizona. A professional trader for over 25 years, Mark was a Market Maker on
the Philadelphia Stock Exchange, a Retail Registered Representative, and futures trader.
Mark is an author and recognized expert in equity Day Trading. He conducts seminars in
Equity Day Trading and offers his firm traders training and support. If his firm holds any
positions in the public companies he writes about, it will be noted at the bottom of his
article.
Market Calls is a daily syndicated column on trading by Mark A. Seleznov, Managing Partner
of Trend Trader,
LLC. For information on obtaining Market Calls for your web site,
newspapers, or publication, contact Trend Trader, LLC at 602-948-1146
Disclaimer: Trading in securities may not be suitable for
all individuals. Consult your broker or other professional to determine your suitability.
This is not an offer to buy or sell securities. The advice given above is of a general
nature and should not be taken as a recommendation to buy or sell the referenced security.
Copyright �
1998-2000 Tulips and Bears LLC.
All Rights Reserved. Republication of this material,
including posting to message boards or news groups,
without the prior written consent of Tulips and Bears LLC
is strictly prohibited.
Last modified: January 25, 2001
Published By Tulips and Bears
LLC
