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ARCHIVE:    JUNE 1999-OCTOBER 2000  

An InvestorLinks article
distributed every market day.

General Electric Co  (NYSE: GE)
Market Call™ for November 27, 2000
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.

The moving average crossover method is one of the oldest technical analysis techniques used in trading. There is not exactly one combination of periods that a trader might use. We use a 5 and 20 EMA in this column.

What is more important is what happens on a signal. I like to call it trading on expectations. If a stock is truly reversing direction, the stock should move up sharply after crossing the longer moving average. If the stock fails at this longer moving average, the average is just resistance as the stock keeps moving lower with the Sell Short signals working, while each long signal fails at the moving average.

Moving Average Crossovers

Moving averages are one of the oldest and most popular technical analysis tools.

A moving average is the average price of a security at a given time. When calculating a moving average, you specify the time span to calculate the average price for X number of periods. For example, 20 periods. These periods may be 5 minute bars, 15 minute bars, 60 minute or daily bars).

The classic interpretation of a moving average is to use it to observe changes in prices. Investors typically buy when a security's price rises above its moving average and sell when the price falls below its moving average.

The moving average crossover method calculates two moving averages, each based on a different number of periods of trading data. When the shorter-term (fewer days) average crosses above the longer-term average from below, this is a buy signal for tomorrow's open. When the shorter-term average crosses below the longer-term average from above, this is a sell signal for tomorrow's open.

The current charts we are using calculate a 5-period and a 20-period exponential MA of the closing prices on 60 minute bars. If the 5-period MA crosses above (becomes greater than) the 20-period MA, you would buy the next bars opening because the system is saying that an uptrend has begun. You maintain this long position as long as the 5-period MA is greater than the 20-period MA. When the 5-period MA crosses below the 20-period MA, the trend is now down and you would liquidate your long position and establish a new short position on the next bars open.

Let’s look at General Electric (NYSE: GE).

After breaking support at 53 on November 13, GE made several moving average attempts to reverse direction.

Each of these rallies was met with new selling and the signals failed.

GE also has a long term support going back to March of this year at 48. If GE breaks below this 48 support, the stock looks to be headed much lower.

It does not bode well for the general market to see market leaders like GE continuing a major downtrend.

GE has just moved up again and is close to giving a Buy signal. If this signal fails, GE will be moving much lower.

The trend is down. If GE breaks below 48 � on Monday morning, I would Short GE at 49 �.

I would place a close stop at 49 7/8.

On a breakdown, GE should continue much lower.

Chart courtesy of
 


Interested in adding Market Call to your website?
Click here for details: Market 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.

 
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Last modified: November 26, 2000

Published By Tulips and Bears LLC