Tape reading the stock market lives in it’s own beautiful world and this volatile trading week was the time to understand how to apply it.
This type of trading has nothing to do with the long-term picture. It’s about learning to read the rhythm of the relationship between the open and the close…between the opening price and the push off the open price… and the distance a stock has moved over the last few days.
Tape reading skills are unique because they discount the big-picture.
If you trade by reading the tape over a 3-5 day window (as I do), the SPY is setting up a perfect sell-short today…
**The SPY sell-short today would trigger IF the first push, off the open price, is higher today. We are set to open lower (7am). The first push in price action off the first trade at 9:30 is what we will be watching for. A lower open and a push lower, off the open, price negates the trade.
Stock Market Today: Map of the S&P 500
(click the map for a full view)
Yesterday was textbook, other than the afternoon pull-back, which also gave you a solid entry to get long again. Today is going to be tough with the weekend here and still quite a bit of indecision. If I was managing prop traders today I would tell them to be careful with leverage.
(click the chart for a full view)
Stocks to Trade | Friday August 28, 2015
- Today’s trading has the chance to be very sloppy and difficult to read.
- If you place a few trades and get poor follow-through, go back to cash and enjoy your weekend.
- Looking the short oil stocks. (see below)
Charts in Focus
XOM bouncing with the rest of the market the last 2 days but over all the sector is still weak. Today should be a solid opportunity to sell-short. Especially if it opens higher into resistance and the 20ema.
(click the chart for a full view)
Earnings in play today > 1M avg shares: BIG
Bullish Ideas ATR/Volume/Price: NFLX, UA, SBUX, NKE, AMZN, V, HS, TWC, GOOG, GOOGL, RAI,
Bearish Ideas ATR/Volume/Price: slb, c, xom, twtr, hal, cvx, cop, qcom, dis, wmt, pg, unp, lvs, txn, dvn, cat, myl, utx, mon, apa, sndk, adsk, apc, twx, armh, viab, bhi, clr, cbs, m, all, vtr, hes, etn, mmm, de, ir, wynn, kss, terp, oke, pxd, gmcr, qrvo, mjn,
Weak Stock Weak Close: fit, rax
Strong Stock Weak Close: CCE
Weak Stock Strong Close: tasr, scty, dvn, jd, wynn, ncr, cvx, clr, twtr, pwr, cop, mur, lvs, cog, oke, sndk, hal, csx, slb, unp, pxd, met, bidu, bp, cnq, bhi, apc, amtd, pru, nsc, urbn, apa, lng, dow, hes, hp, nbl, bhp, txn , mos, pot, eog
Strong Stock Strong Close: NVDA, NFLX
20 day Breakdown:
20 Day Breakout: BBY
2x Normal Volume: slb, cvx, ms, cop, schw, abt, dg, bp, cog, bby, dvn, mon, adsk, nke, scty, adi, ua,
Watch List Longs: BBY, TJX, HD
Watch List Short: kss, cvx, all, cop, ms, hal, slb, bhi, xom, wmt, adm, wynn, lvs, sndk, qcom, hpq, wmt, orcl, emc, txn, dd, intc, klac
Inside days: dltr, wm, xl, qihu, wxc, ccp
Tape Reading Skills Reign Supreme | Volatile Trading Week
Tape reading is not as popular as it was in the old days. Computers have taken care of that.
Savvy traders have adapted and are skillfully implementing tape reading in a much different way today. Chart reading is one method. Another technique is interpreting news and volume traded off the news.
When I say the old days, I am referring to 2007. This is when the NYSE expanded to allow increased amounts of electronic trading. (More on this at the end of the article)
Traders would read the ticker tape (invented by Edward A. Calahan, updated by Thomas Edison) to determine the recent buying and selling pressure. It was much easier to spot a large buyer or seller because daily volume was incredibly light so it was easier to spot a big player. The down side to light volume was liquidity. It could be difficult to exit a trade at a reasonable price.
In the early days there were “bucket shops” to place your trades. I guess you could say they were the first brokerage houses, but without brokers. Prices were posted to a chalkboard as they crossed the ticker tape.
An interesting book to read is Tape Reading and Market Tactics. It is a terrific $7.95 education from 1931. It includes actual numbers and volume from the stock market. A classic trading book to have in your office.
Continue reading more about tape reading…