Plum Education - A Technicians Toolbox

Now what is a trader without his tools? In this article I'm going to share with you all a list of common tools that every professional trader uses in their day to day tactical plans. In the future, I'll share with you which combination of tools I use to make my day to day decisions. For now, take a look at the list and learn a couple of them, understand them, and try to apply a couple of them. See what works for you. Telling you what you should use is not teaching someone to fish for themselves, it's fishing for them. And like I promised, I wouldn't do that to any of you...

Price

• Patterns: Triangles, rectangles, candlesticks
• Momentum: Relative Strength Index (RSI), Stocastics, MACD, Bollinger Bands
• Trend Identification: Trendlines, Moving Averages, Channels

Volume

• Liquidity: Market capitalization, turnover
• Participation: Volume, Cumulative Volume Index
• Breadth (aka Internal Market Indicators, Market Internals): Up Down Volume, Advance Decline Line, McClellan Oscillator, Arms Index, TICK, TRIN, BANK, Market Breadth

Sentiment

• Speculation: Put-Call Ratios, IPOs, Mutual Fund Cash Levels, Commitment of Traders Report
• Consensus: Bullish/Bearish Surveys

Caught Between a "ROK" and a Hard Place

My first real post regarding a stock. Yay! I'll be honest and straight to the point. I am not the greatest at writing and the whole point of these blogs is to just say it as it is and I'm going to do just that. If you've been watching Rockwell Automation (ROK), which I doubt you have, this stock has been on a scream upwards. Bank of America recently upgraded the stock from 26 to $50 just yesterday citing conditions that fundamentals are improving. Improving!? Yes, they beat estimates by four pennies (23 cents, analyst estimate: 19 cents), but this is after they drastically reduced their FY2009 guidance from first quarter from 1.55-2.25 range to 1.40 - 1.70. Who isn't going to beat this quarter's estimates!?


Let's not forget that Rockwell's largest customers include almost all of the automobile companies. Automotive is doing terrible (for lack of a better word) and there are no signs of improvment by the end of this year. Consumer confidence ratings just came in at 46.0 for July vs the so called analyst estimates of 49.3. As long as automotive is in a slump, so too will all of the companies that benefit from their prosperity.

Looking at the technicals, we may see a bit of a push upward since bears (shorts) own about 8% of the shares outstanding giving this stock a 7.9 days to cover ratio and given the volatility of the market, I wouldn't be surprised of another 5% jump before we consolidate. In addition, we also made a move past 39.00 which was a psychological resistance point giving us a bit more room to about 42.50.

But let's not let the upgrades fool us. This month alone has been a 25% jump. I can bet you a dollar that someone (if not everyone) is in the money and just about ready to pull the sell trigger and when they do, I'll be riding on top of that wave with my shorts.

A New Day

We've been doing our best to fast track the construction of Project Plum; however, we didn't realize how much effort there was to get a website up and running. From blogs, to tweeters, to widgets, to newsletter services. The effort is just tremendous.

I guess this is just what happens when you get day traders to plan out a website.