Wednesday, June 29, 2011

Technical Analysis

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There is a common statement that technical analysis is not exact science. There are so many researches done, there are some many simple traders and professional institutions focus their attention on technical analysis, that it is difficult to say that it is not a science. It is definitely science but it still not an exact one. It could be compared to the astrology where you take the results of the past historical observations and look for the patterns and then based on the found patterns you build prediction of possible future price trend developments which, of course, are not guaranteed.

The main purpose of the trading on the stock market is to make money or to secure the money. In ether way technical analysis is one of the tools that is dedicated to help a trader in his/her trading. Yet, it is difficult for a novice trader to figure out where to start from, as there a hundreds of the indicators and hundreds of theories on how to use them. It is not easy to find a way in technical analysis. If it would be easy then everyone would be a winner and this is not how the stock market works.

Tuesday, June 28, 2011

Trading Signals

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Overall, the sentiment cold be considered positive for tomorrow's trading session. The Nasdaq 100 has broke its January 22nd high which could be considered as a good confirmation of bullish sentiment. S&P 500, DJI and Russell 2000 are close to break their highs as well.

Another positive sign that would favor bulls on the current stage is that the last two trading sessions' up-move did not generate any strong volume surges and we did not see any high advance/decline readings on the NYSE Composite and S&P 500 indexes. Therefore, we may assume that there are no overbought signals despite strong rally up we had during the last two days.

Another bullish sign is the decline in volatility which is usually associated with confident and positive trading of the bulls.

Wednesday, June 8, 2011

Nasdaq 100

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Nasdaq 100 trading is one of the most popular types of the trading on the stock market. When it comes to this index most traders are referring to the trading of the Exchange Traded Funds such as QQQ, QLD, QID as well as options on these ETFs. Smaller part of investors is referring to the Nasdaq 100 emini futures and Nasdaq 100 Rydex and other index tracking funds.

One of the reasons why this index attracts so many investors is the possibility to avoid complexity of fundamental analysis. When it comes to the stock trading you may find that most of the time you have to spend on the research of your stocks, tracking news about your stocks, analyzing of balance sheets, earnings, company's prospectus and other reports from the companies. In case of the index trading the fundamental analysis is already done by the company sponsoring the index. For Nasdaq 100 index the fundamental analysis is done by the Nasdaq OMX Group. They track all stock from the index's basket analyze their earnings and other reports on regular basis and exclude weak stocks from the listing by placing instead stronger stocks.

As you may see, by trading the Nasdaq 100 you may solely focus on the elements of technical analysis. That is why many institutional and retail investors more and more are focusing their attention on the QQQ and other index tracking stocks. However, ETFs technical analysis is slightly differs from the stocks technical analysis. As a rule, stock traders are focusing their attention on the analysis of the indicators and studies applied to the stock price and volume quotes. However, price movements of the index tracking ETFs greatly depends on the price movements of the benchmark indexes. Such, QQQ trading require to perform technical analysis of the Nasdaq 100 index. In addition to the price and volume quotes, the indexes have big group of the breadth indicators which are based on the advance/decline quotes. Respectfully these data has to be analyzed as well.

Overall I would say that technical analysis of the indexes, in our case analysis of the Nasdaq 100 index, is more complex than the technical analysis of the stocks, yet, as I already mentioned above, you are avoiding much more complex fundamental analysis.

At the end I would like to list some two resources that are essential for trading Nasdaq 100 index:
1. Volume – while most of the online brokers provide index charts free of charge, yet most of them will give you only price charts and it is very important to have access to volume charts and data
2. Advance/Decline – the same as above, you may find some free sources of NYSE advance decline data, however, there are not a lot of online sources of intraday advance decline charts.
The rest of technical data could be usually obtained at no charge from your broker. For Nasdaq 100 intraday volume and advance decline charts – two references above are the only place as I know you where can get it.