In spite of repeated bad news about Greece, Portugal, and the Euro zone, the market seems to be ignoring the uncertainties there and many analysts seem to be of the opinion we are in for a few months of bullish stock market activity.

Our objectives
The objective of this stock market basics website is to introduce newcomers to stock market trading in a number of ways, such as by pointing out well-known guidelines to manage risk in buying and selling stocks, by providing examples of stock chart analysis and techniques that can aid the trader in deciding when to enter or exit stock positions and, from time to time, engaging in paper trading activities.

Time for a new paper trading exercise
Now might be a good time to undertake any other stock market basics paper trading routine to see whether we can show how profitable trades may be made if the market really does continue its upward progress for the next few months.

Stocks for paper trading
Following my usual methods for finding stock candidates to trade, as explained elsewhere on this stock market basics trading website, I will make a pretend purchase of approximately 10 stocks and set up a Finance.Yahoo portfolio to track them live in real time on a day-to-day basis. In that way we can see whether our methods of selecting stocks and the guidelines for trading him are effective. And it can be fun if we choose winning stocks!

The selected stocks will be chosen after reference to their stock charts to see that they exhibit one of our typical breakout patterns that we believe indicates potential continued price gains. For illustrative purposes I will use the StockCharts.com charts that are available free of charge and which I urge others to also use for reference purposes. StockCharts.com also has paid services that are worth looking into for the active trader.

The stocks (by symbol) with closing prices as of February 6, 2012
HAL, TER, ELN, NUAN,  NVDA, HXL, ASML, UPS, SSO, QQQ

For future reference, I will try to post charts for some or all of the above stocks tomorrow.

Some of the articles listed below are older topics posted to this stock market basics website in the past that may possibly of interest for reference only.

Note: Click on the charts for a slightly enlarged and sharper view.

Chart of S&P 500, January 20 at the close

A mere glance at this stock index tells the story
The breakout occured with the move above 1300 and its continuation on the following days.

But many traders recognize the possibility of a fallback and will be watching events in the near-future carefully, However, more than one hundred corporations will soon be reporting earnings and prospects and if these announcements are good, as expected from previous indications, then we could be setting up for a move up to the 1360 high reached late last April, 2010, see chart below.

Chart of S&P 500 Showing 2010 Maket Top

A simple interpretation for stock market beginners
As can be seen in the first chart shown above, the most recent upward trend commenced towards the end of December, when the market closed above the 20-day moving average shown by the blue line.

After moving up from the December low at about 1160, it can be seen that there was a steady upward climb over the following weeks until early January 2012, when it began to consolidate, as it often does, moving mostly sideways. But after a few days of difficulty getting above 1300, an obvious resistance level, it finally broke above 1300. That 1300 now becomes a first level of support should the market experience a turn down.

Editor’s Note: I should have removed the Blue and Red lines that run accross the chart, they are not relevant at this stage although the blueline which shows the 50 day moving average is considered by many to be important and defines a level at which stocks should not be below in a bull market phase. The Red line is the 200 day moving average line, also a key reference level in some circumstances.

About the Stock Market for Beginners
Being a website targeted at readers who are new to trading and in the early throes of learning the stock market basics, I urge every newcomer to become acustomed to looking at stock charts in the simple way that I do and illustrate here on this Stock Market Basics website. There are postings about stock charts elsewhere on this website.

I also constantly urge anyone new to trading and now wishing to learn the stock markete basics before actually diving into the waters of stock speculation, to read, listen, and watch, whenever possible, to begin to build a fund of practical knowledge and trading tips. I have often listed such sources on other posts on this website and will just mention one source I myself like to check out from time to time, never knowing what I may learn. Today’s suggestion is to go to Finace.Yahoo.com’s Daily Ticker — you can find it by going to the Yahoo.Finance tab at far left at top of the Home Page, under the “Exclusives” drop-down box. This one specifically is worth a visit now: Gut Check Coming.

I do not like the term “dummies” and I only use it here to make a simple point, not to put anyone down, so to speak. The truth is that without an understanding of the stock market basics, it is unlikely a trader will be successful and without a knowledge of basic guidelines to follow, trading would often be no better than leaving your money at the casino.

Start small and learn the “ropes” gradually
When someone has been around the block a few times and traded in the “Market” for years, their first word of advice to the eager newcomer is that this is not a game. This is not betting on the Broncos vs. the Patriots, this is business with your money and your retirement as part of the equation.

You can make money by trading stocks, but some losses are inevitable
I would suggest that it is best to start in a small way so that any losses that may occur will not be devastating but can be limited to an amount that can be tolerated and can be seen as a cost of a learning process that brings you out of the “stock market for dummies” category. There are ways to limit losses but it takes action. And everyone experiences losses, especially in the early days of learning how to trade.

Stock brokers and education
You need to approach stock trading with a maximum of education even if you use a broker. The stockbroker wants you to make money and to continue to make winning trades, because that’s good for business. But the brokers have their own agenda and you need to understand this if you use them. They get their commission in part for trading stocks and selling what the company finds attractive. They are not in business to see your portfolio increase since they do not get a percentage of the “profits” but rather they receive sales commissions. It is to their advantage to have you buy and sell stocks since they make their money on trades. That said, many brokers are good guys with your best interest at heart, but be aware.

Read all you can, books and items by William J. O’Neil, Peter Lynch, and others and columns such as John Waggoner’s in USA Today on Fridays for example, or go to the website SeekingAlpha. The more you learn the better you will be able to assess the merits of the information provided. Not everyone comes to the same conclusions about given stock or market situations, so with conflicting viewpoints offered, you, the trader, must make the judgement – aided by your existing fund of knowledge and accumulated experiences. The more you read the more you will understand and the better investor you will likely become, but it takes time and effort.

Online trading
But most trading is done online these days, without the aid of a broker, especially in the case of the small trader, who is classed in the category of “retail trader” as opposed to the bigger professional traders whose combined actions comprise, by far, the greatest portion of all trading in the stock market and thus responsible for most of the movement in their underlying stocks of interest.

The stock market is not for the faint at heart, but there always opportunities to make money. Buy and hold may not be the best option as the market has periods where it swings like a tempestuous pendulum.

So what are some of the basic guidelines?
While these suggestions are aimed at the so-called stock market for dummies category of newcomer to trading, actually they also often guide the decisions of some of the biggest, most successful, and most famous traders of all time. These guidelines, and many others, are discussed in greater detail in separate posts elsewhere on this website and can be found listed there by going to: Stock Market Basics Guide. The more experienced and expert trader can successfully break the rules and still make gains but for the beginner, such rules should be learned and adhered to.

Up or down markets
As a trader, you can make money in the stock market regardless of whether the market is moving up or down but the beginning trader is usually more comfortable trading when the market is primarily moving up over a period of time.
So from that comes a basic guideline:

• Don’t trade against the trend. Don’t buy stocks when the market is falling, if there are stocks that you believe are really worth more than their current price in a falling market then wait until they reach a “bottom” and turn around, once that is confirmed, they can be bought on the way back up. Do not “average down”.
• Cut losses early. Sometimes expectations for your stock don’t pan out, be alert, if the stock starts to decline, regardless of the reason (which may not be connected to the actual stock itself) be ready to sell. If the stock price falls by about 8% or so from its recent high, it’s time to exit the position. Take the money and move on.
• Let your profits run. When a stock does rise in price the objective is to capture as much of the potential gain as possible, without being too greedy and waiting too long of course and having to watch those gains evaporate. Remember, however much higher the price, you won’t book a profit until the winning stock is sold. It can be tricky sometimes. There is a trading routine called a “Stop Loss” that might be appropriate in this situation, explained elsewhere.

There are many more guidelines to become familiar with but I will just close with an often quoted rule attributed to the great Warren Buffet:

• Rule #1 Do not lose money
• Rule #2 Remember and follow Rule #1

On the positive side, it is an election year, which historically provides a profitable stock market, although this is still a time highly negatively impacted by the Eurozone financial problems and also potential crisis situations in the middle east. However, short term we should be ready to take advantage of an up-trading market that appears to be forming but subject to breaking through current resistance levels on improved volume (higher volume).

For the week commencing January 09, 2012, as a cautious small trader, I am watching the S&P 500 index (SPX), since it represents the broader market than does either the DOW or Nasdaq.

Right now, as can be seen in the chart below, it has paused at about 1280, just below the resistance level shown by the yellow horizontal line on the chart, having moved up gradually from the previous low just above 1200 around December 19 when we last posted the SPX chart here.

Chart of S&P 500 Index, as of 09 January 2012, 3:00 pm

Still waiting
We were waiting then, and we wait now, but if the market can move higher and break through the present resistance level at about 1285 (let us say a close above 1300 would be a god sign, especially if accompanied by increased volume) we could reasonably expect some gains in the following weeks for stocks which have good earnings potential and some have already established breakouts through their own individual price levels.

Target
The target for the S&P Index would be to get back to the previous high of late April, 2011, around the 1370 level. There will probably be some ups and downs but that target seems realistic to me.

Learn about stock charts
That is why it is a good idea for beginning traders, who are learning the stock market basics, to learn as much as possible about stock charts and how to interpret, at least at a simple level, the price and volume activities the charts depict. What I mostly look for is a breakout from a trading range, or a breakout above a resistance level or below a support level. Most of those simple aspects are referred to elsewhere on this Stock Market Basics website, but there are plenty of other more detailed sources that can be found with a little effort.

The objective of this stock market basics website is to provide information to the would-be stock market trader in order to provide an introductory level of basic information to help guide future stock trading activities.

 The motivation to start trading in the stock market is to make money. However, the stock market is frequently where people lose money fast, especially those with little knowledge and who are unprepared for the unexpected reversals the stock market so often exhibits – as it has been doing in recent weeks.

There is a saying “If you think education is expensive, consider the cost of ignorance”. I think that trading in the stock market validates that aphorism. Stock market trading can often be a challenging pursuit for even the experienced and best informed participants.

 Basic rules to trade by:

Trading rules cannot guarantee a profit but it can really help to know them, understand them, and follow them. Many well-known and proven unofficial trading rules, which we refer to here as the stock market basics guidelines, are followed almost automatically by experienced traders. Among the most fundamental are the following five:

1. Trade with the trend. Be sure you know the current trend, whether it be up or down or sideways. A stock chart will inform you at a glance whether a trend is rising or falling or sideways. A sideways trend is often referred to as being “rangebound”.
2. Cut losses quickly but let profits run. Risk management at it’s best.
3. Bulls make money, bears make money, but pigs get slaughtered! A modification of # 2 is: Be ready to take a profit. While not wishing to exit too soon from a winning position, reversals can often occur quite suddenly. If you are not alert to that possibility a nice apparent profit evaporates quickly, keep in mind, a profit only becomes a reality when a winning position is sold.
4. Do not add to a losing position. When already holding a long position, do not average down, meaning do not buy more stock when the stock’s price declines substantially as indicated by it’s falling trend line.
5. Buy Strength, Sell Weakness. Stocks that trade up to their 52-week highs frequently continue to trade even higher. Stocks that trade at their 52-week lows are more likely to continue to go lower.

A look at the broad market as depicted by the S&P 500
A quick look at the weekly chart for the S&P 500 stock index indicates we are mostly range bound at this time, 21 December, 2011. Perhaps the first thing that many traders are looking for is a breakout above the trading range and to a continuation above the 50 week moving average, shown as the blue line in the chart below. Another possibility, of course, is a breakout on the downside to below the 200 week moving average, the red line on the chart, but that is less likely I  believe.

Much of the recent activity has been governed by the uncertainty regarding what will happen in the euro zone and whether the several financial crises there will be overcome. The stock market dislikes uncertainty.

Chart of S&P 500 21 December 2.17 pm

What’s in the near future?
I was just reading that, except for 2008, most recent election years have provided positive upside gains, so that would be a good starting bias going into 2012. Also, most corporate earnings projections are strongly positive, giving additional reasons for optimism that we can end the year in strong fashion with an equally positive following quarter through to the end of March.

While it may be best to stay on the sidelines at this time we should be ready with some potential stock candidates to trade if and when we break through the above-mentioned blue 200 moving average resistance line, which could be very soon.

On the October 14 weekend, two weeks ago, we posted the following chart of the S&P 500 that showed the market had closed right at the upper boundary of a trading range that it had occupied for about 10 weeks, asking ourselves whether we would move up or down from there.

Note: Click on the chart for a slightly sharper view.

Chart of SPX 500 14 October close

The second chart below shows what subsequently has happened and updates the market action until the close on Friday, October 28, as depicted by the S&P 500 index. The chart shows that the breakthrough above resistance has actually occurred, helped mainly by both positive corporate earnings announcements and a lessening of tensions and uncertainty about the European debt crisis concerning the bailpout of Greece. But the problems of Greece, Italy, and Spain are still acting like a cloud hovering over the market, so possible reversals must still be watched for.

Chart of S&P 500 28 October

The Market currently overbought
The Relative Strength Index (RSI) shown at the top of the accompanying chart indicates that the market is in overbought territory. That usually means we can expect a small correction, so rather than chase the market at the current highs, many traders will await the expected dip before taking a position or two. If there are no negative announcements to roil the market, support should follow, making this a suitable entry point.

With many quality stocks currently at low prices, we are hoping that more big-time players will return to the market providing an increase in volume and a continuing uptrend in stock prices as we head into the year end. If that does happen, our Stock Market Basics Paper Trading Portfolio, shown below, has many of the right stocks that can illustrate typical stock price patterns that occur and that traders can often use to assist them in determining the entry or exit levels at which to take action on stocks of interest. For instance, the recent breakout, shown by the green arrow on the chart, would be considered by many to be an entry signal.

We should review the stock charts of each of the ten stocks in the Stock Market Basics paper trading portfolio to see what signals they provide, if any, and from there we can follow their progress for a while to see whether those apparent signals really were predictive.

A good example of increasing daily volume accompanying an accelerating trend direction can be seen on the charts. It was for a relatively short period and it accompanied a downward trend. The vertical bars along the bottom of the main chart (not the smaller MACD chart) represent the trading volume for each day and from late July until about August 10 thay show that an increase in volume occurred.

Here is the Stock Market Basics Portfolio/Watch List  as of market close on October 28, 2011:
(Our target is to gain an average of 25% by year end or soon after.)
The previous version as of October 14 can be seen here.

Stock Market Basics Portfolio - Watch List as of October 28

After a good week for the S&P 500, as can be seen on the chart below, and the Alcoa announcement of a few days ago, Earnings Season has arrived.

While Alcoa’s quarterly earning were a little under the street’s reduced estimates,  they carried with them a positive outlook projecting future growth that could fuel stock market gains going forward. The chart tells the story to date where, for almost 3 months, the S&P has been confined to the trading range indicated between the two horizozntal green lines on the chart below, the uncertainties over the European debt situation have greatly contributed to the highs and lows of the period.

Conclusion
However, for small traders like us, it pays to be patient until we can see a confirmed breakout, either up or down, before re-entering the market. The charts will indicate when that occurs. Meanwhile, our Watch List/Trading List is still in force and valid for our future paper trading activities. At this time, the group of stock as a whole is currently showing an acceptable accumulated small percentage loss (1.1%) since it was initiated in September, but we know the list includes some very good stocks at depressed prices.

However, with the high volatility in the market of late, triggered by continued uncertainties on several fronts, our list may well show a much larger loss over the short term, although a series of good earnings announcements should help the cause, but generally it is hoped that the market will eventually breakout above the levels indicated on the above chart and provide good results into the end of the year.

Explanation: Why we Paper Trade stocks
The stocks in the list were assembled with a bullish bias, and are referred to here only as a learning device. Watching the stocks in real time as they trade over a period of time in this way, enables a newcomer to watch what happens as the stocks fluctuate in price but without actually having to participat using real money. Observing the stock market price fluctuations and seeing the trading price activity depicted in the form of a stock charts should help the observer to identify patterns that typically occur and tend to be repeated by other stocks at other times, the point being that some patterns tend to be indicative of future price movement.

Watching and interpreting the stock charts is sometimes referred to as ‘technical analysis’ although it is not a science or mathematical based activity, but for many who use the stock charts in this manner, it can be helpful in supporting decisions to enter or exit a stock position.

Our Stock Market Basics Paper-trading Portfolio
The Stock Market Basics Paper-trading Portfolio can be seen separately by using the computer mouse to click on the chart below. The chart is obtained from entries made on Yahoo.financ.com, and updated in real time on the Yahoo site with a 15 minute time lag. The data shown below summarizes the paper trading positions as of the close of trading on October 14, 2011. I find Yahoo Finance to be a very useful site for not only tracking a portfolio but also for obtaining up-to-date charts and news on individual stocks merely by entering their respective symbols in the “Get Quotes” box at to left of the display (beneath the HOME tab).

Paper-trading Portfolio October 14

It’s early yet, but we need to get acquainted with the stocks in our portfolio and how they are performing in the real-time stock market. The stocks and their performance are shown on the chart at the end of this post, the chart has been obtained from the Finance.Yahoo.com website that allows anyone who registers with Yahoo to enter a list of stocks to track as a portfolio or a Watch List, free of charge, and which Yahoo then updates constantly during the day as the stocks fluctuate in price — a valuable resource that everyone wishing to learn about the stock market basics should become familiar with and use.

While we are mentioning resources, another one that’s free that the stock market basics learner should be aware of and utilize frequently is StockCharts.com — a great chart source where the display data can be modified by the user to suit individual time and indicator preferences, and moving averages, among other variables. That is where we get the charts we use on this website.

Before reviewing the entire list of the stocks in our new paper-trading portfolio, let us first take a look at the chart of the S&P 500 index, that shows the action of the general market to date — this can be compared with the chart of the S&P 500 shown on our post on September 1st — or you can just observe on the following September 16 chart what action has occurred in the 2 weeks since September 1st.

Note: Click on chart to enlarge slightly for a sharper view

Chart of S&P 500 to September 16 close

So what do we see on the chart?
There have been some down days and some up days since we announced the opening of our new Stock market Basics Paper-trading Portfolio on September 1st, when we started by buying stocks, ten in  number, that we can follow from that date on, observe their progress and make trading decisions based on some simple Stock Market 101 type guidelines that are easy to follow and easy to understand.

We also need to make frequent reference to the charts of the individual stocks, listed below. In future postings to this website we can illustrate and discuss their charts, a few at a time, and also list the “attributes” that we look for in order to confirm that they are appropriate to hold for future gain. Or, if the stocks are failing, as in the case of MPEL in the list below, the chart patterns will support our decision to exit a position and take a loss if necessary — and before it becomes too large a loss. Losses in trading stocks are inevitable, there are many unforseeable forces and events that can impact a stock or the stock market in general,  but remember the axiom: “Let profits run, cut short losses quickly”.

On the S&P 500 chart above, we show the 20 day and 50 day moving averages, a blue line for the 50-day, a green line for the 20-day. Both are important for most chart watchers who consider them as technical resistance or support levels when stocks trade in their vicinity.

We can see from the chart that the last 5 consecutive days are up-trending days, very promising, and we can easily identify a couple of price levels to break through to make that trend more convincing — those are: the August 31 high at about 1220 (we closed Friday last at 1216), and the 50-day moving average in blue at around 1230. And then there is the major target, if we can reach it, at around 1340, the previous high of August 22nd or thereabouts. So that gives you an idea of what I call the stock basics 1010 approach on what to look for. We also will soon have the next quarterly earnings report season to look forward to, meanwhile it is hoped that geopolitical events and the European financial uncertainties do not create additional havoc for us as they have done in the past, not to mention action at home in the U.S.

Here is our paper-trading portfolio list:

Portfolio Performance as of September 16 close

Note: Click on the chart below to enlarge for a sharper view.

Chart of S&P 500 31 August close

The S&P Chart shows that the market has closed above the 20-day moving average line, shown in green on the chart, and the stock price has also closed above the recent high just above 1200 — and those are the patterns that we accept as the confirmation signals. Therefore, based on that assumption and following up on yesterday’s post to this Stock Market Basics website, in which it was mentioned that: “ . . . unless the market falls quickly back to the previous lows, around 1120, I will take paper trading long positions in all those stocks above their 20- dma’s”, we are now in the process of buying stocks for our new paper trading portfolio to which we have given the name “Stock Market Basics Guide – August 2011″.

The new portfolio includes the stocks mentioned in the recent posts on this site and I have used today’s closing prices as our starting point. The stocks and prices have been entered on the Finance.Yahoo.com website under the Portfolio tab which is only accessible via an I.D. and a password — however, to show what is happening from time to time, win or lose, I will display periodic updates on this Stock Market Basics website. Yahoo updates the chart constantly as trades occur throughout the trading day.

The opening positions are shown in the chart below.

A note of caution

It is important that anyone reading the material on this website realizes that the references here are not real trades that are backed by cash but are merely simulated paper trades that are tracked in real time. We use this method  called paper-trading in order to help discuss the stock market basics that might be of interest to newcomers to trading who wish to observe how the market works and hopefully learn what happens when events impact the market in general and some stocks in particular. It is well known that events not directly connected to the individual stocks have a disturbing affect on the stock market. Events such as the unrest in the Middle East, or natural disasters — Japan’s Tsunami comes to mind —  and the uncertainties of the financial stability in the Euro-zone, and even those of the U.S. affect the market and can upset forecasts and expectations.

I would also like to mention that the interpretations of the stock charts that I discuss on the Stock Market Basics website are totally my own and may not turn out to be at all reliable as events unfold — and that is the reason why the stock references are for simulated trading on paper only — it is too easy to lose money, especially as a beginner, when trading stocks without a deeper understanding of the process. We need to learn by observing what typically happens as trade positions evolve in the day-to-day market place.

And dissenting views of the day — important to know, a further note of caution

On today’s CNBC television show Fast Money, almost all the trading expert participants expressed the view that the market will go lower, will retrace to below the August 8 bottom (the opposite of what I’ve been saying above) and will probably do so starting next week. September is traditionally the worst trading month of the year, meaning losses can pile up, and that may last through October as well. Some believe that the current rally can be significantly attributed to short covering and they would rather be selling into it than buying. To really provide an upward impetus, we need to see stronger economic data from here on out to the end of the year and beyond. A point well taken.

Another reason to trade only on paper!

The new paper-trading portfolio
Shown below is the new Stock Market Basics Portfolio – August 2011, with 10 stocks purchased on paper at the August 31 closing prices. As indicated in the Gain/Loss column, everything is at zero right now — but tomorrow there should be changes, after 4 days of the higher highs that we can see on the S&P chart above, I would not be surprised to see a small correction about now, that would be quite normal — but a drastic fall-back would be important. As this portfolio chart is updated by Yahoo it will be posted here from time to time so that progress can be tracked in real-time.

It is worth noting, even before trading starts for us, that some of these stocks made gains today and others made losses — our objective is to minimize losses and maximize gains — that takes careful attention and risk management.

Exit Strategy
We must have a general plan for when to close out our positions. For a gain, if any, the general targets are for a 25% to 30% and for a loss, should it occur, we’ll set that at -8% to -9%. The stock chart patterns will help us be more specific in choosing the actual exit price.

SMBG Paper Trade Portfolio - September 01, 2011

Finally, to repeat from yesterday:
The objectives of the Stock Market Basics website
The comments and suggestions on this website are targeted at newcomers to the stock trading arena who wish to learn about the stock market basics. By illustrating our stock picks with charts, and paper trading them in real-time, we try to give the newcomer to trading an understanding of the trading process, how to choose and qualify stock candidates and how to recognize possible entry and exit signals that might be provided by the stock price patterns that evolve and can be seen on the charts. That information, and a set of simple guidelines that are meant to minimize risk and manage trading capital are the essential stock market basics we wish to convey. Win or lose (on paper), the actions that we take and illustrate on this website should help teach us the basics.

Anyone who has read the recent posts to this Stock Market Basics website would be aware that I have mentioned that the key reference line on the chart is that of the 20-day moving average (20 dma), shown as the wavy green line on the chart — that’s just my own opinion of course, as are most of the interpretations of chart signals expressed here. What we’ve been looking for is what we are seeing on today’s chart, shown below, and that’s a close of trading at above the 20 dma level after moving up from a series of trading “bottoms” that occurred just above the 1120 level.

The next challenge for the S&P, if it continues to move upwards, is to penetrate through the 50 dma at around 1259, which is also a former support level established in late June of this year.

Not everyone will agree
For many, that will not be a convincing enough of a signal to re-enter the market to the upside, especially since the trade volume is not too great for the day. The volume is indicated by the vertical bars in color at the bottom of the main chart. Here is an article that warns Stock Buyers Beware, worth a read for sure.

But to me the S&P chart looks promising and with another good day like this today even if there is a small reversal tomorrow, I will be ready to start buying stocks for our next Stock Market Basics paper-trading portfolio.

But some are saying maybe?
As for my comment above that not everyone is in agreement that we’ve reached a market bottom, after completing this article I came across a piece on the internet, on MaketWatch by Mark Hulbert, titled Leading Indicator of a new Bull Market — We will have to wait and see!

On the Watch List
Almost all of the stocks that we have on the Stock Market Basics Watch List, referred to with selected stock charts in out last post, are already above their own 20-day moving averages. They also have what I consider as a secondary confirming Buy signal, one that I like to follow, known as a cross-over of the 5 dma and  the 10 dma lines.

Also, another crossover that I like to see, not necessary followed by too many, is the MACD — it appears in the small graph below the main chart — shown below as black and red lines.

Not Scientific
I should mention that such chart “analysis” as I am referring to here as signals is certainly not scientific but is based more on the expectation that it depicts patterns that have occurred thousands of times in the past and that a sufficiently good percentage of them have proven to be predictive of a profitable outcome — enough to warrant them being taken into consideration, together with other attributes.

Stocks to trade
The Watch List compiled to date (with today’s closing price in brackets), includes ALXN (57.02), CTAS (31.50), WYNN (147.11), LVIS (45.81), MGM (11.16), and MPEL (12.57), plus a new addition in TIF (71.52), and only MGM and MPEL are still blow their 20 dma.

So, unless the market falls quickly back to the previous lows, around 1120, then I will take paper trading long positions in all those stocks above their 20- dma’s.

The objectives of the Stock Market Basics website
This website is targeted at newcomers to the stock trading arena who are wishing to learn the stock market basics. The purpose of illustrating our stock picks with charts, and paper trading them in real-time, is to give the newcomer an understanding of the trading process, how to select and qualify the stock candidates and to how to recognize the potential entry and exit signals that may be provided by the stock price patterns as they evolve and show up on the charts. That information together with a set of simple guidelines to minimize risk and manage trading capital are the essential stock market basics we wish to convey. Win or lose (on paper) the actions that we take and illustrate here on this website should teach us something.

Note: Click on the chart below to enlarge for a sharper view.

S&P 500 Index Chart for 29 Aug close