Back on November 1st, 2011 is when I first noticed the signals that the markets were going to move sideways. I informed subscribers to my “Go With The Flow” Index Trading Strategy to move to cash.

Two weeks later on November 15, 2011 I noticed the S&P was forming a triangle pattern. I immediately released the first post in this series alerting all my readers to this pattern and to the upcoming move.

Just as I predicted, the move occured the very next day as the S&P broke out of it’s triangle to the downside. This was the signal to go short on the S&P. To short the S&P, all you need do is buy SPXU. It goes up when the S&P falls.

On November 20, 2011 I posted the second post in this series. I once again alerted my readers here that the S&P broke through it’s support and it was time to short the S&P.

Now that it was clear the S&P was falling it was time to buy SPXU. The new question is, when is the right time to exit SPXU?

To find the answer we turn to a post I did back in 2009. In that post, I described the Symmetrical Triangle Pattern and how to use it to tell when is the proper time to buy and sell a stock (I used IBM in the example). You can use this same strategy whenever you see an index form the triangle pattern.

In the graph below I’ve plotted the proper times to trade the S&P 500.

Since the S&P broke out to the downside, the proper time to buy SPXU (an Exchange Traded Fund that goes up when the S&P goes down) is at the open on November 17, 2011. SPXU opened at $15.06.

The proper time to sell is when it reaches line 4. That occured November 25, 2011. SPXU closed at $17.05 giving us a gain of 16.2%.

If you remember the rules for the Symmetrical Triangle, the support line (or sell price) is calculated by taking the height of the opening of the triangle. This is the difference between the #1 (around 1290 on the S&P) in the above graph and the #2 (about 1214 on the S&P). 1290 – 1214 = 76.

So there you have it. Now all you need do is figure where the S&P was when it broke out to the downside (around 1236). You then take that number and subtract 76 (1236 – 76 = 1160). Line 3 in the graph above represents 76 points on the S&P.

So now you know to close SPXU when the S&P hits 1160 (which it did November 25, 2011).

OK now that we close SPXU it’s time to profit off the S&P as it goes back up. To do that we buy UPRO. It goes up when the S&P goes up. On November 25, after we close SPXU we now move into UPRO. UPRO was $47.61 at the time.

Now that we are in UPRO, we need to calculate when we should close our position. To do that we once again turn to the rules of the Symmetrical Triangle.

The line marked “5″ should now be the resistance line. That is when you should close UPRO. The S&P hit that line on December 1, 2011. At the time UPRO was at $58.71. With a buy price of $47.61, thats a gain of 23.3%.

Now if you take your investment and make 16.2% the first time, then roll it all over and make 23.3% the next time, you would now have a compounded return of 43%!

Where is the S&P going next? I’m predicting it will move lower and trade within the shaded area (see the graph above), or at the least , move along line 5 in the short-term.

Rules for the triangle:
http://www.stocklocater.com/content/symmetrical-triangle.html

Previous posts in this series:
http://www.stocklocater.com/content/market-outlook-for-november-2011.html
http://www.stocklocater.com/content/market-outlook-for-nov-20-2011.html

Click here to learn more about my “Go With The Flow” Index Trading Strategy.

In the post I said the market is about to make a big move to the upside or downside starting on Wednesday of last week. As we see in the below chart the S&P fell for three days straight, broke through it’s support line, and now lies at it’s lowest point in over a month.

I take it you all followed my advice and moved to cash and protected yourselves from losses, good job.

Now we are ready to profit off the markets next big move. I see it happening around Tuesday, maybe Wednesday, of this week. I see a potential gain of 10% in a matter of days.

In the S&P chart below (chart as of November 15, 2011) I’ve marked some green lines that are showing the S&P’s support and resistence. If you notice we have a wedge pattern that the S&P has been trading within for the last two weeks.

I’ve marked a circle on the chart. That circle was when I told subscribers to my “Go With The Flow” Index Trading Strategy to move into cash. As you can see the S&P is currently in the same spot it was back on October 31 when we moved to cash. We have been going with the flow.

Soon the S&P will break out of the current wedge and by the looks of things, it could happen as early as Wednesday the 16th. As soon as you see the S&P close above or below the green line, that’s your signal to go long or go short.

If you don’t have the time to monitor the markets, or are not sure what to invest in when the signal comes, join my “Go With The Flow” Index Trading Strategy. I’ll email you when the time is right and I’ll email you what I’m buying to you can copy and do the same as I. Easiest way I know to trade.

In the graph below you’ll notice the head and shoulder with a neckline (support level of the two shoulders) at 1250 on the S&P. Once the S&P crashes through the neckline, then the H&S is officially formed. Before that, it could rise and create a different pattern.

To figure the bottom, you normally take the height of the pattern (from neckline to top of the head) and subtract that amount from the neckline to get the bottom.

Since the neckline is at 1250 and the top of the head is at 1370, that gives us a height of 120 points. So taking the neckline at 1250 and subtracting 120 will give us a bottom at 1130.

The S&P has played with this area on several occasions recently. Check out these days and the S&P lows on those days:
8/8 – 1119
8/9 – 1101 (the day I claimed we had bottomed)
8/10 – 1118
8/11 – 1121
8/18 – 1131

The S&P has been bouncing around a low of 1120 on average and today (8/18) it hit a low of 1131. If the S&P hits around 1120 again, that may be a good time to start getting greedy and doing a little buying.

 
Discover more tips on charting the markets with my DVD, “How To Trade Stocks In A Volatile Market.”

So how did he do it? Zanger uses volume and chart patterns as the main criteria in stock selection. He mostly avoids technical indicators, but instead looks for high momentum stocks with 2-3 times the average daily volume exhibiting pattern breakouts. Some of the patterns he uses most are head and shoulders, cups and handles, rising and falling wedges, triangles, and flag and pennants.

In addition, Zanger looks beyond technicals to the fundamentals. Zanger looks for companies with rapidly increasing earnings, a new product or service, strong management and dominance in their market.

A typical day for Zanger is sitting in front of his six flat screen monitors watching the price and volume movements of the selected stocks that have passed his trading criteria. Zanger also spends a large amount of time on the phone with any one of his three brokers when any of the stocks on his watchlist are on the move.

Every night Zanger scans 1,400 stocks looking for the next days trading prospects. Using his strategy, Zanger has shown a knack for locating high-alpha stocks that lead the market, particularly during a major market move to the upside.

Zanger’s final advice is “Trading for me is all about volume and price action. I buy on pattern breakouts when volume is rising, and as long as price is responding well to increasing volume, I stay on board. But when either price or volume stops rising, it’s time to get out.”