Charted Territory: Some Trend Lines with That Coffee, Please - TheStreet

Charted Territory: Some Trend Lines with That Coffee, Please

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In my bachelor years, a great Saturday was getting to the golf course early, having breakfast with my buddies, and then going out for 18 or 36 holes of nonstop side bets and chop-busting. To cap it off, we'd down pretzels, goldfish and pitchers of beer back at the clubhouse. A real "guy thing."

My Saturdays now? An early morning bagel with cream cheese, a thermos of coffee and a trip to the Y to take both my daughters to swim practice. No backslapping, no bawdy jokes, no first-tee negotiations. Just me, my newspapers and laptop, and a few other parents with Saturday AM duty. Honestly, I really like my Saturdays a lot more now.

You see, I thoroughly enjoy watching my girls swim. I've never found it monotonous; in fact, just the opposite: I find it soothing. Of course, I'm certain I'd feel differently if it were me in the water doing a 750-meter warmup, but thankfully I'm not asked to suit up. Instead, I can enjoy a peaceful Saturday morning, with nothing more to do than enjoy my coffee and reflect on the market.

Therefore, since many of you don't have the opportunity to join me on Saturdays, I thought I'd give you a glimpse of things I think about; notes I take; and any actions I might put in place. My day-to-day work is done during the week, but it's these great Saturday mornings when I try to get a broader picture, take the opportunity to look at trades outside my GBS methods, think about -- horrors! -- a company's fundamentals, and just generally make sense of what's going on.

Notes from Saturday, Oct. 10:

Gee, everyone's a Gloomy Gus about the market, but I'm looking at a chart of the S&P 500, and to me it looks like a double bottom. Note the extremely high volume near both bottoms. This chart alone makes me a little bullish, especially on the big-caps. It's also helpful that everyone else is now a raging bear. ... The A/D line is awful. Maybe too awful at this point. Didn't I spot 1,000 new lows in the NYSE the other day? That smells a lot like a blowoff. Or, of course, a bear market. But again, the S&P chart says otherwise, at least for now. ... (PVN) PVN and (COF) - Get Report COF are in the news. PVN was particularly notable because the decline of that stock over six days was amazing. And typically, a snapback rally was to be expected. But shoot, that candlestick on Oct. 8 was a dead giveaway that exact rally would happen on Friday! That's not the way I trade, but it's helpful to know these kinds of patterns are good indicators of a short-term move. Darn, though, I wish I had seen PVN earlier. ... (WAMU) WAMU also made a nice move up, and apparently the fundamentals are sound. I'd be tempted to do a little bottom-fishing, but nah, the chart still looks ugly. All that overhead resistance makes it appear sellers are waiting to pounce. Best to avoid this one. ... (RNWK) - Get Report RNWK is also being chatted up in IBD. I downloaded their Real Player stuff, and I really like it. In fact, used it to watch some of that Clinton video testimony. Neat stuff, and would love to own the stock. But, yuck, the big Friday move only brought it back to its 50-day moving average. Pass. ... Hmmm, I really should see what (CSCO) - Get Report CSCO is doing. A great indicator of market health is how the favorites are doing. Interesting: a gap up, but then nothing. Plus, the volume was pretty low for this kind of price action. I'd never buy in this situation, and I'd be tempted to short it. Dangerous to do anything silly, though, with this kind of stock. Just too many people focused on it to make a move, unless it's completely obvious. Another pass. ... I can definitely be a contrarian, so maybe it's time to see how the bottom-ranking sectors are doing. No surprise, oil drilling and money-center banks are stinking up the joint. But now that I look, I remember Seth Tobias at the TSC Summit saying he likes (HAL) - Get Report HAL. Interesting, like the S&P chart, this looks like a clear double bottom. Plus everything fits with this: A respected hedgie likes it; I've traded it in the past; the technicals are there; and it's a company that's obviously out of favor. Maybe I should take HAL on Monday...

Tuesday, Oct. 13: Epilogue

Monday was a pretty good day for the market, but that selloff in the last few hours was ominous. And now at noon Tuesday, the Dow is down 16, and the rest of the market looks even weaker. "Heavy" is how I would describe these conditions. Still, if I had to bet, I'd say the S&P has put in a bottom. Guess we'll find out shortly. ... RNWK was the stock to buy ... before Monday, that is. It's up 7 since the Friday close, but most of those points are from a gap up Monday morning. Nothing to do now but watch. ... Like most stocks, CSCO gapped up on Monday but is now down over 2 points on since Monday's close. I definitely would not like that action if I were long the stock. I came extremely close to adding some HAL to my long-term holdings, but Wesson noted the up volume was nothing special. The risk/reward on this one still looks great, though, so maybe I'll give it a few days more and see how it's doing. It's essentially unchanged from Friday, so I haven't missed anything. I'll file this in my "to watch" list.

So, pretty exciting, huh? A lot of yammering, but not much action. And that's how a lot of my Saturdays are. I think, I noodle, I scribble notes, I absorb and reflect. And then I generally do nothing with all this knowledge other than learn a little and wait for some good opportunities to show up.

And that's what a lot of trading is about. It's really not the action part that's beneficial. It's the waiting for the right moment to act. In the meantime, as long as I have a fresh bagel and some hot coffee, and my girls are getting ready for the short course

season

, I can't think of a better way to spend a Saturday morning.

Gary B. Smith is a freelance writer who trades for his own account from his Connecticut home using technical analysis. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. This column, Charted Territory, appears every Wednesday. Smith also writes Technician's Take, which appears every Monday, and TSC Technical Forum, which appears every Saturday.