A:  A chart, no matter what the time frame, is never too late because it is simply telling us the history of the price action. So the thought provoking question is: Can history ever be too late? From history we learn many lessons and in the world of trading and investing it’s price history that we rely on. For instance, if you were to look at a weekly chart of DIA, QQQQ, SPY and OIH you will see that in all four charts we will see a bullish engulfing pattern. What does history tell us about bullish engulfing patterns? Well, if you study your history you will find that in the majority of the cases, bullish engulfing patterns were followed by price rallies. So there is a very good chance we will see higher prices in these four stocks/ETFs.

Now, what does a chart tell us about risk management? This is the most important message because if we are wrong about the bullish engulfing pattern in the weeks that follow, we need to protect ourselves should the pattern not hold. This means we should be setting our stop prices somewhere below the lows of last weeks price range. Should the stocks go down instead of up, we will limit our loss and be around for another day. History…If you do not remember the past, you are doomed to repeat it.

Q:  In this current market, we continue to retrace lows and violate resistance; what are the signs to look for to mark a bottom of a bear market?  – Greg

A:  First of all we need to make sure we have support and resistance at that right ends of the chart. Support lines connect the low points and resistance lines connect the high points. We are currently on intermediate to longer term support levels in the DOW and RUT. One of the major things we look for is a drop in volume after the volume spikes on these support levels along with prices moving up from the most recent support levels. We are bullish at this point but like I said in the answer to Tim’s question….protect your downside.

Q: BMI looks like good entry point today, is volume ok, and what other risks do you see with this stock from Power E*Trade panel. -Bill M.

A: Today BMI is showing a red candle patter that is called a spinning top. You would typically like to see a green candle the the fact that it is a spinning top indicates a point of indecision. The good thing is that today we had a higher high and a higher low than yesterday. The point you want to watch out for is a close below the 200 day moving average 44.5 to 45. A close below this level would signal and end to your long position. In other words get out if it closes below 44.5.

Q: I have been tracking some stocks KOG, TGC, MBIA and missed the break out when they went up. I am tracking alot of stocks but how do I improve my tracking so I don’t miss catching a run up? -Marty M.

A: We usually suggest that you build a watch list of about 50 stocks that are in upward sloping trends over the past 2 to 3 years. Once you have your stock in the list you would identify the key support levels on each one and set price alerts to notify you when the support level is reached. From there you would wait for the pivot point or bounce off of support and buy the stock. Last thing to do is enter your stop loss order below the support line and sit back and wait for the rally. If you get stopped out just move to the next stock. If the stock moves up as expected then trail the stop loss order to lock in your profits at the stock rallies.