X: Bear play, shorter-term rules

United States Steel Corp. (X), headquartered in Pittsburgh, Pennsylvania, broke below its 20-day price channel on Tuesday, March 3. Although it opened still lower the next day, it quickly reversed to the upside, moving back within the channel, thereby negating the bear signal.

[X in Wikipedia]

X

Direction

The negation of the bear signal makes this analysis pro forma.

X's share price was devastated by the Great Recession, dropping from $196 down to nearly $25 in under six months.

In the following years it had a small recovery, relatively speaking, and then a decline that has resolved somewhat into a sideways move.

The right chart, with the 20-day price channel's lower boundary marked, shows what happened to the price over the past few days.

Click on chart to enlarge.

X 10 years weekly bars (left), 2 days 5-minute bars (right)

At this point I can break off my analysis and go straight to the decision.

Decision for My Account

Without confirmation, there is no trade. Even had the signal been confirmed, I doubt that I wold have taken the play, since the price remains above major resistance at $20.13 set on Jan. 26. I'd want to see a beak below that level before opening a position.

-- Tim Bovee, Portland, Oregon,  March 4, 2015

References

My volatility trading rules can be read here. For a discussion of the rationale behind the rules, see my essay, "Rules for very short term trades".

The directional score is calculated as the sum of the following:

• Zacks rating --The Zacks ratings are translated as follows: 1=2, 2=1, 3=0, 4=-1 and 5=-2.
• Enthusiasm rating --: A single percentage derived from the number of analysts whose opinions are in one of five categories: Strong buy, buy, hold, sell and strong sell.
• Strong buy share -- The percentage of all analysts who rank the stock strong buy. If the share is 60% or greater, the score is 1; if 40% or less, then the score is -1; otherwise, the score is zero.
• Ethusiasm momentum -- The score is 1 if today’s enthusiasm rating is larger than the rating 30 days earlier; otherwise, the score is zero.
• 30-day direction -- The trend that best describes the 30-day chart: 1 for an uptrend, -1 for a downtrend and zero for a sideways trend.
• One-day direction -- The trend that best describes the one-day chart: 1 for an uptrend, -1 for a downtrend and zero for a sideways trend.

From time to time I use the number 68.2% in using applied volatility to calculate the expected trading range. This comes from statistics and refers to the one standard deviation boundaries, which are expected to contain 68.2% of whatever is being studied. Putting it another way, given an item (a trade or whatever), there is a 68.2% chance that it will appear within those boundaries.

Elliott wave analysis tracks patterns in price movements. The principal practitioner of Elliott wave analysis is Robert Prechter at Elliott Wave International. His book, Elliott Wave Principle, is a must-read for people interested in this form of analysis, as is his most recent publication, Visual Guide to Elliott Wave Trading. 

Several web sites summarize Elliott wave theory, among them, Investopedia, StockCharts and Wikipedia.


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Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

License



All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at www.timbovee.com.