Looking for Bear Trends from Two Charts from a Swing Trader’s View Bear trends can only be realized depending on the perspective of the trader. A look at the energy transportation sector shows this variance.
Tradezero Ocean Place Cable Beach, Unit #1 Nassau, Bahamas
Commission free trading is a great way to start your stock trading experience, but as you get richer in experience and go to bigger trades, there is a lot of analysis to do to make successful long-term trading decisions. A Week that Witnessed an Exception to the Norm From the perspective of swing traders, sometimes you could have weeks when you find trends that are unique. Looking back at the Black Friday week, you can realize that it was quite an exception to the norm.
Charles Schwab Analyst John Jagerson in this
Investopedia article estimates that with the exception of the market holidays of Thursday and Friday half-day, the whole week was quite an exception to what the rule is. Wednesday saw a spike in volume as well as volatility with traders continuing to respond to reports of retail earnings negatively, despite these earnings exceeding expectations. The tech sector witnessed quite a lot of selling, with traders being concerned about what impact the trade restrictions and disputes would have on the tech exports. The pattern by which investors sell on positive earnings reports caused the S&P 500 to be sent back to the short-term support somewhere around $2,634. Are There Sufficient Indicators for a Bearish Trend? This negative reaction to earnings reports that are positive can be explained by the fact that while there is the concern regarding interest rates and tariffs, investors are looking to focus on the possibility of earnings attaining a high-water mark. But according to Jagerson, the likelihood of the major indexes attaining a bearish trend in the short term is less since bear markets usually come 10 to 14 months behind the actual earnings peak. Oil Sector Could Give Bearish Indicators But to find bearish indicators, Jagerson says that we need to look at oil prices. Since breaking support last month, crude prices have kept on declining, with traders hanging on to watch what happens to the OPEC meeting to be held on December 6th and 7th, 2018. Jagerson finds this similar to 2014-end when prices of oil declined with the rise in US production. Back then, among the worst hit were companies in the energy transportation field. This was because the lower prices of oil affected the margins of these companies and also reduced demand. Firms with major debt loads were particularly affected. There are also organizations that are limited partnerships traded publicly. Their losses were aggravated as a result of the interest rates soaring.
www.tradezero.co
+1.954.944.3885
Jagerson points out that many publicly traded partnerships pass on much of their profits to the shareholders in the form of dividends that are greater than average. But now we find that the expectation of rising interest rates is devaluing dividend payments just when oil prices are declining. Chart Adjusted for Dividends Indicates the Worst Has Passed Jagerson mentions the following StockCharts chart of the ETF called Global X MLP ($MLPA) to show that the price charts make the sector appear to have already accommodated the worst outcomes. That makes it quite easy to miss the potential for downside. This chart comes with adjustments for dividends.
Chart Unadjusted for Dividends Gives Bearish Signs But in a chart where you don’t adjust for dividends, it looks different and is clear that this ETF has still more potential for fall before it can hit its lows on the basis of equity value.
www.tradezero.co
+1.954.944.3885
Jagerson says that the adjusted chart is more accurate in assessing potential downside in the short term. Oil transportation companies have yet to get to their earlier lows if traders keep pushing the prices of oil lower on expectations of OPEC increasing the production limits so as to not lose further market share to the US oil producers.
www.tradezero.co
+1.954.944.3885