Johnson
& Johnson (NYSE: JNJ)
Market Call™ for April 4, 2000
Contributed by Mark Seleznov, TrendTrader.com.
The purpose of this Market Call section is to
educate readers in technical analysis patterns and indicators. As with all investment
information, you need to research information and consult your financial advisor before
initiating any strategies that are contained in Market Call.
Also, you must realize that as with all trading strategies,
opinions can change quickly depending on market conditions and developments.
This column tries to present historical examples, potential set
ups, and examples of entry and exit strategies.
Channel Breakout
Channel Breakouts are a popular method of trading stocks. The principal
behind a Channel Breakout is that when a stock trades above the highest
price or below the lowest price in the last N (number of periods) number of
periods, a new trend may be starting to take place.
This channel trading method can be used in any number of periods from minute
bars to weekly time frames.
The results of using such a method will often result in a stock moving above
a defined resistance or below a defined support area.
I feel that with any pattern, indicator, or strategy, the key is to
recognize when it works and when it doesn’t. A pattern or indicator tested
over a long period of time may only have a 50-50 chance of working out in a
trader’s favor. A key to successful trading is to limit losses with stops
and recognize when the pattern or indicator did not perform as expected.
Let’s look at Johnson & Johnson (NYSE: JNJ).
After a gap down on March 24, 2000, JNJ has been trading in a channel
between 69 and 73.
We are now at the top of this channel and a breakout above 73 would be a
channel breakout.
A base over the past week could be the base that can down propel this stock
higher.
I would Buy JNJ on a break above 73 �.
If JNJ does not break above this channel, do not take the trade.
Hopefully, readers of this column see how buying only when the trend takes
place and not taking trades that gap down, save a trader a lot of money.
If filled at 73 � on a Buy Stop, I would place a stop at 71 �.
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Call Information
Mark A. Seleznov is a General
Securities Principal and Managing Partner of Trend Trader, LLC, a NASD, SIPC broker/dealer firm located in
Scottsdale, Arizona. A professional trader for over 25 years, Mark was a Market Maker on
the Philadelphia Stock Exchange, a Retail Registered Representative, and futures trader.
Mark is an author and recognized expert in equity Day Trading. He conducts seminars in
Equity Day Trading and offers his firm traders training and support. If his firm holds any
positions in the public companies he writes about, it will be noted at the bottom of his
article.
Market Calls is a daily syndicated column on trading by Mark A. Seleznov, Managing Partner
of Trend Trader,
LLC. For information on obtaining Market Calls for your web site,
newspapers, or publication, contact Trend Trader, LLC at 602-948-1146
Disclaimer: Trading in securities may not be suitable for
all individuals. Consult your broker or other professional to determine your suitability.
This is not an offer to buy or sell securities. The advice given above is of a general
nature and should not be taken as a recommendation to buy or sell the referenced security.
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All Rights Reserved. Republication of this material,
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Last modified: March 17, 2001
Published By Tulips and Bears
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