Trading on Volume Reversals
04/15/2005 12:00 am EST
Trading expert Mark Leibovit uses a proprietary analytical system known as Volume Reversal, which he applies to assessing the overall market, sectors, and individual stocks. Here’s a sample of this top-performing trader's latest commentary.
"A volume reversal is a change from a rally day to a reaction day accompanied by a increase of volume. Reversals coming off intermediate lows or highs have greater significance in helping to define those lows or highs and important pivot points in the marketplace. Sector volume reversals show where big money is possibly effecting an entire group of stocks. The same proprietary analysis is given to individual stocks.
"Folks, this is a trading environment and not an investing environment. We were in an investing mode back in Spring and Summer of 2003, but the road gets harder from here in our humble opinion, but not necessarily less lucrative. Crude oil has peaked and a negative volume reversal has been formed and the US dollar looks like it wants to rally further. One market that is looking more and more interesting is gold. Gold is due for a cyclical low. Thus, we consider gold shares as ‘big picture buys’ but note they appear vulnerable near term, especially if the dollar continues to rally.
"The latest selling wave is gaining strength as the Dow, Nasdaq, and Russell 2000 have carved out new lows for 2005. Our own bearish attitude has us on our toes to look for signs of a reversal, but we must first see solid signs of buying before we temper our outlook. If this decline continues, look for the Nasdaq to next find support around the 1920 area. We still have the 1140 - 1150 downside target on the S&P that has yet to be fulfilled. If that area is reached we will re-evaluate at that time.
"Meanwhile, our latest trading idea isSIRF Technology Holdings (SIRF NASDAQ), which is a supplier of global positioning system (GPS) semiconductor solutions designed to provide location awareness capabilities in high-volume mobile consumer and commercial applications. Its products have been integrated into such mobile consumer devices as mobile phones, automobile navigation systems, personal digital assistants, handheld navigation devices, and GPS-based peripheral devices, as well as into commercial systems, such as fleet management and road-tolling systems. Technically, the stock exploded out of a pullback on very heavy buying. Wait for a break of the downtrend line which is currently around 12. SIRF will probably consolidate some here. Aggressive investors can start accumulating shares now. Place a stop at 10.51. Our upside target is 16-18."
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