NOTE: As a Platinum Zone member, you may call Sunny at (760) 930-1050 if you have any questions about terms used herein.

Commentary

TUESDAY NIGHT: OCT 8, 2002:

It still looks like we are hammering out a foundation a chunk at a time, rather than plummeting into the abyss.  The intraday Dow took us up about 78 points, another reason to vote for this being a bottoming formation.  But, it went higher only after exploring new low territory down to 7351.  From the chart above you can see that we are only just past the cycle lows, still experiencing some down draft from the double cycle conjunction.  Today's upward action confirms that the two cycles are now exerting upward pressure, hopefully taking us into recovery areas, even if it's only small.

Following the last double cycle low, we climbed just about 2,300 points over the ensuing 3 month time frame.  We could climb 2,300 points once again and still be in a serious downtrend.  In fact, that point rise from current levels would take us just to the bottom of the downsloping trendline drawn off the peaks of the chart above.

Is this doom and gloom?  No--take the profits and run.  It seems that this could be a great short term buying opportunity.  Even bear markets have corrective up waves as they progress.  We are, after all, traders, not investors.

QQQs

As the market was making new lows this morning, we gave an alert to intraday Platinum Subscribers at 9:01amPT, saying that we had just exceeded the lower SunnyBand and it was time to watch for profit taking opportunities.  That took us out of the QQQ short trade right at the lows for the day!  The alert to go long came at 11:52amPT, and the market turned on a dime afterwards and went back downward.  But, it didn't hit our stop loss protection, so we are still long the model overnight on the QQQs.

Our alert told subscribers to set the stop loss at 20.04, which we may hit tomorrow on the open if we have a gap down.  If so, get out and stand aside watching for the market to poke its head back up over the Attractor at 20.05 before re-entering.  (Assuming we are still on a buy signal at that time.)  I'll let you know as it transpires.  Hopefully this is a new one-wave forming, and if so the three wave should take us to 20.80 where we can take profits on this long trade.

Price on the QQQ hit the upper SunnyBand, only to bounce back down from it and head straight for the midline; but, it showed strength by stopping near the midline.  RSI has pulled back slightly into neutral territory, which is nice because it gives it room to progress into the 65 and above range tomorrow.  

Stay tuned -- and stay nimble.

LESSON:  SunnyBands are constructed around Sunny's Dynamic Moving Average pair, by adding a multiple of ATRs to the faster moving average.  The Bands in the chart above are at 1 ATR, the theory being that the market (whatever we are watching) will tend to move about at the same rate it has been moving.  If, on average, the Average True Range of a bar (be it daily, weekly or 15-minute) is .2293 points, then we can expect the next bar to have a similar ATR.  If we move outside of this "normal" range, then something out of the ordinary is happening, and we should watch for the market to regress to the mean--that is to come back towards its average.  Thus, when price gets away from the midline (the sjhDMA) and touches the upper SunnyBand, it is likely to (a) push hard and move quickly on upward or (b) realize it has gone too far and turn around and come back.  If case (a) happens, then we often get very strong moves that continue for several bars.  In that case, we stay on our toes and watch for any turn back toward the sjhDMA midline, which is when we would take profits.  The SunnyBands work great for setting stops and profit targets.  This is a newly released indicator, and if you are interested in having a license to use it on your own TradeStation it is, like the others, $495.

How Did We Do?
Click here to view archives of past Platinum Zone commentary, including the Weekend Stock Alerts.

Weekend Stock Alerts

Last week's stock alerts were hit on four stocks: FRE, MDT, MER & SPC.  We profited on three of the trades and hit the stop-loss on the fourth, for a net profit of $260.

Click Here to go to the Weekend Stock Alerts Archives to view prior weeks' performance.

This week's (10/06/02) Sunny Side of the Street Weekend Stock Alerts:

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