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TRADING SYSTEMS


Is It Time To ROK And Roll?

10/06/11 08:51:10 AM
by Donald W. Pendergast, Jr.

After six weeks of seeking a bottom, Rockwell Automation looks like it's in prime position to rocket higher.

Security:   ROK
Position:   N/A

It's not based on technicals only, but the intraday market reversal we witnessed on Tuesday, October 4, may have been the turn that launches the broad US markets into a sustainable year-end rally. Hundreds and hundreds of large-, mid-, and small-cap stocks are manifesting the same kinds of bullish price/money flow chart patterns -- patterns that should be taken seriously. Here's a look at the very bullish chart setup in shares of Rockwell Automation (ROK) (Figure 1).

FIGURE 1: ROK, DAILY. While no chart setup or system signal is guaranteed to be a winner, this one looks about as low-risk as you can possibly get.
Graphic provided by: MetaStock.
Graphic provided by: Raff MarketSpace Stock system from MetaStock 11.
 
Wow, what a pair of reversals in both the weekly and daily charts of both the .SPX and the .RUT! While it's still early, things sure look promising for more follow-through over the next few sessions. One large-cap stock in particular, ROK, has an exceptionally bullish daily chart pattern, complete with a new Raff MarketSpace Stock system buy signal to boot. Just look at the near-textbook quality bullish price/money flow divergence pattern on the chart, one based on the 100-day Chaikin money flow histogram at the bottom of the graph. As the selling pressure in the stock abated, the institutions and other big-money traders began to step up to the plate and began to establish new positions in ROK (and tons of other stocks, as I've pointed out before), apparently sure of some sort of year-end rally to follow.

The Raff buy signal is also looking like a real contender, especially coming after such a pronounced period of accumulation, base building, and subsequent breakout. You can find this system in the Expert Advisor template portion of MetaStock 11, and it's probably worth your while to start using it on a regular basis; it appears to be an exceptionally capable (but not perfect) trading system. Overall, this setup looks like a no-brainer, but make sure you still use risk control and try to keep the maximum hit to your trading account at 1% to 2% of your total account equity, just in case the trade doesn't take flight.



Donald W. Pendergast, Jr.

Donald W. Pendergast is a financial markets consultant who offers specialized services to stock brokers and high net worth individuals who seek a better bottom line for their portfolios.

Title: Writer, market consultant
Company: Linear Trading Systems LLC
Jacksonville, FL 32217
Phone # for sales: 904-239-9564
E-mail address: lineartradingsys@gmail.com

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