Carla Pasternak's Premiere Issue of High-Yield International Just Released!
Don't miss out on the most generous yields in a generation -- we're talking about stocks yielding as much as 21.1%. Income expert Carla Pasternak's debut issue of High-Yield International covers a Taiwanese manufacturer yielding 11%... a rare Mexican monopoly yielding 12.7%... and other top-performing investments yielding up to 21.1%. Carla Made the Leap Abroad, Find Out Why Should Too!

Just One Stock Every Month is All You'll Ever Need
Buffett recently claimed that diversification doesn't make much sense. This sort of thinking is why we've recently taken this "Keep it Simple" approach. Just one pick per month. In fact, expert analyst Amy Calistri has already put this technique to the test. She is up +22% in this bear market.
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Government's Biofuel Timetable Could Spell +15,900% Growth

+15,900% growth might seem far-fetched... but it's not. In fact, it is mandated by law. And I've identified the ONLY stock positioned to capture this growth. Visit this link to watch the video and learn more.
 


Get the Monthly Payments You Need With This 9.5%-Yielder
During the market turmoil of the past year, this stock has been our haven. Through thick and thin it has never failed to pay us the same juicy dividend every month. (Currently it yields a nice 9.5%.) Also, while the market seesawed, this stock held steady. Over the last year it's outperformed the S&P 500 by more than +43%! So if you're looking to beat the market, and secure a reliable monthly income stream, then you need to take a look at this stock. Go here to get the details.

Seven “Yield Doubler” Stocks That Are Clobbering The Dow
Just 12 trading days before the market hit its 6,500-point low this year, the “Yield Doublers” portfolio was born. That was 4 months ago. The Dow has rebounded +12% since then -- but our seven “Yield Doublers” have clobbered that figure by a factor of up to 9-to-1… delivering up to +144.2% gains to boot! Go here to see why you should add these “Yield Doublers” to your portfolio today. Go here to see why you should add these “Yield Doublers” to your portfolio today.

Find Out Which of the Rarest Securities on Earth Carries An Average 17.2% Dividend Yield
Knock-out returns are available from a rare security that combines stocks and bonds. Grow $10,000 into $35,598 -- or even $25,000 into $88,994! There are only eight of these securities in the world. Learn more by clicking here!


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Important Updates for Investors

Carla Pasternak's Premiere Issue of High-Yield International Just Released
Income expert Carla Pasternak's debut issue of High-Yield International covers a Taiwanese manufacturer yielding 9.5%... a rare Mexican monopoly yielding 13.4%... and other top-performing investments yielding up to 19.0%.
 

Government's Biofuel Timetable Could Spell +15,900% Growth
+15,900% growth might seem far-fetched... but it's not. In fact, it is mandated by law. And I've identified the ONLY stock positioned to capture this growth.

The Silver Lining to a Falling Dollar
Despite the U.S. national debt, there is a silver lining for income investors. This massive spending, combined with movement out of U.S. Treasuries, is going to take its toll on the dollar, and international income investors could reap the rewards in the form of higher dividends.



GAPS FROM A JAPANESE CANDLESTICK VIEWPOINT


In the last two issues of this newsletter we have explored the perspective of Western technical analysis on gaps. As we have seen, the swing trader should be able to identify four different types of gaps: area (common), breakaway, continuation (measuring) and exhaustion.

As you'll remember, an "area" gap occurs within a trading pattern such as a triangle, rectangle or rounding base. Typically, the "area" gap is of little significance. Since area gaps are often filled quickly, they conform to traditional wisdom that gaps are filled.

A "breakaway" gap is an entirely different matter. The "breakaway" gap ends a consolidation pattern and happens as prices break out. Often, a "breakaway" gap occurs on very large volume, as the supply available within the consolidation pattern has been consumed and bidders who want to enter the stock must pay up for it. A genuine "breakaway" gap will often not be filled for weeks or months (if ever).

A "continuation" gap occurs within a rapid straight-up movement. This type of gap is also known as a "measuring" gap because it usually occurs approximately halfway through the move. "Continuation" gaps may eventually be filled, but it should take some time to do so as the stock needs to first peak, reverse, and finally trend in the opposite direction.

An "exhaustion" gap occurs at the end of a price move. If there have been two or more gaps before it, then this kind of gap should be regarded very skeptically. A genuine "exhaustion" gap is filled within a few days to a week.

When a swing trader sees a gap, he or she should immediately ask, "What kind of gap am I witnessing?" Often it will take some time to come to a final conclusion. What seems to be a breakaway gap, for example, may over the next several weeks be filled and that filling may be an important catalyst to take swing-trading action in the opposite direction.

Candlestick theory, while less detailed about gaps, provides some important additional insights. Japanese theory does not distinguish between the types of gaps. Nor does it even use this term. Instead a gap is called a "window."

Whereas a great deal of emphasis in candlesticks is given to reversal patterns, a window is considered a continuation pattern. In other words, trading is highly probable to continue in the same direction after the window as it did before it.

In his groundbreaking work on candlesticks, author Steve Nison advises traders that they should typically trade "in the direction of the window." If a particular stock is declining when the window" occurs, then it is highly probable that the decline will continue. If the stock is rising when the window occurs, then it should continue to rally.

Once a window has occurred, it becomes an important support and resistance area. If the window occurred in a downtrend, then on any subsequent rally the upper end of the window should turn back prices. If the window was created in an uptrend, then when prices rally the bottom edge of the window should be the lowest point of decline. Further candle theory holds that the test of all open windows is likely. The key thing to examine is what happens on this test.

When the alert swing trader spots a window in a rising trend, he or she should expect, for a time, that the price will continue higher. Eventually, however, prices will reverse and will test the open window. On this test, prices should hold at the lower edge of the window, which is now important support. If, however, this support level is violated and selling pressure persists, then it is likely that the trend has reversed. The swing trader should now go short in the same way he or she would if a horizontal support level had been breached.

In a downtrend, the opposite is true. After the initial window, the decline should continue. Eventually resistance, which is at the upper edge of the window, should be tested. If buying pressure persists and is able to move prices beyond this upper window, then the swing trader should go long in the same way they would if a resistance level were overcome.

Continental Airlines (CAL) is a stock I've spotlighted recently in our "STOCKS TO WATCH" section of the StreetAuthority Swing Trader. Its chart provides a very interesting study of gaps from the perspective of both gaps and windows.

Late in 2000, CAL peaked at almost $60 a share. It then began a steady and near uninterrupted decline into September 2002, when it hit a low near $4. In the daily chart below, we see a second test of this bottom in mid-March at $4.16.

I have labeled three "gaps" or "windows" on this chart. The first gap occurred at the very beginning of April. It ended the brief downtrend that occurred when the shares hit a peak outside the Bollinger band at $6.85 in mid-March and thus far has not been filled. Traders who followed the candlestick dictum to "go in the direction of the window" were amply rewarded here, as prices peaked five trading days later at $7.06.

A second gap or window occurs in late April. I have labeled this gap "G2," and it appears to be a "continuation" or "measuring" gap. Prior to G2, CAL had moved from a low near $4 a share to approximately $8 a share. This gap then created a target of $12 a share for Continental. The stock then reached an early May peak at $12.25.

The third gap took place at the psychologically important $10 level. What is fascinating here is that the gap could turn out to be either a "breakaway" gap or an "exhaustion" gap. Only time will tell. From the "breakaway" gap perspective, CAL shot through key resistance at $10 and did so on very heavy volume, which is typically associated with this kind of gap.

However, this gap is also the third gap in this move, which may mark it is an exhaustion gap. In market trading on Tuesday, May 5th, the gap was filled or the window was closed. Selling pressure, however, did not persist. Instead, the shares bounced off support (but on light volume). That created a short-term buy signal, although I suspect strongly that the rally will fail at $12.

Similar mixed signals are given in the balance of the chart. The stock is above rising 20- and 30-day moving averages, but below declining four- and nine-day moving averages. MACD is on a sell signal, but the histogram has hit a support level and seems to be bottoming. Daily stochastics is very near oversold but has not created a buy signal. RSI, thus far, is holding the important 50 level.

A downside level to watch extremely closely is $9.80 (if the stock tests this level again). A break of $9.80 would take out a key support level. The next support level would be the window just below $8, and that decline would bring a very high-percentage return to the alert swing trader. I will be watching CAL carefully and readers might want to follow the stock as well.

Combining western wisdom and eastern insight on gaps, what then are some key trading tactics you can take away from today's lesson? The principles below should be applied within the context of other chart messages such as moving averages, trendlines and MACD. That said, here are several swing trading principles based on gaps:

  1. On spotting a gap in a daily chart, immediately question yourself as to which of the four kinds of gaps it is.
  2. Generally, short-term trades should be in the direction of the gap. The larger the gap and the stronger the volume, the more likely it is prices will continue to trend in that direction.
  3. If an "area" gap is identified, then the swing trader should look for a short-term peak. When prices begin to move back toward the gap, a trade may be placed anticipating the gap will be filled.
  4. Upon identifying a "continuation" gap, the swing trader should, other factors considered, buy quickly. The trader should then use the measuring principle, which applies to this gap, to identify the short-term target.
  5. A "breakaway" gap also provides an immediate buy point, particularly when it is confirmed by heavy volume.
  6. The third upside gap raises the possibility an "exhaustion" gap has occurred. Swing traders should look for the gap to be filled in approximately one trading week. If the gap or window is filled and selling pressure persists, then that issue should be shorted. If the gap is the third one to the downside, then traders should be alert for a buy signal.

As powerful an analytical tool as gaps are, generally they should not be acted on in isolation. View the gap within the context of the other technical messages given by the chart. For a complete system of gap analysis, swing traders should apply both western and eastern concepts of gap analysis. Hopefully, this series on gaps has filled in some "holes" in your knowledge of how to apply this vital technical analysis concept.


 

Who Cares What the Market is Doing When You're Pulling in $28,900 a Year in Dividends?
With the safe, growing, high-yield picks that Editor Carla Pasternak recommends every month you don't have to worry whether or not the market has bottomed. You can sit back and collect annual dividend paychecks of $16,300, $19,900 or even $28,900! You can't go wrong looking into Carla's recommendations. A year from now, when you've collected as much as $28,900 from dividends alone you'll be glad you did. Take the first step and, read this report now.


Seven "Yield Doubler" Stocks That Are Clobbering The Dow
Just 12 trading days before the market hit its 6,500-point low this year, the "Yield Doublers" portfolio was born. That was almost 4 months ago. The Dow has rebounded +12% since then -- but our seven "Yield Doublers" have clobbered that figure by a factor of up to 9-to-1... delivering up to +144.2% gains to boot! Go here to see why you should add these "Yield Doublers" to your portfolio today.



We're Putting $50,000 on the Line in Our NEW Stock of the Month Portfolio
We're SO confident in this strategy that we're putting our money where our mouth is... $50,000 worth of it in fact! That's how much we've put into a brokerage account to fund the real-money portfolio for StreetAuthority Stock of the Month. Amy Calistri just made her first purchase, and it's not too late for you to join in and follow along with everything she does. Don't be left on the sidelines, click here to learn more now.


Two Infrastructure Stocks That Are Profiting From Massive Government Spending
Since the stimulus package was signed into law on February 17th, these two infrastructure picks have moved up quickly. One's a worldwide construction company that's already gained +32% to date. The other makes critical copper, aluminum and fiber optic cables... and shot up +41% in a matter of just weeks. Both are headed higher. You’ll find their names in this special report.




6 Free Months of Bernie Schaeffer's Option Advisor
Learn the secrets of successful options trading from top trader, Bernie Schaeffer. Start your free 6-month subscription to The Option Advisor newsletter now and get free online access to Bernie's Crash Course in Top Gun Trading Techniques.

3 Penny Stocks Poised to Soar 300%
By the time Wall Street notices the 3 picks revealed in this report, you could be sitting on a fortune.  Click here to get immediate access to an exclusive Free report -- "3 Underground Penny Stocks Poised to Soar."

 

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52 Wins in 52 Weeks - 365 Days Without A Loss
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Investing Doesn't Get Any Easier Than This

Stock picker Amy Calistri's strategy is as simple as investing gets -- just one idea a month designed to make money in today's market. Invest this way and you don't have to worry about oil prices, automaker bailouts, or what the Fed is up to -- because every "bad" economic development actually helps some investment or another.Your investing life can get a lot simpler -- starting today.
Go here to learn about Amy's simple investing strategy.
 


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