Trust the Trend but Verify: Price Headly

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Buy at support, sell at resistance, but always back-test. That was the message from our pro trader this morning.

Price Headly, founder of BigTrends.com, runs Donchian channels on his TradeStation platform to time entries and exits. Like many other power users, he’s capitalizes on Radar Screen’s almost limitless power to track and analyze stocks and ETFs. Headly’s tools to find stocks with the potential for a bounce, but are also smart enough to exclude names that have broken their bigger trends. He then checks the Strategy Performance Report tool to ensure the signal works for each symbol in the given circumstance.

Today’s long candidates included Wynn Resorts (WYNN) and Southwest Airlines (LUV). The BigTrends.com scanner also said Gap (GPS) was at the bottom of its range, but the back-tester shot it down.

Turning to the broader market, Headly thinks the trend remains bullish but cautioned viewers to avoid chasing on “FOMO”, or “Fear of missing out.” His retort: “Patience will be rewarded.”

His favorite bearish play was Western Digital (WDC). He also saw risk in Ulta Salon (ULTA), Skyworks Solutions (SWKS) and Walgreen Boots (WBA).

Near the end of the webinar, a viewed asked about Salesforce.com (CRM). Headly said it end a session above November’s high. “Wait for the daily to show we’re closing through that resistance. If we test it and close below, it’s not a breakout — it’s a potential fake-out.”

Every day Don Pratl speaks with some of the market’s smartest traders and instructors on his Morning Market Briefing. Click here to sign up for the latest installment.

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David Russell is VP of Content Strategy at TradeStation. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.