Tuesday, August 10, 2010

Charts for thought



On Friday, in the USA, a jobs report caused a sahrp drop in the S&P from 1125 to 1110. Then, intraday, a rally started which took the SP back to 1121. Afraidtotrade.com has a 5 minute chart of the SP highlighted the technial signals which indicated the en of the down move & start of an intraday up move. Here is the edited chart:


Here are comments from afraidtotrade.com

1. Failed Impulse Sell


Generally, after a market makes a new price, momentum, and TICK (market internals) low, we would expect lower prices yet to come. A good trade set-up – that I call the “Impulse Sell” – occurs when price rallies into resistance after a sharp downward thrust. We expect lower prices ahead.


2. Rounded Reversal Formation

3. “Kick-off” Sign of Strength

4. Bollinger Band and 50 period EMA Breakout


I’m not sure this gave you much of a ‘warning’ but it was the final signal needed – the final nail in the bearish coffin for the day – that odds strongly favored a reversal. This was your execution signal to get long – or take your stop-losses if you remained in an intraday short-sale position.

from: http://blog.afraidtotrade.com/lesson-the-four-early-warning-signals-given-before-the-afternoon-reversal/
 
 
 

4 comments:

rajv malik said...

namaskar shri sukhani,

great insights with charts.
btw these two are independent charts or you think there is some sort of interrelation between the two charts you have reproduced.

warm regards
rajiv malik

rajv malik said...

sukhani ji,

you say below 5425 short term traders should exit longs. but you have not suggested them to initiate shorts after they exit longs. so which would mean exit longs and wait and watch for further developments. pl elaborate.

warm regards

mbansalicy said...

waiting your comments on last 3 day developments.how u justify these levels?

rajv malik said...

namaskar sukhani ji,

you said short term traders should quit their longs if market closed below 5424 levels. now interestingly yesterday market did close below this level at 5416 but today again it has bounced back to 5452 levels.

in such circumstances what is your further guidance to the short term traders. moreover on cnbc you said that market is undergoing a correction. now even after this bouncing back to 5452 would you like to maintain your cnbc views.

warm regards
rajiv malik
rajivhtc@gmail.com