Bounces Happen
While it’s best to stay focused on what the market is
doing now, it’s also important to be aware of potential price levels at which a
market can encounter support or resistance. Read Borsellino’s
piece on a regular basis. He’s an expert at this.
Keep in mind that his is not an issue of predicting anything because, if you
do this right, you’re not trying to predict a bounce or change in trend.
Rather, you’re looking at a particular price level and watching to see whether a
tradable setup will occur there.
This morning we had our eyes glued to big cap bellwethers as the Nasdaq
gapped down into the open. They broke their support levels, but recovered during
the first half of the session. Often these kinds of opens trigger emotional
selling, which washes out the weak hands and sets the stage for a bounce. Kevin
Haggerty teaches how to trade these Opening Reversals in his video course.
Were you ready for the bounce?Â
Here is one example of the types of clues that can fall into place as you watch
key stocks for signs of directional bias in the market as a whole.Â
Sun Microsystems
(
SUNW |
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PowerRating), one of the bellwethers we were watching
closely, plunged to the level of its July 20, 2000, breakout and its 20-day
moving average. Look at how precisely the intersection between these two
distinct different technical factors coincided with the powerful bounce which
ensued.
The motto is that you may have a particular bias about which direction a
market is headed in the intermediate-term. But don’t underestimate the power of
key support and resistance levels to trigger powerful countertrend moves in the
short-term.
See you Friday,
Eddie