Here’s Why The Diamonds Are A Trader’s Best Friend
Today’s early action witnessed a major
reversal of character in the markets. After a gap open to the downside,
shaking out many potential “weekend warrior” position traders in the
process, the ETFs alerted daytraders to a classic Opening Reversal, and a much better trade
opportunity from the buy side.
It happened very quickly this morning, but not so
fast that those looking for reversals couldn’t participate out of pattern
triggers in any one of a number of products. In the chatroom, I happened to be
focused on the ETFs as the lows of the session were close to the 1 Volatility
Band level. I also prefer to look at the ETFs for opening reversals, especially
in a news-driven environment. The reason for this would be the liquidity
factor, as well as the fact that if the market is moving, the ETF will
definitely be going along for the ride. With no company-specific news to
concerned about, the ETFs (and of course futures contracts) are the purest way
to play the gyrations of the market.
As the 9:50 bar was triggering a FlipTop
entry in the Dow Jones Industrials ETF
(
DIA |
Quote |
Chart |
News |
PowerRating), I was busy alerting our
subscribers in the chat to this situation with a well-defined price entry.
With the low of the formation .45 lower, an
initial money stop of no more than .35 would be the way to play a long entry out
of the pattern. Some traders might decide to tighten the stop for a bit less
risk, but in this case that outcome is academic at best. In the real world of
trading, another reason for taking the trade and further improving the validity
of the strategy, as well as one’s bottom line, was well on its way.