Angle, Angle, Angle
I’ve got lots to say today, so
let’s get right to it. The Qs are
red as we approach midday following yet another exhaustion gap and fleecing of
the retail investors. (While the Nasdaq is up on the year, there are plenty of
investors deep in the red as a result of yet more ridiculous overnight and
pre-open “bullish” hype the press has been dishing out … but I
digress.) We’ve broken key hourly support on a price basis, which was not the
case on Friday — more on that below — and a 5-MA cross will confirm a
potential reversal on that key time frame.
A quick note on the QQQ charts below. As most of you know, I advocate using the
Nasdaq E-Mini (NQ) futures charts to depict natural market movements when
trading the Qs, especially on smaller intervals where delayed and irrelevant
out-of-market ECN prints can inappropriately skew QQQ triggers. As I typically
present 13-minute and greater intervals in the column, you’ll begin to see more
QQQ charts.
Monday January 7,
2002Â 12:00 PM EDT
In Friday’s column,
I referenced looking for a bounce off the key hourly support after the late
morning drop. Why was I feeling confident of probability being skewed toward a
rebound? (Again, as I mentioned in my recent lesson and the QQQ
video, no one can
predict the market, and there’s no right or wrong, so we’re talking probability
and bias here.) Three reasons: “angle, angle, angle.” Let’s review:
In this case, I’m
referring to the angle of the hourly 15-MA. Sure, it’s just a red line on a
white background. Yet as a visual representation of the significant market
strength over the prior two days, there could have been no better
“heads-up” indicator, especially when combined with oversold
stochastics on a relative basis (yes,
stochastics can indeed be oversold above the 50 band, so let’s continue to
destroy the myth that only improving low band stochastics at lower levels are
buy signals) and trend changes on lesser time periods. The end result? A $0.75
intraday bounce in the Qs and $1.15
when swing traders factor in the morning gap.
Of course, charts are merely a reflection of mass market emotion, and given the
pullback toward support on a key time frame, there were likely a whole lot of
“ticked-off” folks who either missed putting cash to work over the
last few days or were looking for any significant
pullback opportunity toward trend support to cover losing short positions. This
was a great example of why I stress over and over the need to watch multiple
time frames and not just focus on one, even if you’re an intraday scalper, and
why I’ll never publish a QQQ chart without at least three time frames. If you
had limited your intraday focus to just a three- or 13-minute interval, you
would have missed the larger picture. As I’ve said before, when you’re chopping
trees for a living, you need to know the overall fire danger conditions.
Good Trading (and
Go Patriots*)!
*Like shorting into a rising market, probability has not favored the local
entrants in recent years, so please forgive my momentary indulgence.