Finding A Market Bias
The Qs remain range-bound this morning
in a fairly well-defined trading channel bordered by 13 minute trend support to
the south and hourly Bollinger Band resistance to the north. The morning gap
also immediately placed the Qs north of key hourly support, and the two
timeframes have worked well in tandem to support intraday long pullback entries.
Having said that, volatility has been on the decline (the VXN.X is down 2.41 as
we approach midday) and the hourly stochastics are climbing rapidly which
introduces potential for complacency and profit-taking as we approach the
afternoon.
2002 12:00 PM EDT
Picking up where we left off on Friday,
we must once again tip our hat to our 13-minute and hourly trend indicators
which indeed signaled and triggered what turned out to be the Q play of the
week. If you recall, last we met on Friday I mentioned in closing “should
the 13-minute stranglehold reverse, there is profit potential beneath the hourly
downtrend support given the wide gap.”
Fast-forward to 2:00 pm ET where the Q 5MA officially crossed the 15MA at $33.35
— which I alerted to those in TradersWire Interactive — and never looked back
until $34.20 at, you guessed it, hourly 15MA downtrend support on the nose. Such
a trade, even if captured in part, could have provided (and did for many) a tidy
weekly or monthly income stream.
Now at this point, it’s wise to again remind all that this business is about
probability (see my recent
lesson), and that the trade could very well have broken support after the
cross which would have triggered a stop. However,
combine (a) low band stochastics with (b) a key MA cross of what had indeed been
a stranglehold of resistance (support for the previous downtrend), and (c) a significant
range beneath the support for the next larger timeframe downtrend, and you have
the potential for a strong market move out of consolidation with a textbook
profit-taking guide (along with a reversal opportunity at the top, but we’ll
keep things simple for now). Simply put, there can be no better
evidence of why I’ve settled on this mix of timeframes and indicators to skew
trade probability as discussed in detail in the QQQ
video. Let’s review
the tape:
Again, there’s no
such thing as a Holy Grail and trading is simply about finding a market bias
that repeats over time. Yet I continue to be amazed at those who continue to
waste unnecessary time and energy seeking a grail that simply doesn’t exist,
rather than settling on one — whatever it may be — and “working it”
into the ground to generate consistent profits.
When I think back to much of the past content in these columns over the past
nine months (has it really been that
long?), I sometimes chuckle over narrating at times to bland moving averages
and momentum indicators that are as old and exciting as dirt. So much for the
Executive MBA education and 21st Century technology. I’m sure many also get a
kick out of my standard responses to questions such as: “What about the
PE’s and accounting scandals?”, “What just caused that pop … was it
news?”, or “But what about the TRIN?” … to which my respectful
yet crisp response is typically “I don’t know and I don’t care.”
You see all I care about is
producing income by repeatedly flipping a coin that is weighted towards heads
and expecting heads more times than not. Period. (Actually,
I don’t really care if the darn coin comes up tails more often if coupled with
effective trade management, but why shoot jump shots when lay-ups are
available.) Couple such a method with the Qs which may very
well have become THE
most liquid trading vehicle on the planet (107 Million, 109 Million, & 100
Million shares traded last Wed — Fri with ECN liquidity that continues to bust
at the seams) and I’ll take boring consistency over exciting losses every day of
the week.
Good Trading.
Don Miller
P.S. We’re getting very
close to bringing QQQ trading education into the next stratosphere with
never-been-seen-before interactive trading technology that has been a long time
coming. Stay tuned for some exciting launch details!