Gauging True Strength
The Qs continued to
follow through from yesterday’s retracement, thanks in part to
continued consumer un-confidence, yet have rebounded nicely off their early lows
providing profit opportunities for both long and short trades. As we climb mid-day,
I’ll be watching the current 60-minute resistance which may provide support for
an inverse cup-and-handle entry, while respecting the immediate trends until
broken. Volume and pace remain on the lighter side, which leaves little room for
intraday error, and I am managing accordingly.
Tuesday October
30, 2001Â 12:00 PM EDT
Approx. Equivalent QQQ Price
Our daily chart
shows once again why I place a great deal of weight in using chart stochastics
rather than price to gauge true strength. While divergence itself only provides
a “heads-up” as to a potential reversal, divergence when combined with
trend reversal triggers such as MA crosses can be a powerful combination for
both managing trend exits and considering reversal entries.
Good trading!