Here Is Why You Need To Watch Oscillators
Taking out the previous
day’s high is a sign of strength. In fact many traders try to buy as
soon as the stock moves above the previous day’s high.
09:38:37
Alert
Following a breakout above its bull flag, palmOne
(PLMO)
is now challenging yesterday’s high. PLMO is up 0.60 at 40.48.
As you can see on the 3-minute chart below, PLMO briefly traded above
yesterday’s high, but quickly reversed. At a time like this, I really realize
how important it is to place a tight stop.
Now, look at the stochastic. It was negatively diverging from the price
movement. It could have prevented you from pulling a trigger. Be careful when
the oscillator is giving you a conflicting signal.