Listening To The Market
The market is speaking
volumes this morning…and in a low bass tone that even James Earl
Jones and Alan Greenspan themselves would be proud of. The inability of the NQs
to move beyond its three-minute 15 MA coupled with the break of critical 1700
support (if only psychological) has us moving in one direction: down. Of course,
we only care about where we go from here as the past quickly becomes irrelevant
in the trading world. We’re currently consolidating at these levels, and as with
any consolidation, we’ll eventually have to break hard one way or the other. (I
know that’s not much help, but I just listen to the market.) At the risk of
sounding like a broken record, I’ll continue to look to the three-minute 15 MA
as support for whatever trend emerges and consider both pullbacks to support or
shorts against the 13-minute 15 MA if it approaches for quick trades.
WednesdayÂ
July 18, 2001Â 11:05 AM EDT
Trade Premise
One of the points I made yesterday addressed premise- vs. price-based stops
(we’ll revert to the more common label today), which has generated as much
discussion and intrigue over the years as has my continuing beliefs that both
the ’75 and ’86 World Series ended after Game 6 (the ’86 series after two were
out in the bottom of the 10th). If I had a dime for every time I was asked how
tight my stop is, well I’d have a pile of dimes. Suffice it to say here’s what I
mean and don’t mean.
What I mean:
In on an early trend-pullback entry toward
support.
Out on support breaking, no matter whether the trade is a winner, loser or flat.
What I don’t mean:
In late on a low-probability entry into
momentum.
Out on a $0.10 stop near support (because your “rule” requires $0.10
stops).*
Â
* Been there…done that
As far as reinforcing the concept that a trade doesn’t end with a stop, let’s
just say that after all, it is a seven-game series.
Good trading.
P.S. Yes, I really did
permanently stop out on HLTH near $120. For the record, HLTH closed around $100
that same day, $67 three days later, and closed yesterday at $5.90. While I
certainly traded other stocks short during the 2000 drop, it will still make
good material for Duke’s next column.
Oh, and no cavities yesterday.
For
a more in-depth look at how Don trades the QQQs, click here.