Potential Reversal?
Down has been the theme of the morning so
far as the Qs broke into an immediate downtrend after an oh-so-brief
10-minute
attempt at a post-open rally. As was the case yesterday, the early tip-off
was weakening strength on the one-minute chart as the gas gauge for the longs
quickly flashed "low fuel." The
early move notwithstanding, I’m beginning to search for potential intraday
reversal indicators given the extent of the drop over the last seven days, which
has put us into a longer-term oversold condition.
Keep in mind that oversold can become more oversold and that we have several
short-term 15-MA resistance points on the 13-, 30-, and 60-minute time frames, yet
trends don’t last forever and improvement in the context of a three-minute
uptrend (I know it’s pushing the memory banks a bit, but try to remember what
one looks like) is an imperative prerequisite.
Trendless?
I received several e-mails yesterday from
folks asking how an intraday trader can effectively trade a "trendless"
day like yesterday, as opposed to Wednesday where opportunity seems to be
"plentiful." My response is that it largely depends on the
trader’s style, and many professional scalpers — including this trader — often
do better trading chop that provides multiple "mini-trend"
opportunities, as opposed to a day like Wednesday where pullback entries become
higher risk and lower probability the further a trend moves to extremes. (For
example, while the three-minute chart we reviewed yesterday clearly precluded
long entries, re-entering short on pullbacks became riskier the further the trend
moved along.)
So while Wednesday may have resulted in home runs for intraday "swing"
traders who were able to enter early and use the 15-MA as a trailing stop on some
shares, some trading shorter time frames actually did better yesterday using
divergences and early trend pullbacks as entries and paring on range extremes.
And since markets often chop more than they trend, the career intraday trader
has two choices:
- Focus on generating an income stream from more frequent
choppy markets where gains accumulate, or… - Focus on larger gains in less-frequent trend days. Or in baseball terms, do you want to be a power
hitter who strikes out a lot, or a singles hitter with a more consistent, higher
average?
Thursday August 9, 2001
Good trading and
have a great weekend!
P.S. I’m pleased to announce that I’ll
be hosting a two-day
QQQ trading learning forum immediately following TM2001 at the Venetian
Hotel and Resort on October 7- 8, 2001. It seems like we’ve struck a pleasant
nerve with the Q column, and I look forward to sharing my thoughts and views in
a live forum highly conducive to learning and interaction, as well as simply
meeting many of you in person. So whether you trade the Qs or watermelon
seeds, consider extending your stay just a bit and we’ll combine some very
intensive trading discussions and some fun!
For
a more in-depth look at how Don trades the QQQs, click here.