Sky High
The Qs have continued
their climb from slightly oversold daily levels this morning (more on
that below), and stronger-than-expected NAPM data helped to fuel a strong short-covering
and fresh long-buying* rally. Trends have been
strong on multiple time frames, and there have been several trend-continuation
opportunities on pullbacks for those missing early runs. And while the air is
certainly getting thin up here as defined by sky-high absolute stochastic
readings (pick a time frame), the market should continue to tip its hand as to
future reversal opportunities when the time is appropriate. As is my usual rule,
13-minute and hourly downtrends are a prerequisite for a longer-term reversal,
and any shorting is best left strictly to those who are nimble scalpers until
trends turn.
* Footnote to
longs – Remember that game we played as a kid with the chairs and music?
Wednesday December
6, 2001Â 12:20 PM EDT
(1)
Approx. Equivalent QQQ Price
As I mentioned in yesterday’s
column, and expanded on in TradersWire
Interactive midday yesterday, one chart that had been gnawing at me over the
last few days was the daily chart, which was beginning to reflect oversold
stockastics on a relative basis while price was holding in the area of support.
In my QQQ
video and workbook, one of my favorite setups — when combined with an
appropriate trigger — is one which I call “Oversold on Support,”
which reflects decreasing stochastics on a relative (vs. absolute) basis
while the price barely budges and holds support levels.
This pattern, where the absolute
reading of the stochastic is less important than the combined stochastic and
price action, played out very nicely yesterday for those following the daily
chart, as well as the subsequent three-minute pullback after the break occurred,
and based on the mail I received last night, it seems like many of you, indeed,
followed through on the entries.
While patterns are simple to spot
after the fact, I commend those of you who spotted and understood the pattern as
it unfolded, which is the mark of a trader who’s worth his/her weight in
gold.
Good trading!
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