Todays market had another great example of the signals I look for that a reversal is probable.
The markets were weak on the day so being on the short side or playing the inverse ETFs was the smart play. Both the QQQQ and S&P 5 minute chart showed a slowing on the down trend with dojis, so I sold and went short. 15 minutes later both indexes showed another doji along with dropping volume. That said to me the pop is probably finished and to trade it the other way.
Chart #1 shows dojis on S&P and QQQQ after the market pop has stalled.
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2 comments:
Hi Scott - have recently discovered your blog and have found your insights on trading very informative and interesting. Thanks for doing what you do!
I was wondering if there are any things you look at to determine if a slow in momentum is leading to a reversal rather than just a continuation in the same direction. That is something that I have real trouble figuring out. Or do you just get out and then back in if it looks to be continuing?
Yes you just have to play the odds the a doji is the signal for a reversal. Think about what a doji and the slowing candlesticks mean. In an up trends it means the buyers are taking a rest and the sellers are taking control. For sure I factor in what the overall markets are doing as most times a stock will trade what the markets are doing. I'm always ready to proven wrong and jump back into the original trend though.
Sometimes the buyers or sellers are just taking profits and resting before the next surge.
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