Wednesday, November 04, 2009

Resistance shorts working

The daily charts out there are a complete chaotic mess --- what seems to be working more than break-outs are resistance short trades. Here are the two from last night's newsletter:

We wrote last night "Watch for possible reversal tomorrow near 41.9 resistance" and IYR came without a nickel of resistance and reversed and sold off for the rest of the day.

We wrote last night "Keep an eye on possible intraday reversal at the 50 SMA tomorrow near 45.5" and the stock reversed exactly at 45.5. Resistance shorts often work well on Fed days as traders are nervous on buying break-outs.

Sunday, November 01, 2009

The chart that tells the story

It really is all about the USD.

SPY talk

The market is broken (trend-line and 50 SMA gone) but also deeply oversold. We'll be looking short but only after a decent bounce. Next support on SPY is 102 -- we get there on Monday (while deeply oversold) and we'll be buyers of this area.

How to Daytrade Support

AU had been on our newsletter (Thursday newsletter) as a support buy on 36 near the 200 SMA on a deeply oversold/extended daily.

On Friday it set-up intraday. One of the most important things to remember when buying support is to stay away from the intraday base. In this case the intraday base was at 37 -- 1 point above our buy spot. Perfect. The stock accelerated into our buy zone as panic started taking over -- a steep descent into a major support zone is exactly what you want when you buy support. Entry was on the reversal of the candle into 36 (low 36.05) with fill around 36.2.

Where do you exit? By definition if you are buying the reversal of a deep speedy descent you will be buying away from the 5 min/20 EMA. The first partial exit is on the EMA. Now what about the rest?

Look at what the stock is doing on the EMA. Is it basing above, on, or below? If the latter two then start lightening your position even more -- if its basing above then hold to see where the stock can go. AU rallied straight away from the 5EMA and into resistance of S1 -- a perfect exit as the stock rallied away from the EMA . Rule of thumb when buying support or exiting against resistance -- buy the spike down away from the EMA and into support (on reversal so you have a stop and don't get blasted) and sell the spike away from the EMA and into resistance.