Going into the end of the week we’ve been following this premise that trading on the long side made the most sense, even when it doesn’t look particularly sensible in the short term. Our rationale has been supported all along by the position of price against major resistance/support levels.
Support and resistance trade places all the time – when price breaks key overhead resistance, and holds above, we consider old resistance to now be new support. Frequently such moments are marked by significant rallies or attempts to rally.
We’ve certainly had the latter, some times in a matter of minutes (yesterday), and now markets are once again attempting to hold these support levels. An early long this morning is once again giving us the comfort to go to a break even stop and wait things out.
Swing traders operating only off the daily chart will be looking at QQQQ at the moment as its triggered against yesterday’s high. Ironically this entry will be more difficult and initially more dangerous than our intraday trade, but at least there is a premise backing up an attempt. Lets look at the big picture charts:
S&P 500 futures in fact have been the strongest of all markets from a support/resistance perspective, having turned old resistance into new support by a signficant margin in the past few days, then failed, and since recovered again as of yesterday and reconfirmed this support this morning. +1 for the long scenario and a big heads up.
Dow 30 has not acted quite as strong, but even as I write this the chart now shows price solidly back in the range. +1 for the long scenario.
Nasdaq 100, the poor cousin, has a completely different and much more complex picture. However yesterday and today I attempted and obtained successful long entries at the relative lows of the day, encouraged to make the attempt by a) the price action in the broader markets, b) Nasdaq itself traded much more solidly starting Thursday, and c) Nasdaq has been pushed down so far and hard that IF a rally of any lasting nature shows up, the percentage gain potential in that market will (likely) quickly overshadow a more conservative trade in the S&P.
In the end I selected Dow and Nasdaq for my futures swing trades, complimenting Gold longs and broader market ETF longs from earlier this week (Canadian).
Having a plan is important; but even more important is having two or more plans. Had markets not reconfirmed that old resistance is new (apparent) support, we very quickly would have shifted gears to short the market.
05.02.11 11:10 #