Hi Everyone
Impressive work by the markets on Friday but remember, in order to trade an upswing we need one of two things present before we can activate a trade safely:
(a) A consolidation pattern or
(b) A reversal pattern
As you’ll see below, a couple of our favourite securities did form doji patterns tipping us off for a reversal, but it was by no means across the board. However, if this market really means business, then we should expect some sort of consolidation before the next big breakout to the upside (this is where I reserve judgement that it will happen – I really don’t think we’re about the see the next major bull run of our time!)
The curious thing about Friday’s move is that while volume was decent the OVI didn’t join in the party, so I’m very intrigued to see what happens next. There are two reasons for this:
(i) The move could run out of steam soon; or
(ii) The OVI will catch up – though this would be unusual, as it typically leads (even though we’re working on speeding it up by 12-16 hours or so, which we are already working on).
Here are a few OVI charts:
Nasdaq (QQQQ):
Great move up but OVI turned down into negative territory, which I was surprised at considering it just broke a minor resistance just below $46 on Friday. Note the next resistance level just above $47.
Dow (DIA):
OVI turns down to a neutral reading. Resistance just below $106 and again at $108. Friday’s bar is a hanging man which can be bearish. Volume not great either.
S&P (SPY):
OVI turned has barely made it into positive territory even with the last few rising days. Plenty of room to the upside if it wants it and volume more encouraging than for the Dow and Nasdaq. All points to somewhat mixed readings.
GS:
OVI is reluctant with this powerhouse stock but volume was decent on Friday and there’s some good upside here. As with the other charts we do need a consolidation in order to set the scene for a new trade.
AAPL:
I’ve been harsh with AAPL in my Private Traders Club webinars but it’s certainly looking upwards in this short term run. Note the doji bar from two Fridays ago, setting the scene for this powerful new run up. The question is how long and how far can it go? We’re still in the context of a longer term Head and Shoulders pattern here.
S&P Intraday Chart:
Now, if you want to trade intra-day, we can find these quite nicely … and I’m developing software to find them too. Take a look at this chart of the S&P, which is a chart consisting of 30-minute bars:
As you can see we had two beautiful flag setups on this timeframe, and with the OVI poking into positive territory, these would be legitimate trades.
Today is going to be interesting after the Labor Day holiday, that’s for sure!
More soon …
All the best
Guy
