March 1, 2010

1. We’re not interested in buying support on stocks with any type of news. We want to buy support when a stock is going down with the sector on a broad sell-off — and not because their CFO just got arrested. If you don’t have access to a news wire just watch volume — when buying support long you don’t want volume to be heavier than other stocks in its sector (the exact opposite of what you want when buying long break-out and looking for heavy volume to confirm the break-out).

2. Everything we note on the daily chart can be applied to the intraday chart. For example if a stock has support at 50 and has sold off from being at 60 in 3 days it has a better chance of finally bouncing with extreme oversold readings, coming down vertically. This is exactly what we talk about in terms of buying support on an intraday chart when we talk about not buying the base (buying break of base only applies to break-out longs and break-down shorts, the exact opposite of what you do in support longs and resistance shorts). Again, if you have no idea what we’re talking about shoot us an email and we’ll forward you some old newsletters explaining this in detail (and with hand-drawn charts).

3. The more oversold the market, the more interested we are in buying support from daily triggers. In a neutral market we look to buy support near alert levels on the intraday chart (especially the 20 EMA on the 5 minute chart).

4. The intraday chart is like a microcosm of the daily chart. Trade when the two come together (oversold daily coming into support meets up with oversold intraday coming into daily support).

5. And lastly, unless you’re a veteran who really knows what you’re doing (i.e., professional trader making income enough to support family for at least the last 5 years) then only buy on reversal from support with a stop just under the support against which you bought or a defined stop under support but still small enough not to ruin your day.

Affirmation — “Today I focus on what I want.”