This morning I was flipping between some news networks and after listening for two minutes, you would think the world was coming to an end…or as TV tells us, “falling off a cliff” (as in the impending fiscal cliff). This was enough to make my head spin so I turned it off. When I then went and looked at my charts, I was reminded that the S&P continues to decline from our major XLT supply level.
You have two choices during these most interesting times. One is to give into fear and take no action or worse yet, take ill-informed action. Your other choice is to rise above the fear, rise above the perceived risk, observe the reality of what is happening, and understand that with the most challenging times come some of the greatest opportunities.
For any trader, the most important function of your routine is proper analysis of supply and demand; where are significant institutions buying and selling. As I have written about before, one of the most important pieces of that analysis is knowing the objective profit zone on a given trade. Recently in the XLT (Extended Learning Track, our graduate trading rooms), we used our rule based supply and demand analysis to identify a very low risk, high reward, and high probability trading opportunity. I will explain for your review using some of the rule based information we use in the XLT. This opportunity was found in the NASDAQ futures using a very small time frame. Notice there are two small demand levels that we combined to make one level. We know this is demand because on the left side of the chart, price could not remain at that level and rallied strong from that area, the origin of the move. Price only rallied from demand because there are more buyers than sellers at that area. Notice… Continue Reading
