This morning I was flipping between a couple cable news networks and after listening for two minutes, you would think Europe, specifically Greece and Spain, were about to fall off the map. They were talking about many things including a local run on the banks. This was enough to make your 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 challenging 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 risk, observe the reality of what is happening, and understand that with the most challenging times come the most outstanding opportunities.
For any trader, the most important function of your routine is proper analysis of supply and demand. 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. The other day in the XLT, we used our rule-based supply and demand analysis to attain a very low-risk, high-reward, and high probability trade that worked out very well. I will explain for your review using some of the rule-based information we use each day in the XLT. This opportunity was found in the NASDAQ futures using a very small time frame. Notice the supply (resistance) level found in XLT. We know this because before price initially declined, it could not stay there. Price only declines from supply because there are more sellers than buyers at area “A,” that level. Notice the first time price revisits supply. Our rules tell us here that novice, consistently losing traders… Continue Reading
