A Classic “Fade The Gap” Day
Courtesy of David at allabouttrends.net
“What’s so special about 1130? It’s downtrendline resistance and a 50% fibonacci level” [Click here for a video on Fibonacci retracements.)
One look at the SPX chart below tells the story, all in a news driven pop based upon the Yuan.
So are the markets really up today or are they down? Just look at the two charts below.
But to those who had to chase the market at the open and REACT AFTER THE FACT the market is down. This is what they mean when they say “Fade The Gap”. Folks going into today we were overbought to begin with and the Chinese Yuan news was just the icing on the cake to set up the fade the gap and lock in some gains.
Think about it, anyone who basically bought anything today is basically down from their entry.
Moral of the story — listen to the charts and above all NEVER CHASE BUSES BY REACTING.
The markets are stretched and hitting key resistance levels and a lot of individual stocks are also showing this — AKAM, SNDK,NFLX — all have technical indicators and nano-timeframe toppiness showing up as well. Right now we are going slow and protecting what we have.
“What Do I Need To See To Make Me Take A Trade”
You would do yourself well by printing off that phrase and pasting it to your monitor somewhere to keep you focused and to ingrain it in your subconscious.
On the long side it’s all about “Pullbacks Off Highs” patterns. It’s really all you need to know and how to trade them of course.
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Adam at Market Club put together a lesson on Fibonacci retracements, an important tool many traders use to determine turning points in the market. Like all tools, it has its flaws and should be used with other complementary tools, such as Market Club’s "Trade Triangle" technology or whatever other TA tools you may find helpful.
Click here for the video.
