Key Reversal Bar Seen on NASDAQ QQQQ
by Chart School - September 1st, 2009 2:42 pm
Key Reversal Bar Seen on NASDAQ QQQQ
Courtesy of Corey at Afraid to Trade
I wanted to highlight an interesting potential “Key Reversal” bar in the NASDAQ ETF QQQQ. Let’s take a look:
Take a look at the bar I highlighted on August 28. Price gapped upwards off the opening (due in part to the Consumer Confidence expectation) and formed a fresh 2009 high for the year… before reversing off the open and selling off almost the whole day.
Generally, a more ‘perfect’ key reversal bar would close lower than the prior bar, but what draws my attention to this bar is the logic behind it.
Imagine, you’re a bull and you see a long price advance and you’ve been sitting on the sideline, or have money you want to invest in the market that you’ve been holding. All of the sudden, a gap occurs and you can’t wait any longer so you rush in and put your money to work, excited and fearful that you’re missing the rising boat.
However, price begins to sell off just as you are most confident and you now become stressed and confused. Perhaps you hang on to your long position in hopes of a recovery (because now you are ‘underwater’) and if price continues to fall – like it is doing today (September 1st), then you ‘cry uncle’ and sell your shares at a loss.
Key reversal bars that gap up and then sell off all day are generally rare, but can be powerful short-term or even intermediate term trading signals, because it captures the euphoria of the bulls and then leads to downward movement as their hopes are dashed as they sell at lower and lower prices.
Beyond the key reversal bar drawn above, we see a critical negative momentum divergence as price tapped above the upper daily Bollinger Band – that’s enough reason to take a short-sale scalp/swing trade with a tight stop.
Study this pattern a little more and let’s see if we continue to get downside momentum from a possible ‘buying climax’ high.
Corey Rosenbloom, CMT
Afraid to Trade.com
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Sell Signal on SP500 Monthly Chart?
by ilene - July 3rd, 2009 2:44 pm
Sell Signal on SP500 Monthly Chart?
Courtesy of Corey at Afraid to Trade
June’s monthly candle closed with a ‘doji’ at Fibonacci resistance – that’s a bearish development as we start the new month of July. Let’s take a look at the S&P 500 monthly chart to see its current structure.
We see the S&P 500 is still below levels from 1998 – in fact, price recently came into the 950 level which was prior support in late 1998 (and for the September spike-down in 2001).
Most importantly, we have come into the 38.2% Fibonacci resistance level of the May 2008 highs to the March 2009 lows – virtually to the point.
In combination with that, we have a bearish doji candle formation at overhead resistance – and as of June 2nd, we have a down-candle.
Don’t put so much emphasis on the two trading days in July as equal to the full months the other candles represent – but it’s telling.
If price continues in the direction it appears to be traveling (down), then we will have a confirmed reversal/retracement down off the 950 highs in mid-June.
Corey Rosenbloom, CMT
Afraid to Trade.com
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
Ilene is editor and affiliate program
coordinator for PSW.