How do you tell when the market will offer nice pullbacks or when it will trade off of momentum? The easiest way to check this is to look at the ADX indicator.
Readings below 25 indicate that the market will offer nice pullbacks to initiate swing trades. Readings above 25 indicate a strong trend - pullbacks will be shallow or nonexistent.
As long as the ADX indicator is above 25 and sloping up, the market will continue to trade off of momentum. Momentum is lost when it begins to slope down.
It's not a perfect technical indicator (none are) but it does a good job of telling you the current strength of the trend.
Not sure if you already know about this but EWI has their 2013 State of the Global Markets Report available. It's a worthy read - and it's free.
Download it here
I'm not sure how long it will be available so grab it while you can!
Take a look at the following chart:
H&R Block (HRB) recently broke out decisively (arrow) through resistance (highlighted). This stock is now in first pullback mode and could create a nice trading opportunity if it prints a reversal candle.
The one problem that I see is that this stock is in a mature trend which could lead to failure patterns.
Still, this is definitely one to keep an eye on when the market resumes trading.
I know from experience that a stock should move in your favor within a day or two after your entry. If it doesn't then it will likely go against you. Here is a recent trade that I had:
This stock pulled back and formed a bottoming tail and then an engulfing candlestick pattern. So I bought the stock. Then I waited...and waited...and the stock went nowhere. So I dumped it after a couple of days.
The first question that should come to your mind when this happens is:
Where are the buyers?
They aren't there.
Time to get out.
Readings below 25 indicate that the market will offer nice pullbacks to initiate swing trades. Readings above 25 indicate a strong trend - pullbacks will be shallow or nonexistent.
As long as the ADX indicator is above 25 and sloping up, the market will continue to trade off of momentum. Momentum is lost when it begins to slope down.
It's not a perfect technical indicator (none are) but it does a good job of telling you the current strength of the trend.
Not sure if you already know about this but EWI has their 2013 State of the Global Markets Report available. It's a worthy read - and it's free.
Download it here
I'm not sure how long it will be available so grab it while you can!
Take a look at the following chart:
H&R Block (HRB) recently broke out decisively (arrow) through resistance (highlighted). This stock is now in first pullback mode and could create a nice trading opportunity if it prints a reversal candle.
The one problem that I see is that this stock is in a mature trend which could lead to failure patterns.
Still, this is definitely one to keep an eye on when the market resumes trading.
I know from experience that a stock should move in your favor within a day or two after your entry. If it doesn't then it will likely go against you. Here is a recent trade that I had:
This stock pulled back and formed a bottoming tail and then an engulfing candlestick pattern. So I bought the stock. Then I waited...and waited...and the stock went nowhere. So I dumped it after a couple of days.
The first question that should come to your mind when this happens is:
Where are the buyers?
They aren't there.
Time to get out.
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