Trading with the trend should be your main focus for long term success no matter what type of trader you are (Options Trader, Stock Trader, or ETF Trader) although it’s not as easy as it sounds.
The good news is that there is a simple trading model that removes
95% of trading analysis and greatly reduces trading related emotions
because the key technical analysis rules based on one of the world’s
best chart technicians (John Murphy) technical analysis methods have
been applied to the chart automatically. The key is to identify the
trend of the market. Once that is known you can focus on trading
strategies that take advantage of the current trend.
Over the past few years I have been creating this indicator/chart
layout tool which converts my chart reading experience, tips and tricks
into a simple system removing analysis paralysis which cause most
individuals to second guess what they see and don’t pull the trigger.
Using too many indicators or read/listening several other traders
commentaries with different views than you causes this paralysis.
My simple red light, green light model clearly shows a viewer the
current trend and expected price range (high and low) looking forward a
couple days. I uses a series of data points like volatility, volume,
cycles, momentum, chart patterns and logic rules. It even shows extreme
pivot points helping you find low risk entry prices for both bull and
bear market conditions.
Recent trends and signals for the SP500 Index Daily Chart:
Trading With the Trend – The Sweet Spots
Knowing the direction of the market is simple using the chart system
above but trading with the trend is not that simple because of natural
human behavior. Instead traders fall victim to trying to pick a top or
bottom because they think the price is overbought or oversold and they
want to catch the next big trend change.
We all know the saying “the market climbs a wall of worry”. Well,
the biggest worry most traders have is buying long in a bull market
because stocks and price always look overbought and ready to top each
week… This leads to people trying to get fancy picking a top only to get
their head handed to them a few days or weeks later depending on how
stubborn they are to exit a losing position.
The key to long term success is to buy during broad market (SP500)
corrections once sentiment, cycles and momentum are starting to flash
extreme oversold conditions. These show up as green arrows on the trend
chart. At that point most sectors and high beta stocks like IBM, GOOG
etc… should be at a key entry points with most of the downside risk
removed already. Remember ¾ stocks follow the broad market so it only
makes sense to follow it also.
What about a runaway stock market? This is when the stock market does
not pullback but just keep grinding its way higher and higher… The only
thing you can do is sit in cash, or look for a stock or sector that is
having a small pause or pullback and get long with a small position
until you get that broad market pullback and major by signal to add
more.
Below are a few sectors showing a minor pause/pullback within this bull market.
Mid-Week Trend Conclusion:
Overall, the broad market remains in an uptrend. While I would like
to see the SP500 pullback and give us another major buy signal like it
did in December and February I do mind that much if prices keep running
higher as it just give us more cushion and potential profits for when
the trend does eventually roll over and flip signals. I hope you found
this report interesting. It’s just scratching the surface of this topic
but it’s a start.
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The main price level to watch on JIVE is $16 (blue). Not only was the
$16 resistance readily apparent over the (7) months and back in March,
but that price also acted as support just last week. So, the $16 level
is key to this stock. Assuming the stock moves higher, the increments of
$2 (red) have also acted as common price levels for the stock.
Today
one of the wealthiest people in the financial world spoke with King
World News about what he considers to be one of the most incredible
opportunities he has ever seen for investors. Here is what Rick Rule,
who is the CEO of Sprott USA, had to say about that opportunity and
creating great wealth: “One of the things that is interesting at this
point, Eric, is the, ‘why bother’ question? When investors go through a
bear market like this where they haven’t been making any money they
ask, ‘Why would I take this risk?’ The thing you have to point out to
investors and speculators is that history repeats.”