- NASDAQ Composite’s closing day’s price is the most important price.
- Market index itself will tell us the conditions of market.
- Trend reversals or transition points is where maximum ROI is made.
I have heard that from FT 71
Futures Trader 71 aka Morad Aksar. He is a well established day trader but i am not a day trader but i have learnt some tit bits from him.
Another important truism/maxim i have learnt in theory and practice is this : Preserve your capital at all costs. In theory i have learned it at Options Express 2 day courses with George Fontanills. Practically after losing much of my profits i learnt to add this : Preserve your profits at all costs too!
why? When we transition – right at transition times is when we hit Gold mine.
Let me explain : Now you see the NASDAQ daily chart. On December 24th 2019 we hit 6190 and 50 days Simple Moving average was 7164. The difference of around 1000 points.
Since we know at this blog that the price is the only true North Star and we would have been in short position for this long. We expect the price to continue trending down till it does not.
Now next day we have December 26th, and we also know that the closing price is very very important and significant. All the billions and billions of dollars and savvy money managers and hedge fund gurus and Mutual funds all fight it out and finally come to the days end and a closing price. The most significant price for the day. December 26th it closed up around 361 points.
Has the trend reversed? We don’t know, but the wonderful big green candle catches our attentions since we are attended the heart beat of the market which is nothing but the index like NASDAQ Composite.
that is the first day of attempted rally. why ? the closing price was higher than the previous days closing price and by a whopper!
we wait and see and by Jan 4th after 7 trading days it is alright up by around 525 points from the low of the first day of attempted rally. It was day 7th follow through day of the attempted rally
System developed by William J. O’Neil to identify an important change in general market direction from a definite downtrend to a new uptrend.
A follow-through day occurs during a market correction when a major index closes significantly higher than the previous day, and in greater volume. It happens Day 4 or later of an attempted rally. Leading up to a follow-through day, an attempted rally takes place during a downtrend when a major index closes with a gain. The rally attempt continues intact as long as the index doesn’t make a new low.
Follow-through day variables include: an index closing sufficiently above 1% on increased volume, positive behavior of leading stocks, and improved market action regarding support vs. resistance levels. The most powerful follow-through days often happen Day 4 through Day 7 of an attempted rally.
In the wake of a follow-through day, the market should continue to add gains in strong volume, with breakouts by top stocks. This is further confirmation a new uptrend is underway.
Now we enter the market always always with a stop and right now the market is up 750 points from the entry.