Dow… still trapped. Someone save it?

Apr 2, 2007: 10:22 PM CST

I am sounding like a broken record, yet so is the market.

We have reached a clear equlibrium point and soon price will break one way or the other out of the consolidation we are experiencing. Remember, the longer the consolidation, the larger the move, yet it is difficult to predict which direction price will eject when it is trapped in a range.

Gutsy traders can take a position now and place clear stops if wrong… or you can place a buy (or sell/short) stop to draw you into the market when this range breaks. Either way, my prediction is for a clean, clear break out of the recent indecision zone.

The “Mighty” Dow is still Trapped

dow-apr2.png

The Nasdaq is also Trapped.

nas-apr2.png

If you must take a position, go Long SPY (S&P) with a tight stop should it break below moving average support.

spx-apr2.png

Sometimes, the best play is to wait for the market to tip its hand and then enter, but beware a “wash and rinse” which means the market may thrust initially in one direction, then shake back and take out the weak hands and stops, and then rally (or fall) hard in the original direction. Beware this, to those who keep stops too tight to the market.

 

Either way, be prepared and best of luck, regardless of your trading style.

2 Comments

2 Responses to “Dow… still trapped. Someone save it?”

  1. Alan Says:

    Hi Corey,

    I am more inclined to the long side. I think we will see higher low on 1h chart which will trigger more buying. But I think it is better to wait and see what the market will do. Problem is that sometimes market explodes and you can not find entry with good rr.

    you have a great blog,
    good trading,
    Alan

  2. Corey Says:

    Thank you, Alan, for your comment and support.

    I favor the long side now from a sentiment standpoint as well. The old saying goes “when the market SHOULD be going down and it is not, odds favor there’s something going on that most people don’t see and if it can’t go down, ride it up” (Ok, so I paraphrased).

    Quick moves out of equilibrium often occur without warning, which may be what happened this morning. You’re right – it is often difficult to ride them if we’re not already in the market when it is consolidating. It can be a gamble, but it helps to position yourself in the consolidation. It’s all based on your risk tolerance and experience, in the end.

    Take care!
    Corey