One might describe Tuesday’s action as a “Creeping” or “Oozing” Trend Day which never really gave a clean retracement swing to enter as price bled its way to the close. Let’s look at the DIA and take a special glance at the NASDAQ’s near perfect trend channel which pushed the Index down for almost a 6% loss in a single day.
DIA 5-min chart:
In terms of ‘idealized trades,’ there really were about three of them, all of which came from a retracement up into the 20 EMA for a short-sell. Keep in mind, we need a decent retracement up, like the 10:00 to 10:30 five-bar rally or the four bar rally at 11:30 and then 12:30 or even the three-bar rally at 3:30. Anything else did not give a clean retracement up, meaning it ‘felt’ difficult to enter.
On a Trend Day, the ‘name of the game’ is enter in the direction of the trend and hold until the close. Generally, you usually have enough evidence to believe it’s a trend day by noon or perhaps 1:00 EST, though aggressive traders can enter earlier off a large, unfilled down-side gap at the first retracement to the 20 EMA, though that’s a more aggressive ‘trend day’ strategy. Early identification is key.
We started the day with a moderate overnight gap which wasn’t even attempted to be filled. After the impulse down into a new momentum low, price formed and completed a bear flag and Impulse Sell trade – the Impulse Sell met its target while the Bear Flag officially fell shy. Price then tested confluence resistance (the 50 and 200 moving averages). That was ‘all she wrote’ as the market fell from this area and never really looked back… and never gave a clean entry (with the exception of mini-dojis at the falling 20 EMA).
I did want to highlight an important fact – you cannot use oscillators on Trend Days – look at the flatline of the 3/10 Oscillator (a stochastic or RSI would stay oversold all day, permanently locked in a false signal).
Today was a true trend day – we opened on the exact high and closed on the exact low.
I wanted to show the NASDAQ chart, mainly to highlight the trend channel that formed for the second half of the day – that is very rare for an index.
NASDAQ 5-min chart:
The analysis is similar to the DIA, only we fell harder (down 5.78% on the NASDAQ vs 4% on the Dow).
I again wanted to call your attention to the near perfect parallel trend channel that began around noon and ended at the close. The 20 period EMA contained all price ’swings’ to the upside.
Sometimes you can’t “Play Cute” with your trading (as in fighting a trend or waiting for a perfect retracement to enter in the direction of the trend) and you just have to throw out a market order and join the current or get left behind… or swept away if you’re trying to fight the trend and not using stops.
Look deeper for yourself into the price action for additional clues and don’t beat yourself up if you didn’t achieve the results you desired on such a creeping day.
Afraid to Trade.com