Setting targets using 1:1’s:
The 50 or 61.8 double bottom break down:
Conditions:
Technical buyers will know that the 50 or 61.8 is an important support level.
Most will recognize the fact that trouble lies ahead for them if the market breaks below the defined support. Sellers will know to seize the opportunity also.
If the second test of the low fails to attract good volume and does not rally enough buyers will throw in the towel or plan to reverse short.
Situations such as these get traders thinking of their own self preservation. This is more so in the short term than the long term. Nevertheless they are creatures of habit and will only see the main option ahead for them – get out or lose money!
In this case, we are dealing with the effects of human emotion, greed and fear along with the fact that everything they know is working against them. Moods can change very quickly when the tide turns and if you are prudent enough to recognize this in advance, you can take advantage of it.
Just remember that the support at the 50 or 61.8 may have been generated from hedge fund computer orders automatically placed in advance. The computer has no idea of what is right or wrong. All it knows is how to either buy or sell when and where instructed. However, the computer also knows how to reverse short if the support level they are buying off fails, so this will add more volume to the downside.
Basic Sell Set Ups 62 Chapter 10.
Retests of support just broken:
These are particularly good places to get on board a resuming downtrend if the conditions are right.
Conditions:
The trend indicators need to be pointing down in the minor degree and the support base needs to look like it was a solid support before it broke.
If the break of support has reasonable volume but does not follow through it will attempt to come back up for a while but you should never give it more than 15 minutes to make the retest.
If it hasn’t started going back down by then, it is not a good trade. Personally I would walk away from it.
Price action has a body language all of its own. You have to feel the pressure on the other side of your position to know when you are correct. If you can’t feel it with the knowledge you now have about the market then you are only guessing.
In this business, guessing is not a good policy; you are better off out of the market waiting for new evidence to make a trade.
This is a policy I follow most of the time. I am always assessing the relative indicators so I know what they have and what they haven’t got up their sleeve.
The BREAK BACK SELL trade:
Basic Sell Set Ups 63 Chapter 10.
Conditions:
When the break back occurs, your trend indicators should have been registering overbought on the reversal for the short trade to have more credibility.
There is no reason for it going up because at this point, the volume is not agreeing with the direction.
This places the bulls in a predicament which means they will capitulate. The breakout is false if it is not on volume and this may have occurred just before some fund hits the market with a huge order causing the break back to occur.
So stay alert and if you are monitoring all the respective charts, the opportunities that are out there will soon become obvious to you.
When the market can get everyone around the wrong way and then reverse, you should get a good move back the other way until some equilibrium is reached.
Just remember that most of the time 90% of the people trading will be caught around the wrong way when something like this happens. Mostly they will have to learn from it, so you should learn how to deal with it beforehand.
The only way they can deal with it is to get out or reverse if they have any idea at all on what is the best strategy for them at the time.
Basic Sell Set Ups 64 Chapter 10.
Basic Sell Set Ups 65 Chapter 10.
Double TOP sells:
These are regular occurrences in the market because traders see the RESISTANCE well in advance. Nevertheless you need to determine if there is any reticence on the part of the buying side before you sell a double top.
The best way to determine the chances of a double top reversing the market is if the market cannot sustain a forward movement beforehand where it takes smaller corrections as it heads towards the double top.
The importance of the price action going into a double top is extremely important.
If there is a tendency for the market to hesitate prior to the double top by attempting to sell off earlier, then the chances are the corrections will be a little larger before the double top finally comes in. There could be a false break at the double top but it should be contained within 2 ticks. If not then reverse long but only to recover your initial risk.
The volumes prior to the double top will be obvious to you if you look closely enough. You should be able to see by low volume going into a double top if they are going to sell it there. When a market reverses on a Double top it will become very clear that the sellers are dominating allowing you to manage the trade from that position.
As a double top becomes clearer to the less informed it will attract more selling pressure and this is where your focus should remain; increasing selling volume.