Brandon Wendell, CMT
Brandon Wendell
A few weeks ago, I wrote about a technique I use while trading to increase my chances for success. Last week in the Stock Extended Learning Track (XLT), I was able to use this technique for the benefit of the many traders in the room.
On Thursday, July 25th, the markets were reacting to earnings released the previous evening. The NASDAQ 100 Index was gapping up while the rest of the indexes we down. At the open, QQQ, (the ETF that tracks the NASDAQ 100), started to move down to close the gap.
On my XLT Prep Screen, I had identified 167.92 – 167.99 as an intraday demand zone for SPY, (the ETF that tracks the S&P 500 Index).
At the open, QQQ emerged as the leader of the indexes to the downside. Remember that the percentage change chart is set to begin at the current day’s open, not the prior close. I do this to gauge the current day’s momentum. As the SPY hit its demand, the Q’s were approaching their demand as well.
Several students went long on SPY when it hit the demand zone. The odds were more in their favor once the leading index ETF, (QQQ), also hit its demand.
You can see how prices accelerated upward when the QQQ ETF had bounced from demand. The exit for the trade was also signaled from a related security. The IWM, the ETF that tracks the Russell 2000 Index, became the leader for the bullish moves. Traders were able to time their SPY trade exit based on the leading IWM stopping at a supply zone.
Traders who use odds enhancers and have the ability to read price will always have an edge over those who do not. Learn how to gain this edge by attending one of our courses at Online Trading Academy today.
Neither Freedom Management Partners nor any of its personnel are registered broker-dealers or investment advisers. I will mention that I consider certain securities or positions to be good candidates for the types of strategies we are discussing or illustrating. Because I consider the securities or positions appropriate to the discussion or for illustration purposes does not mean that I am telling you to trade the strategies or securities. Keep in mind that we are not providing you with recommendations or personalized advice about your trading activities. The information we are providing is not tailored to any individual. Any mention of a particular security is not a recommendation to buy, sell, or hold that or any other security or a suggestion that it is suitable for any specific person. Keep in mind that all trading involves a risk of loss, and this will always be the situation, regardless of whether we are discussing strategies that are intended to limit risk. Also, Freedom Management Partners’ personnel are not subject to trading restrictions. I and others at Freedom Management Partners could have a position in a security or initiate a position in a security at any time.
Editors’ Picks
EUR/USD climbs to daily highs near 1.1820
EUR/USD now picks up pace and advances to the area of daily peaks north of the 1.1800 barrier at the end of the week. The pair’s decent move higher comes against the backdrop of a generalised lack of direction in the FX galaxy and the mild offered stance in the US Dollar.
GBP/USD trims losses, retests 1.3460
After briefly challenging its key 200-day SMA near 1.3440, GBP/USD now manages to regain some balance and revisit the 1.3460 zone on Friday. Cable’s pullback comes as the selling pressure on the Greenback gathers traction, reigniting some recovery in the risk-linked space.
Japanese Yen gives back half of early gains against USD ahead of US PPI data
The Japanese Yen (JPY) surrenders half of its early gains against the US Dollar (USD) during the European trading session on Friday. The USD/JPY pair rebounds to near 155.90 as the JPY falls back, but is still 0.15% down.
Editors’ Picks
EUR/USD: Fed calm, ECB steady, but the Dollar still leads Premium
EUR/USD is still struggling to find real traction. The pair has tried to stabilise, but momentum keeps fading, leaving the door open to further weakness.
Gold: Falling US yields, geopolitics help XAU/USD hold ground Premium
Gold (XAU/USD) gained traction and climbed above $5,200, ending the fourth consecutive week in positive territory. The next round of US-Iran talks and crucial macroeconomic data releases from the US will be watched closely by market participants in the short term.
GBP/USD: Will Pound Sterling defend key 1.3450 support ahead of US jobs data? Premium
The Pound Sterling (GBP) entered a bearish consolidation phase against the US Dollar (USD), after having tested critical support near the 1.3450 level on several occasions.
Bitcoin: Another month of losses, and it’s been five
Bitcoin (BTC) price is stabilizing around $68,000 at the time of writing on Friday, but the Crypto King is poised to close February on a fragile footing, marking its fifth consecutive month of losses since October and a rare start to the year with back-to-back monthly corrections.
US Dollar: At a crossroads; Fed steady, tariffs in flux Premium
The US Dollar’s (USD) upward momentum from the previous week seems to have encountered a tough nut to crack in the 98.00 region, as measured by the US Dollar Index (DXY).
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