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 clings to strong gains above 1.1850 on USD weakness
EUR/USD preserves its bullish momentum to start the week and trades above 1.1850. The US Dollar struggles to find demand ahead of Wednesday's critical January employment report and helps the pair continue to push higher.
GBP/USD hovers near 1.3600 as UK government crisis weighs on Pound Sterling
GBP/USD moves sideways after registering modest gains in the previous session, trading around 1.3610 during the European hours on Monday. The pair could come under pressure as the Pound Sterling may weaken amid a fresh government crisis in the United Kingdom.
USD/JPY slumps below 157.00 on intervention risks
The Japanese Yen outperforms the US Dollar to start the week on the back of speculations that authorities will step in to stem JPY weakness in the domestic currency following Prime Minister Sanae Takaichi's landslide win in Sunday's election.
Editors’ Picks
EUR/USD clings to strong gains above 1.1850 on USD weakness
EUR/USD preserves its bullish momentum to start the week and trades above 1.1850. The US Dollar struggles to find demand ahead of Wednesday's critical January employment report and helps the pair continue to push higher.
USD/JPY slumps below 157.00 on intervention risks
The Japanese Yen outperforms the US Dollar to start the week on the back of speculations that authorities will step in to stem JPY weakness in the domestic currency following Prime Minister Sanae Takaichi's landslide win in Sunday's election.
Gold holds steady above $5,000
Gold builds on the gains it posted to end the previous week and holds steady above $5,000 on Monday. Data released over the weekend showed that the People's Bank of China extended its Gold buying spree for a 15th month in January. Moreover, dovish US Fed expectations and concerns about the central bank's independence drag the US Dollar lower for the second straight day, providing an additional boost to the non-yielding yellow metal.
Cardano steadies as whale selling caps recovery
Cardano (ADA) steadies at $0.27 at the time of writing on Monday after slipping more than 5% in the previous week. On-chain data indicate a bearish trend, with certain whales offloading ADA. However, the technical outlook suggests bearish momentum is weakening, raising the possibility of a short-term relief rebound if buying interest picks up.
Japanese PM Takaichi nabs unprecedented victory – US data eyed this week
I do not think I would be exaggerating to say that Japanese Prime Minister Sanae Takaichi’s snap general election gamble paid off over the weekend – and then some. This secured the Liberal Democratic Party (LDP) an unprecedented mandate just three months into her tenure.
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