No serious US news events today. The Nasdaq started out with an immediate breakout to the upside at 7:30. It moved up and then corrected about 5 minutes after the open. The 5 minute chart had a consistent decline in volume on the correction. A sideways range formed on the 1 minute chart. When it hit the bottom of the range the second time, it went back up. The price action at the bottom was not that great, so I didn’t enter here. Once it hit around the top, a hammer like candle formed on the 5 minute chart. It proceeded to break out up. It has strong volume, and a strong candle finish. I entered long. I don’t really like entering on breakouts like that. Sometimes, they move, sometimes they correct. This one moved up some, but didn’t want to break the top of the breakout candle. I decided to go ahead and exit that one. It took a small 1 dollar profit.
The market then corrected more, and the volume on the 1 minute chart kept decreasing. That is often a sign we are in a correction. It went back up to the top of the movement, and appeared to be forming another sideways range. This is a market where the upside directionality has been established. I’m looking for a really solid entry, and I will only trade upside, or I will not enter, (according to my trade plan). I’ll only enter for the first hour. That might give my trade some time to move, and give me the chance to enter an effective trade. It is part of my written trade plan. The stock market starts to move around 9:30 eastern time. It really usually stops around 12:00 eastern. It might start back up after 1:00 sometimes, but I’d just really rather be done with it after the first hour. My goal is to get 1 or 2 effective trades, preferrably one.
Now, we’ve moved up to the top of this range, and we’ve had a very small up candle on higher volume. Usually, that means selling. Something was going on in that candle to have that increased volume, and it didn’t move up. Sometimes, a move like this is getting ready to break out, and maybe it will. Now, it has had another even higher volume small bodied candle. It slightly broke the resistance. I am not trusting the upside here, so I’ll just stay out at this point. It has now fallen some. It just went back up, and trading is over. It may glide on up for the morning.
Here is a picture of what was going on today on the one minute chart. From left to right, the first circle is the open. The second circle is a point where someone might want to go short. It might make a little, but trading counter the market direction doesn’t usually get you much. The third one is where I went long. That could have made more than what I made as you see, but I did trade into a small correction, and just decided to exit, which is ok. The fourth and fifth circles are the small higher volume candles. As you see, the movement didn’t last really that much longer. The lines are points of resistance I was looking at as the movement progressed. As you can see, where I did my trade, the market actually only correct down to the previous resistance, so resistance became support. Holding on here would probably have been a good play. But, that’s sometimes the way it goes. As you can see, that last resistance finally did not hold up as support. The strength of selling had increased. If you were trying to buy at that point, you might have been late to the party, and the big operators were waiting for you.