The Dow Jones Industrials Index has given us a defined trading range this week. And we are presently at the lower part of the range which is the 8200 area. If you notice, we bounced in this area before and at this point we are looking for signs of another bounce. Keep in mind, we are in a support area and the price can break through the support at 8200, going only a little lower and then reverse right back up. That would be a false break, or a fake out. Be ready for that scenario. If you watch the market intraday, watch for signs of sluggishness on the short side. If price falls right through without a problem, then this is confirmed weakness which means time to look for short positions. The positive momentum is still present, so I wouldn’t be too aggressive on the short side just yet. At the present rate, it will take at least a week to see a change in market momentum so stay tuned.
In this type of environment, it really helps to be patient and wait for prices to reach significant levels before taking a position. And even when prices are there, you want to wait and see what is does. Wait for a confirmation. Patience in trading is an acquired skill. It is especially challenging within the context of the immensely impulsive world that we are exposed to every day. One helpful solution is when the product you are trading is not showing any opportunities, you move on and find something that is showing signs of an opportunity. This lesson took me a couple of years to realize thanks to my stubborn nature. What does a sign of an opportunity look like you ask? Well come to our trading chat room and find out. It is much easier to show on a real time chart than it is on this blog.
One thing you may hear often when learning how to trade is learning to anticipate where price is going next. It sounds almost like a chess game, where you are always trying to anticipate your opponents moves two or three moves ahead of where you are now. This is a very important trading concept. It helps to protect you from being impulsive and chasing seemingly runaway prices. We illustrate this often in our webinars and in the trading room.
As far as upcoming news to watch for this week we have: Case-Schiller home price index on Tuesday along with consumer confidence, not exactly huge market movers. Existing home sales on Wednesday while Thursday we have durable goods, new home sales, crude oil inventories and initial jobless claims. The home sales numbers and oil inventories are possible catalysts for market momentum so be awake when these reports come out. Friday has Chicago PMI and Q1 GDP revision. Be awake for these also because the media likes to create a lot of drama around these numbers. The eurozone, Japan and pacific rim have many similar types of reports coming out and if you are active in the currency market, you should at east take a look.
Click here for market events calendar.
So enjoy your holiday and come back all ready to be patient! This is a great time to learn how to trade because you don’t have to worry about missing alot of market moves. Join us in the chat room we will show you how it all works. See you there!