AlphaTrends Trading Blog

Objective technical analysis of stock market trends since 2006

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From Failed Moves, Come Fast Moves

The chart below of the $SPY is one I sent in to the editors of SFO Magazine Friday morning for THIS ARTICLE Unfortunately, by the time the article was out this morning, the market had gapped lower and the short could not have been initiated as outlined.

Technical analysis is largely about knowing where key levels of support and resistance are and then anticipating the potential trading scenarios which develop around them. If we can find what looks like a low risk/ high potential trade based on pure dynamics of supply and demand, that is when we transition the “science of technical analysis” into the “art of trading.”

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Failed Move, Fast Move Again?

The market has made momentum chasers reconsider their moves a few times this year after it appeared an important technical level had been breached. Most recently, the failed higher high in September saw a quick pullback, while the lower low on October 4 led to a 14%+ rally to the $SPY falling one penny short of a new multi-month high yesterday.

It is too early to say that this will happen again, but it is definitely a scenario to be aware of. We have been talking of a “higher low” and it will take a move below 119 for this market to violate that low, but that level is still far enough away to cause damage to account balances. A strong defense wins this game!

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