Tuesday, May 19, 2009

Waiting for that perfect set-up

I sat on my hands all day today waiting for that perfect set-up to make some good money.  If it doesn't come, I am content.  If it does, I better be in it.  I have attached a 5-minute S&P chart below.   I will take you through my thinking process and show you what I saw, real time.  I saw six different reasons why I needed to get short right before 2pm (CST) today. 

1.  I had 915.00 (S&P) as a resistance level.  (This information can be obtained every day when you register for free at tradingrm.com)
2.  The overnight high was 915.75 which coincides with the 915.00 level from above.
3.  On the chart below, I drew a trend line which had been holding all day.  Every time we got to the upper part of the trend line, we sold off, and vice-versa.
4.  XHB and XLF did NOT make new highs with the S&P (divergence)
5.  Sectors were mixed.
6.  Rally to 915.00 was on SUPER light volume. 

When you have 6 things (rare) it makes for a grand slam trade.

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