Tackle Today – Intraday Reversals: Which way did it go?
October 21, 2021
« Which way did it go? »
Traders,
We have seen a dramatical reversal in the markets in the last week or so. We had a pretty aggressive pullback that involved a number of lower highs and lower lows. We even broke some very significant moving averages on the daily charts and really were only saved by the 20- period weekly moving average which for many traders is a line in the sand when it comes to being either bullish or bearish. However, all that has been forgotten by the V-shaped recovery from the last five trading sessions.
So, what does this all mean? Don’t the markets do this all the time? The answer to that question is yes.
Markets do reverse all the time and wouldn’t it be great to know exactly when that might happen? Well, I can’t give you that but we can get some important information from these reversals that may help us identify them sooner.
This recent reversal may not have been a massive surprise as it somewhat showed its hand before finally making the turn. There were four candles at the bottom that had sizeable wicks. This was a clue that the sellers were losing control as they tried hard to drive the price down and failed each time. This is a classic sign of slowing momentum which is a natural precursor to a turn in price. After this clue, there was a series of price movements that were higher than the low prices of the aforementioned four wicky candles. This all led to the reversal confirming and showing what we see in the market today.
Looking at the market right now it seems that it is going to the moon but is it really? Well, let’s apply the same logic to the current market that we did a week or so ago. Is there slowing momentum or some other technical conditions that might lead us to believe that maybe the moon isn’t in the cards at this point? Well, looking at the major indexes they pretty much all have successively smaller candles as each day progresses and this can be one sign of slowing momentum. Another sign of slowing momentum can be intraday reversals. They are the same as longer-term reversals they just happen sooner. We can see this playing out in the Nasdaq index right now. There was a sudden and aggressive reversal during this past session and this could add to the potential slowing momentum of smaller candles and give us an indication of a change in the short-term direction.
There is no sure-fire way to know that the markets will reverse but we can keep a keen eye out and recognize the signs and then we can take other actions to get a view of the overall market picture. One such action is looking at the futures charts to see if there is follow-through after the decline. This can help us get ready for what the markets may have in store next.
Trade Well,
#TeamTackle
Chart of the Day
/NQ Chart with RSI (15min)
This 15 min chart of the /NQ shows a serious intraday reversal beginning around 10:30 AM and really accelerating around 1 PM. This aggressive reversal can give us a clue of what might happen next and therefore watching the action going forward can help see if the reversal is likely to happen in a longer-term timeframe.
Video of the day
How to Trade a Poor Boys Covered Call on Goldman Sachs – Jedi Options
Coach Tyler teaches how to trade a Poor Boys Covered Call on Goldman Sachs $GS in this Jedi Options educational video.
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