Tales of a Technician: Mind your Time Frame
March 23, 2021
Do you want to increase the emotional tug of your swing trades? Zoom into a one minute chart and watch the noise. Every little uptick will generate pleasure, and every red bar will deliver pain.
We engaged in just such an exercise during Monday’s Trader’s Lounge while discussing Comcast (CMCSA).
The communications space has been red-hot. Take a look at DISCA, FOXA, NWSA, or VIAC. They’re all on rocket ship rides to the moon. Comcast has joined them and even offered a nice bull retracement pattern entering this week. Naturally, we included it in our Scouting Report.
CMCSA ended Friday with a doji candle signaling a potential reversal was in the offing.
If we advance the chart to today, you’ll notice Comcast triggered on Monday and is continuing higher Tuesday morning.
Here’s where Monday morning’s lounge comes into play. Though the daily candle looks as if CMCSA charged higher all day long, it actually was a little messy in the morning. Here’s the 5-minute chart.
While we were discussing the trade, CMCSA fell below the 50-period moving average on the 5-minute time frame. One trader understandably asked if we should be concerned. Might this breakdown morph into a bigger reversal that stopped us out?
Maybe. Anything is possible.
But worrying about it isn’t productive. We placed our stop under the pivot low for a reason. And that reason was because it would take a breach of that support zone to invalidate the bull retracement pattern. No amount of intraday shenanigans is worth abandoning the plan.
Notice how the price quickly reverted higher and went on to more profits for the trade.
Here are the key lessons from this episode.
First: If your original stop loss placement was sound, then don’t second-guess it.
Second: Let the trade play out. Don’t obsess over the intraday chart when you’re managing positions off the daily time frame.
Third: if you really want to strip the emotions from the equation, then automate everything.
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