A quick follow-up to the morning call on Turnaround Tuesdays.
A daily chart of the year so far shows the trend clearly. You don’t need any proprietary indicators to tell you it’s up. And the record shows that Tuesdays have a particularly strong tendency to end positively. (Stats on the chart–click to expand.)
And you can see that if the trend continues–after a bit of correction and hesitation, profit-taking and last-minute jumping aboard–the trendlines all point above 1700. Fibonacci projections identify some of those same points. And traders on the floor are hearing the same numbers for buy stops, in the range of 1699 through 1707.
And beyond. Can you see from the chart why 1750 is not unreasonable to expect, once it clears the hurdle of 1700?
So how do you trade this oh-so-profound insight? A number of ways, according to your style. We do have a habit of repeating “the trend is your friend,” because, well, it is. But if you prefer to trade the selloffs, even so, it’s a good idea to remain aware of the trend that your countertrend strategy is counter to.
I fired up the simulated account that NinjaTrader kindly gave me. Bear in mind this is a simulation for information purposes only. I didn’t have the emotion that a real trade involves. And that’s the biggest factor, no matter what your strategy.
In this case, I could buy the dips at Fibonacci levels, using the next level down as an absolute stop-loss. I like to also have a tighter stop (sometimes just mentally) at which I’ll get out if the market is simply taking too long. You can always get back in (unless you’re out of money). You can see in this example that buying at the 61.8% correction and riding the trend up to 38.2% would have been a safe and straightforward way to make a small profit. Do that four or five times and you can call it a day.
How are you trading Turnaround Tuesday? If you haven’t tried our IM-PRO traders’ chat room, join us in there and see what the pros are doing. You can look over their shoulders as they work and ask questions.