Quote from dbphoenix:
Pop Quiz:
1. Why was going long off "support" at 32 at 1000 not such a great idea but going short off "resistance" 45m later a better one?
2. What is an "air pocket"?
A little more time here, so let's look at #1.
Rather than think in tradertalk I tend to think in terms of metaphors. This whole area that got started at Wednesday's lunch reminds me of an aquarium, one which hasn't been cleaned in a LONG time and has lots of muck in the bottom.
This became even more mucky this morning when price first tried to pull itself out of the muck at 0815 after having been plunged into it after 0715. It did manage to reach 40 just before the NY open, but then it got dragged down again. If one thought that "support" had been established by that pre-market touch and tried to go long at what he might have perceived as a "test", he would have had a hell of a time doing so even if he applied this approach, getting stopped out more than once. Price doesn't even reach clear water until it gets past 37, and even then it gets pulled back again at 1030.
But then we reach the surface and bob up above it for air. There's nothing up here. No resistance at all. But no support either. No muck. So if and when price were to fall, it would most likely fall a lot easier than it rose.
Which is what it did. Guess it was tired after pulling itself out of all that muck.
Point is, you'll know when the trade is right almost immediately. As Teresa Lo once said to me, if it doesn't go, you don't want to be there.
Incidentally, there won't be much if any of this sort of "analysis" in future since it's all fishwrap in a day or so anyway. I mentioned today's activity only because it jibes with the opening posts and provides a current -- or was current at the time -- example of application.
And there's that air pocket.
