Quote from Investorsources:
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Man WTF was that at the end of the day. You see, you just never can tell when shit like that is going to happen.
1) Can you tell me one thing you can see in my chart or yours that woudl have let me know that this might have been coming.
Somethign in the price action, because when i look at the indicators at the moment the spike began, they were showing a slightly overbought state. Not overbought, but getting there.
2) Also, when you look at the spike. At the top there is a hammer, with no change and you woudl think the trend would go negative again, but it didnt. But it was right at the end of the day, so there might not have been enough time.
Somebody with some insight on this would be appreciated.
Answer to #1:
Market Breadth Indices like...
* Market Volatility Index VIX
* Nasdaq 100 Volatility Index VXN
* NYSE Advance Decline Line
* Nasdaq Advance Decline Line
* SOX.X and NYA.X Indices
If you don't follow one of the above...your at a disadvantage in my opinion.
To answer your question more specifically...
As a day trader you need to understand that not every trading day your going to understand the intraday price action nor will there be trade signals every intraday.
My point is that sometimes the intraday trade signals may have occurred the prior day or several days ago and the current price info your looking at is just either
continuation or price noise in reaction to something that had occurred in the prior trading days.
The NYA.X and SMH made their bullish signal on late Nov 1st Tuesday and in the first interval on Nov 2nd Weds via the 10min chart.
Now...take a look at your 60min chart of SMH and you should be able to see how SMH bounce (reversed) off the lows on Oct 28th Fri.
Also, make sure you can also see all the price action between Oct 3rd to Nov 4th because there's an
obvious price pattern there.
If you can't see it...research the below link to help you see the pattern...
http://www.chartpatterns.com
Further, you should be able to see via the 60min chart is trying to find some direction out of the range its been in for the past 2 trading days...
Price noise and not worth the time and effort trying to figure out what's going on because what's going on had occurred much earlier.
Now...I haven't mentioned anything about indicators because I don't use them.
However, you do use the ADX/DMI and if it doesn't give you any heads up sort'uv speak on any of the trading days I mentioned above...
It's either lagging too much or your not using it in a way to give you more vision about market turns.
I'm hinting to you in my above answer that you need to look at a higher chart frame to give you more perspective about what's occurring on the lower chart frames...
Not having
tunnel vision.
Answer to #2:
Don't use Japanese Candlesticks unless you have a strong understanding of their strengths and weakness.
What you call a Hammer is actually a Hangman...a low probability meaningless Hangman based upon the price action that occurred prior to it.
Had the lower shadow of the Hangman been much longer and not occurred at the end of the trading day...it may be worth analyzing or discussing further.
(most hangman sub-group patterns are unreliable except for two)
Summary:
Don't have
tunnel vision that puts you at a disadvantage because your only looking at the information
only on the SMH chart and some indicator...
Nor limit yourself to just a small chart interval that prevents you from viewing the whole playing field sort'uv speak.
Therefore, using a
market breadth index as a trading tool will help
confirm price turns in SMH along with helping you to focus more on the price action because sometimes the current intraday trading action is just either continuation price action or just price noise...
Simply, you need to know the big picture prior to trying to trading the small picture.
With that said...there are prior threads here at ET about how some traders use Market Breadth and past threads about
Japanese Candlesticks (what's unreliable or reliable).
Last of all, none of the above is hindsight analysis because there have been several threads discussing the big picture on those key trading days I mentioned above...
If someone was listening on those particular trading days to some of the ET members that have a good grasp of the big picture...
That's a different story.
NihabaAshi
