First of all, our open trades: UGL and SSO continue to chug along like Thomas the Tank, if not as quickly. Our pending trades have finally turned up something.
The chart above is of UDN. An ETF representing the Dollar Index, which is the dollar vs a weighted basket of the main currencies. If the price rises, the dollar is gaining strength against the basket and vice versa. The UDN represents the dollar struggling.
Our first task is to check the trend. Now, normally that is done by way of the relationship of the 21 EMA (blue) (exponential moving average) to the 55 EMA (green). The blue is slightly below the green indicating by our definition of a trend that it is down. Therefore since we don’t want to swim upstream by placing a long trade against a downtrend, we would normally walk away.
In this case we have an exception. In our world of trades, we can see that the 8 EMA and the price have closed above the blue AND the ROC is above the 0 – line. Our impediment was the resistance that was hanging around just above the current price. I needed to see a CLOSE above that line. Unlike the error I made with UGL, my stop – buy is now just above $20.09. Our protective stop will go just below the support level at $19.47.
If we get a rise above the high of $19.47, we are in.
Lessons this evening, Grasshoppers?
– Resistance levels can cause you grief as well as joy. If you place your order under resistance you can sentence your trade to bounce around awhile then fail, or maybe succeed. We know that buy orders are building just above a resistance level. Our trade, if the time is right, could run like a stabbed rat.
Are we guaranteed of a good out come as a reward for our patience? Absolutely not, but we have increased our odds dramatically.
If you have any questions or comments, they can be sent to me at: firstname.lastname@example.org.
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