Using What We Learn

Brandon Wendell
Instructor, CMT

A few weeks ago, I wrote about a technique I use while trading to increase my chances for success. Last week in the Stock Extended Learning Track (XLT), I was able to use this technique for the benefit of the many traders in the room.

On Thursday, July 25th, the markets were reacting to earnings released the previous evening. The NASDAQ 100 Index was gapping up while the rest of the indexes we down.  At the open, QQQ, (the ETF that tracks the NASDAQ 100), started to move down to close the gap.

6-25 qqq

On my XLT Prep Screen, I had identified 167.92 – 167.99 as an intraday demand zone for SPY, (the ETF that tracks the S&P 500 Index).

7-25 prep

 At the open, QQQ emerged as the leader of the indexes to the downside.  Remember that the percentage change chart is set to begin at the current day’s open, not the prior close.  I do this to gauge the current day’s momentum.  As the SPY hit its demand, the Q’s were approaching their demand as well.

7-25 percent

Several students went long on SPY when it hit the demand zone.  The odds were more in their favor once the leading index ETF, (QQQ), also hit its demand.

6-25 spy follow up

You can see how prices accelerated upward when the QQQ ETF had bounced from demand.  The exit for the trade was also signaled from a related security.  The IWM, the ETF that tracks the Russell 2000 Index, became the leader for the bullish moves.  Traders were able to time their SPY trade exit based on the leading IWM stopping at a supply zone.

6-25 iwm

Traders who use odds enhancers and have the ability to read price will always have an edge over those who do not.  Learn how to gain this edge by attending one of our courses at Online Trading Academy today.

This newsletter is written for educational purposes only. By no means do any of its contents recommend, advocate or urge the buying, selling or holding of any financial instrument whatsoever. Trading and Investing involves high levels of risk. The author expresses personal opinions and will not assume any responsibility whatsoever for the actions of the reader. The author may or may not have positions in Financial Instruments discussed in this newsletter. Future results can be dramatically different from the opinions expressed herein. Past performance does not guarantee future results. Reprints allowed for private reading only, for all else, please obtain permission.