Where will price turn, where will it go?
The question above is the most important question to the trader and investor in any market. You can be the top fundamental analyst in the world and know your data inside and out but it all comes down to where price will turn and where price will go. To answer this question requires a simple focus on one thing and one thing only, buy and sell orders (demand and supply). Most people focus on the market turning and timing portion first and foremost, but that is only half the focus. The focus of today’s piece is to help you see the price pattern to predict where price will move to and we will do that by looking at a trading opportunity offered in the Mastermind Community last week.
NASDAQ (QQQ) 11/10/16 Daily Market Overview Income Trade
The key is to know how to identify where banks are buying and selling, specifically, what the picture of demand (unfilled buy orders) and supply (unfilled sell orders) looks like on a price chart. The trading opportunity was found by using the Daily Market Overview in the Mastermind Community. The trade was to sell short the QQQ at a fresh supply zone as noted on the Daily Market Overview and the yellow box on the chart. Once price falls away from that yellow shaded area, the price pattern and odds enhancers tell us that banks are selling the QQQ in that area and that not all their orders are filled. In short, we have a fresh supply zone. Whether we take the trade or not depends on one more important factor which is the focus of this article, where is demand. Once supply is established, we need to know where banks are buying, where significant demand is. On this chart, we don’t see any “fresh” demand so the profit zone is big. The pivot low you see below and the gap are NOT demand. Conventional technical analysis says that the pivot low and the gap are “support” and that prices will turn. This is why you don’t see people making consistent profits with technical analysis.
So, the simple reason why prices fell is because there was fresh supply and no significant demand below. In other words, we had a ceiling and the floor was much lower. This price pattern can be clearly seen in the charts if you know what you are looking for and have a razor-sharp focus on orders. The rally into supply is the entry point for the trade, selling short to a buyer who was buying after a rally in price and at a price level where supply clearly exceeded demand. This short term income trading opportunity worked out for a nice profit. Whether you are trading for short term income or long term wealth, whether you are buying or selling, nothing in this piece changes. By focusing on where the significant buy and sell orders are in the market, you will answer the two most important questions.
- Where are prices going to turn? Price will turn at fresh supply and demand levels.
- Where are prices going to move to? Price will move through levels where there is a lack of supply and demand.
Price in any and all markets simply moves to and from supply and demand levels. Understand this simple concept and unlock a lifetime of low risk, high reward and high probability trading opportunity. For more on this concept, read some of my prior articles or join us at a market timing preview.
Hope this was helpful, have a great day.
Sam Seiden – firstname.lastname@example.org