However, I'm declining the trade without doing a full analysis. This is one of those occasions where narrative and the chart trump the math.
DIA -- the Dow Jones Industrial Average -- is an avatar for the blue chips, same as is SPY -- the S&P 500. There is some variance between the two, and DIA happened to cross the 20-day price channel first, but SPY isn't far behind.
DIA -- the Dow Jones Industrial Average -- is an avatar for the blue chips, same as is SPY -- the S&P 500. There is some variance between the two, and DIA happened to cross the 20-day price channel first, but SPY isn't far behind.
By contrast, QQQ -- the NASDAQ 100, which skews toward the tech sector -- and IWM -- the Russell 2000, which tracks mid-caps -- are far from a price-channel breakout.
This tells me that blue chips are largely alone in their upward lurch, and that often a sign of a price movement that is running out of steam.
The chart shows that DIA is in the midst of what is a fairly sharp downtrend. The present rise is a counter-trend correction, and it will take a move above $183.55 peak set in May to change that assessment.
Click on chart to enlarge.
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| DIA, 1 year daily bars |
Finally, there's the purely parochial concern that I already have bearish exposure to blue chips and remain bearish in my assessment, based on the chart, so I don't want to complicate my portfolio with a contrary trade.
References
Tradecraft: Playing the odds to build winning stock market trades from options, a description of how I trade, can be read here.
Alerts
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All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
Based on a work at www.timbovee.com.
-- Tim Bovee, Portland, Oregon, Oct. 9, 2015
References
Tradecraft: Playing the odds to build winning stock market trades from options, a description of how I trade, can be read here.
Alerts
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Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.License
All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.
Based on a work at www.timbovee.com.
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