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The Bigger Picture

July 23, 2012

I don’t really do a great deal of preparation before the open. I will set any support or resistance lines up on my chart where possible, and I’ll take a quick glance at a daily chart as well. I never do this to try and predict what is going to happen. Once the session starts, I always trade what I see in front of me, but if this involves something like a significant trend change, I’m less likely to be caught off-guard if I know the bigger picture.

 Daily Chart – Pre-Market Analysis

Linked above is a daily chart showing what I was looking at pre-market. Look familiar? I’m basically looking at exactly the same information as I follow intraday. After the pullback in May, the market has been putting in higher lows. With the rising support line from the swing low made the week before last, I am aware that we are now approaching an area where buyers may step in, and the CCI is oversold. As we have continued to trade lower pre-market after Friday’s sell-off, I can guess that a reversal to the upside is a possibility for today’s session. I didn’t know in advance that this would happen, just that it might happen. If the market starts to trade higher intraday and gives me the entry conditions I need, then I won’t be taken by surprise, and I won’t hesitate to start buying.

Here’s what happened as the session unfolded:

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Daytrading Chart 23rd July

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A potential short set up five minutes before the open, but I missed this. I put a resistance line in using this swing high, and shorted the next pullback to this and the EMA. This trade was stopped out.

Price moved higher, but the first pullback to a support line did not meet me risk:reward requirements, and the CCI wasn’t oversold. Instead, I bought against the EMA and then exited for a profit at the prior swing high.

Another pullback, but this time I had a confluence of support line and EMA against which to place my buy limit order. The pullback continued to within a tick of my stop. The last push higher had only gained a single tick on its predecessor, so I wasn’t overly convinced that there was significant demand at this stage, and I was surprised to see my profit target hit at the prior highs again.

The market continued to drift higher, and then we pulled back. I bought at the support line for another very easy profitable trade – if only every day was like this!

View Today’s Full Chart

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