Tuesday, January 4, 2011
Top40 30 minutes chart
Most of the time people trading one time frame get so focused on it that they can’t see what is brewing on other time frames. Best approach it to have global picture and one level lower time frame than yours and, of course, time frame that you trade. Even Dr. Alexander Elder recommends using 5 times bigger time frame to determine trend for time frame you trade. So, for example if you trade 5 minutes time frame one should first check 30 minutes chart to see what is going on.
We are going to do exactly that tonight:
As you can see from chart above, there is nice clear trend on 30 minutes J200 (Top40) chart. It was started on December 13th and it is still intact. Currently trend line is around 28650 and break of that level will signal change of trend. We have to be honest and note that market is not really steaming up, as it is easy to see that new highs are smaller every time they are made, but there are still being made.
There is a rising wedge on that chart, for my liking is too extended, as I prefer to see wedge breaking earlier. This is bearish pattern and there are around 700 points in it if it breaks, of course.
For now, 30 minutes chart does not show any weaknesses, we are solidly above 10 exponential moving average and long trade on your 5 minutes time frame should be taken more aggressively and short trades should be ignored or tight stop loss should be in place.
Trade with trend!