The Much Needed Pullback Is Complete
- Posted by TheArmoTrader
- on September 26th, 2012
The Market ($SPX) has been strong since bottoming in June. Most pullbacks have been bought. The uptrend hasn’t been the cleanest on the daily, however, on the weekly the uptrend is much more cleaner. With the announcement of QE3 two weeks ago, the market became overextended/”overbought”. Buying into the news was not the greatest risk/reward trade out there.
However, with time, and price, we have not only worked off the overbought conditions but are now setup for some good pullback long trades, with great risk/reward opportunities. To remind people, I am a day-trader, but I used to be a short-term swing-trader and still manage a small longer term swing account. This pullback has given market participants opportunities to scale into some names.
And if we fail and breakdown more, well I’ll just hit out of the names I scaled into and re-evaluate. No big deal. Also, don’t forget, Post-QE3 action thus far is mirroring post-QE2 action.
As you see, we’ve been in a tight channel (I’d argue against this being a ascending wedge because we are not in a bearish pattern, like a bear flag, and we just hit multi-year highs). We’ve pulled back right to the trendline and have worked off some extreme RSI readings.
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.blog comments powered by Disqus
Jerry Khachoyan is currently an undergraduate student at UCLA pursuing a degree in Political Science. He started trading in September of 2008. He concentrates on using technical analysis and reading the tape to enter the best risk/reward trades. The stock market to him is one of the greatest inventions by man.
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