January 8, 2009
Stock Market Entry Signals
By Planet Wealth
Trend lines are more significant the longer they have been validated for, so when looking at a stock to trade shorter, it is vital to look at the long term picture as well as small term.
CPU shows us a fantastic example this week. Tuesday could have been an entry signal for a long position as it was a Bullish Up Day, breaking through a down trend, bouncing off support and had higher volume. Wednesday saw it retreat. Take a look at the chart below..
(click on images to enlarge)
Now zoom out a small and take a look at the longer term picture of the stock. When the trend lines are redrawn you can clearly see the resistance that held the stock down the next day. The longer term trend line has many more touches over time making it more valid and “stronger”.
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