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Future Trading Signals

Everyone knows that one of the best ways to use indicators, is to have it identify buy pts by highlighting oversold conditions in an uptrend.  The problem with indicators though, is you definitely have to confirm that you are in an uptrend or the indicator can become worthless.  This morning we had the NFP job number published.  The market was waiting on this all week (spent most of time chopping all week).  On the news we made an aggressive move up during pre-mkt trade.  When the mkt opened, we had a clear gap up.  The mkt immediately started to closing it.  The thing here is you just don’t know how far it’s going to go.  Will it close 50%?  Will it close 100%?  On the chart below, you’ll see the TF crossed into oversold after the close of the first 5 min bar.  If I wanted to trade long here are some options:

  1. Immediately go long hoping the uptrend holds and that we are truly “oversold”
  2. Wait for confirmation.  Does the next bar go down.  When it doesn’t, immediately go long with price not showing conviction on a down move.

Research:

  1. Go back and look at different gaps.  See how the mkt responds when percent r crosses to oversold/overbought but has not closed the gap.

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