It’s very tempting to start looking for long entry opportunities after a series of nasty sell off. Clearly there couldn’t possibly be more selling around the corner after an entire month of upside progress has been wiped out in a matter of days, right? WRONG. Gauging downside price action by comparing it with upside price action is a flawed perspective that has cost the trading accounts of a many traders.
I was chatting with my quant buddy Tony a week or so ago and he asked me what ‘MOMO’ meant, which kind of had me stumped. In my mind it was an abbreviation for ‘market momentum’ but obviously this doesn’t make any sense. I was trying to figure out where and how I had absorbed that term and couldn’t figure it out. Nevertheless I have used ‘momo’ for many years now without thinking about it, which goes to show that we all fall prey to intrinsic habits and more often than not aren’t even aware of it.
Trading near important technical inflection points has good as well as bad characteristics. Generally speaking volatility expands while price either reverses or gyrates sideways. Both scenarios (volatile-corrective or volatile-sideways) are aimed at shaking out weak hands whilst drawing in new participants. The overall medium to long term trend generally defines the characteristic and vehemence of what can be described as ‘pre-resolution tape’.
I promised you a comprehensive momo update and just like a Lannister the market mole always pays his debts. Except here at the lair you won’t have to wait almost two years for new episodes. Come rain or shine, I deliver daily and I’m known to spoil my intrepid subs in particular. That said, if the GOT producers get away with taking an 18 months break, all the power to them!