Use The 'Counting Method To Determine A Market Bottom'.

Today was flat to slightly bullish. Volume was lighter than even last Friday. How will we know if this rally will peter out and turn bearish again, or will confirm? Look for the 'counting method to determine a market bottom' to be satisfied. Click here to get today's free options advice; have A.J. explain option trading to you in everyday language.

Hey trading team,

We continued with the low volume rally today. In fact, we had lighter volume today than on Friday. So the real question is; how will we know if we hit a market bottom last Thursday?

One of the methods most commonly used to determine if indeed we found our market bottom and the trend reversal we’ve seen is one we can put some confidence behind, is called the counting method to determine a market bottom. Basically, it’s this. We draw a reference line from the lowest day’s close. Every subsequent close should, at a minimum, be above that level. Even better is to have every subsequent close higher than the last. Now, between the fourth and the seventh trading day we are looking for a price increase of 1% or greater on heavy volume. If that follow thru happens, we are confident of the trend reversal. If it doesn’t within the seven days, then we need to start the method all over again. This method, team is right over nine times out of ten.

So, tomorrow, Tuesday, October 18th, is our fourth day on all three indexes. If we get that validation from the counting method to determine a market bottom… that will be enough to swing our trading bias from bearish to bullish. So, read between the lines team… or listen to me say it bluntly. Be prepared to exit short positions should this happen. It’s premature to exit now. But, should we get a high volume gap up day… you’ll want to be out of short positions.

My Techne January 55 Call closed up at $3.60 per option. I’m 40% into my initial investment after 13 days.

Team, I’m going to be playing defensive again. Without an understanding of where the broad market is really at, it really hampers me in determining whether I should be looking for long or short entries. Of course, if you pick a stock that stands firmly on its two feet you may be able to weather going against the broad market. But, for me, the proposition of perhaps winding up the salmon going up stream is not too appealing. So, I’m playing the wait and see game.

Okay, team. I'm done.

Till tomorrow, happy market watching, trading and money making. Trading Trainer is here helping you create your dream lifestyle.

Best regards always,
A.J.

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