Monday, April 21, 2008

Qs Hairy Monday

Welcome to the lowest volume Qs day this year. Clearly a lot of cash on the sidelines awaiting AAPL and MSFT to report(and others). With overbought signals flashing all over the place, traders appear to favor caution in lieu of valor before jumping into the fray.
The NYAD was asleep all day, with the exception of the classic 14:30 breakout rally.
The TICK was equally non-committal, and did not reflect the upslope NYAD action in the late afternoon. Closing TICK of 593 was bullish, but not considered indicative of tomorrow's open.
I've switched the chart to 8 minute bars today to display a reverse signal that I frequently utilize and which I term either a hairy top or a hairy bottom. (The patterns can also be seen clearly on 10 minute bars. (Today was rather unique in that the Qs showed both patterns.)
The hair, of course, describes the candlestick tails, relative to the candle body.
Hairy bottoms:
Between 10:26 and 11:14, with the Qs candle bodies oscillating at the PP pivot, long tails predominate. Once the Qs close above the pivot at 11:14, the trend is up.
Between 13:46 and 14:18 the Qs flash another hairy bottom and at 14:26, with the hairy bottom squat pattern clearly broken, the Qs again trend up.
Hairy top:
Between 14:58 and the close (and this is a longer duration than normally occurs) the Qs candle bodies oscillate right on R1, with the tails poking up, but with no confirmation higher closes.
While technically a hairy top, I would caution trading that particular signal as it continued into the close. Had that pattern appeared midday I would have been much more interested.
I find hairy tops and bottoms Qs frequently telegraph impending turns of the Qs on 2, 5 and 8 minute bars. Since my current bias is towards trades that seldom last more than 120 minutes, these signals have saved me more than once. When the hairy top settles at or just below a pivot resistance line, or when a hairy bottom settles at or just above a pivot support line, the odds are extremely high that a reversal is imminent.
Works best on ETFs, indexes and big caps.

No comments: