A lambent view of Day Trading EMAs
Mid-day Exponential Moving Average
What I refer to as the Desert can be observed in several ways.
One name I like is the EMA Embrace.
We know that trading slows down in the middle of
the day - the Desert.
To get a different feel for this, look at a 1 or 2
minute chart of one of your favorite stocks.
Or take a look at the NASDAQ chart on 2/13 - this is a
near-perfect example of the EMA Embrace.
If you use EMAs, you’ll notice the greatest
divergences between these occurs early and late in the day.
Generally the EMAs will converge (embrace) between
the hours of 11:00 and 1:00 Eastern Standard Time.
Naturally, there are exceptions to this.
Fed announcement days or major news will cause the
markets to rally or dip even in the Desert.
Exceptions will also happen when the market gaps at
the open. In such cases, depending upon the severity
of the gap, the EMAs may not “correct” until
noon (or so). Likewise, if the close of the day
is extreme in either direction and has a carry through
the following morning, it may cause kisses in the
morning action where the EMAs converge and diverge
several times prior to embracing later in the day.
If you’ve traded using EMAs, you’re aware that
the Embrace is a time of indecision and the breakout
is the likely direction in which to make a small trade.
Of course, you’ll want to watch all the usual suspects
for confirmation - the futures, the index, MACD, stochastics, etc.
Does your favorite stock follow the EMA Embrace time frame?
If not, make some notes as to when it has the greatest
and least divergences - this will aid your trading
and add to your "feel" for its daily and intra-day movements. |
