EE: There are a lot of ways of looking at the sticks - one thing you should consider is that, after two consecutive shaven (or near-shaven) bottom down days, the odds rise significantly that the next session will be up or, failing that, close higher than it opens. We've had two recent examples on 6/15 and 5/31.
There are numerous popular set-ups involving bounces of that sort. More common are the set-ups that are triggered when, after a big down day (numerous definitions, often including gaps), the action during the next session moves above that previous day's low or, in other cases, that previous day's close. The actual reversal (i.e., at first appearing to continue the predominant trend, but then moving against it decisively) typically needs to be observed, thus to avoid the oft-observed falling knife syndrome (a falling missile on 3/12, but then look at that nice reversal on 3/13). The opposite situation (reversal downward after big up days) also often makes for a good short set-up. Other set-ups (more similar to 6/15 than 5/31) simply look to go long when the selling simply appears to have climaxed.
Such set-ups sometimes make for a nice quick day-trade, sometimes for more substantial gains... and, it should be noted, sometimes for very dangerous situations... |
