The Master Trader top-down method of stock market analysis is a comprehensive approach that starts with a Techno-Fundamental perspective and narrows to individual stocks.
Master Trader uses a Top-Down method to educate students through courses and letter memberships.
There were multiple changes from down to sideways this week.
Multiple daily trends moved from down to sideways last week.
How we determine a change from down to sideways occurs in one of two ways.
Prices moving down make lower Pivot Highs (PH) and Pivot Lows (PL).
The PH previous to a lower PL is Major Resistance (MR), and when prices trade above MR, the downtrend is broken and is changed sideways.
Multiple sectors traded above their respective MR; however, not all have equal “potency” to signal a trend change.
A way of determining this through a “visual aid” is to look at the location of prices related to their respective moving averages.
Look at the Industrials, and now look at the Real Estate.
The Trend Analysis above is used for all tradable instruments. However, not every trend change is equal.
Master Trader Tip: The distance that prices are to moving averages is used to measure trend strength. Comparing that relationship from one sector to another will provide a measure of Relative strength or weakness.
The other way the trend is marked from downtrend to sideways is by a deep retracement higher of 70 to 80% between the recent PH and PL.
While prices did not trade above MR, historically, a retracement of that depth precedes a higher or slightly lower low, and our bias moves to a sideways trend.
Trends are fluid and, at times, erratic. Down can move sideways and back to down or sideways to up. So, an objective method that changes with that fluid movement is required and what Master Trader Technical Strategies (MTS) does.
Look at the trends and patterns and compare the daily and weekly Industrials (sideways) to Real Estate daily sideways and weekly down.
Hopefully, you found this small lesson on trends and multiple timeframes helpful. The Swing Trading Course covers these concepts in greater depth.
The Advisory Swing and Options Letter shows you how to use Techno-Fundamentals, how to scan sectors, stocks and provides trade ideas. Watch the Video Below from the Week's Letter. New trades with the technical setup and management updates are sent intra-day by text message to subscribers until the trade is closed.
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Happy trading! If you have any questions or comments, please e-mail Greg Capra at Greg@mastertrader.com or Dan Gibby at Dan@mastertrader.com