Looking at the Wrong Screen
After trying a DIVERGENCE short trade that didn’t work this morning, I saw a pattern that kept me from taking more trades. Each price peak was accompanied by less volume, and by 8:00 (Pacific) we were obviously going sideways.
The trendlines on the chart show a sloppy rectangle, and about 10:30 we had a false break to the downside. Then at 11:30 came a break to the upside, but without enough volume to be interesting. Or so I thought.
On most patterns a break to the downside doesn’t require much of a volume increase, but when the direction is up, low volume often means the move will fail. I decided that this move was not going anywhere. My mistake was in not looking at other markets.
To look at the other markets I follow only takes a few mouse clicks, but I keep them hidden most of the time. I usually take a quick look at them after I’ve decided I have a trade setup forming. Today, on that low volume breakout, the OEX, the Midcaps, the NQ, and the ES were all making pullbacks within nice uptrends, and the Russell was lagging. Naturally it spent the last hour playing catchup without an entry in sight.
