Overnight Moves
One of the disadvantages of day trading is the inability to capture overnight moves. Of course one of the advantages of day trading is not getting caught when one of those gaps goes against your position.
The Russell opened up over fourteen points, and that’s almost exactly where it closed. The actual range during market hours was about seven points, but almost all of that came in a 30 minute period. If you didn’t catch that move and were still trading, you probably ran into a number of whipsaws.
Could you catch it? There were the normal Fibonacci signals at the top, but I wasn’t willing to take the trade. The distance from point “2″ to point “3″ is a 127% external retracement of the distance from “1″ to “2.” It turned at a trendline that matched the upper blue arrow. Down below, the Stochastic provided a very clear divergence.
The market wanted to remain symmetrical today, so since it used a 127% move above the early high, it did the same thing under the early low. I guess that’s another way of saying the day was sideways.
If you’re trying to get a feel for the slightly longer term, take a look at the Fibs on a daily chart — we just got back to the 50% retracement of the big drop. That doesn’t mean we can’t go to 62% or 78% and still turn down. I don’t think the market has any firm direction right here, so I’m being rather cautious.
