Tuesday, April 19, 2011

A Potential MACD Buy Signal For The Qs

The overnight futures have managed to hang on to yesterday's gains, but the action looks like an upward correction.  I am not sure what that means, but probably that a more complex correction is taking place - large triangle or ending diagonal?  Only time will tell.  Nevertheless, the Qs have now set up for a potential MACD buy signal as the MACD has pulled back to the neutral line while the 50dema has remained flat.  This is a signal I will take should it occur, particularly given the nice hammer reversal.

When looking at the 50dema it will either be rising, falling or flat.  Don't overthink it.  Small oscillations should be ignored.  Draw a line across it.  In this case it is basically flat.  When the first MACD buy signal occurred in March I would say that it was basically flat but beginning to turn down, so the signal was ignored.  When the 50dema is flat, we take the second valid MACD buy signal.  Once in the position the exit occurs on the second sell signal unless there is a valid intervening buy signal, in which case the position can be held longer.  I have a feeling this trade is going to go nicely and the bears will be disappointed once again.

Based on the FXI chart it looks like we will have some sort of low in early May.  It should be a higher low based on the current picture.

By the way, I am glad I took profits in VPHM as it fell 9.8% today closing below my entry point.  Had I not exited the position, I would definitely exit on the open today to take a SMALL loss.

No comments: