Moving on to the OTC Composite, it's really simple. A retest of the highs IS RESISTANCE -- notice how the OTC is out of synch with the Dow? That's because the OTC is where the leadership is. Notice where we made all our money last week? All OTC stocks.
While on the subject of the OTC Composite, let's take a quick look at the program traders favorite stock.
Look familiar? If the OTC tops, AAPL will top with it.
Going forward what we want to be on the lookout for over the next few days or even weeks are "Change In Trend Patterns"-- in this case from up to down. Last week we saw just about everything that was a recent screamer hit the 50 day average or a trendline and bounce hard, especially the chinese stocks. So now it's some of those same names that you want to be on the lookout for from here to develop topping action. So that's where our main focus will be from this point forward. This brings us to our educational segment this week.
CHANGE IN TRENDS
If you are long at market peaks you need to know when to get out as all uptrends eventually change trends.
Two of the patterns that we are always on the lookout for are Change In Trend patterns (in this case from up to down) that have served us well in the past. There are the Double Top and the 1st Thrust Down patterns.
Below are a few examples of what we are talking about. First up is the double top pattern.
Next is an example of a 1st Thrust Down
What a great chart this is! It's got everything going for it:
- 5 waves up
- the double top
- the trendline break
- the 1st Thrust down
- snapback rally
All of this is wrapped up into one chart. This is what you want to be on the lookout for with regards to Change In Trends patterns from up to down.
Notice the time frame? How fitting it should be close to the current time of the year we are in. In fact, it's the last time we had a bear market rally before this current one we are in.
Next week is a holiday shortened week and by Wednesday the volume ought to be really dropping off from that point forward.
Learn the patterns, learn the set ups, learn the trends and you'll know more than 90% of traditional Wall Street!
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