Here's my biggest problem with this trade - it's still a bullish
chart. Sure, the 20 day MA is pointed down, but the 50 day is
pointing up and that's bullish. You'll notice that on this chart
(and just about every other chart since March) that pullbacks to
(or even below) upward-sloping 50 day MAs get bought. If
you want to short a bullish chart (which I generally don't do),
you'll need to do it much earlier than this. Or perhaps on a low
volume bounce. Here's a strategy that works: when a stock pulls
back to or below an upward-sloping 50 day MA (or some other key
moving average) and then puts in a bullish candle or starts to
base, that's a buying opportunity, with a close stop under
recent lows. However, most people insist on shorting these
situations, which is a mystery to me. You'll be wrong 3 or 4 out of
5 times if you bet against the moving average. Hope this helps!
Thanks, Daniel! Mining stocks are indeed in a bull market, so
the trade would be a counter-trend. In my understanding, a break of
the MA(50) is the key to note a weakness (pullbacks to the MA(50)
are bought, as you noted). GDX is below the its MA(50), which tells
me where the trend is going. Gerald Clifton had me learn to respect
the GDX as the index.
This is the first correction of the $USD since March, so it's a
different situation for all other pullbacks. The break of the
MA(50) occurred on the high volume, not seen before. You are
probably right that I should wait for a bounce and pounce
there.
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Here's my biggest problem with
A trading question: is NXG a good short candidate?
Posted by user32 on 21st of Dec 2009 at 02:56 am
Here's my biggest problem with this trade - it's still a bullish chart. Sure, the 20 day MA is pointed down, but the 50 day is pointing up and that's bullish. You'll notice that on this chart (and just about every other chart since March) that pullbacks to (or even below) upward-sloping 50 day MAs get bought. If you want to short a bullish chart (which I generally don't do), you'll need to do it much earlier than this. Or perhaps on a low volume bounce. Here's a strategy that works: when a stock pulls back to or below an upward-sloping 50 day MA (or some other key moving average) and then puts in a bullish candle or starts to base, that's a buying opportunity, with a close stop under recent lows. However, most people insist on shorting these situations, which is a mystery to me. You'll be wrong 3 or 4 out of 5 times if you bet against the moving average. Hope this helps!
Thanks, Daniel! Mining stocks are
Posted by junkie on 21st of Dec 2009 at 05:14 am
Thanks, Daniel! Mining stocks are indeed in a bull market, so the trade would be a counter-trend. In my understanding, a break of the MA(50) is the key to note a weakness (pullbacks to the MA(50) are bought, as you noted). GDX is below the its MA(50), which tells me where the trend is going. Gerald Clifton had me learn to respect the GDX as the index.
This is the first correction of the $USD since March, so it's a different situation for all other pullbacks. The break of the MA(50) occurred on the high volume, not seen before. You are probably right that I should wait for a bounce and pounce there.