SUGAR NOT ALWAYS BAD FOR YOU
Anyone who knows me personally knows I am a fitness and nutrition nut, so as a result I try to avoid Sugar at all cost. However, here is an example where Sugar could be good for you. The above daily chart of Sugar shows a very strong downtrend, yet on the weekly it still could be a pullback in an uptrend. We have some divergences showing up in the accumulation/distribution and momentum oscillators. We also have a reversal bar down today. If tommorrow the high of this reversal bar were to be taken out, it would be a valid long entry. The more conservative play here is to wait for a move up then a test of the low that holds or takes it out and immediately reverses.
If you were to take that route and wait you do avoid the risk of this just continuing to cascade downwards. This is what I call a running market meaning it has almost no pullbacks at all, more or less the inverse of what the stock market looks like right now. This risk of waiting for the retest is that at times like last March in stocks, you do not get one and the market is off to the races without you. There is no perfect answer to this and it boils down to how aggressive of a trader you are. I generally start swinging at these knowing I may take a loss or two before catching it. I do not like it and always hope for the best and at times do catch almost the exact low or high when the markets reverse.
If you take that route of being aggressive it is imperative that you have the mindset that as long as the setup is in place you keep taking the trades. If you get discouraged after a loss or two and walk away, invariably you will pass on the trade that makes it all back and more. You must have a plan and stay diligent in this business. This is also where money management comes in. If you risk 2% per trade you would only be down 4% if you happened to lose twice before catching the big win where the market reverses, that makes you 10%. You cannot afford to miss that move if you trade reversals.
I tend to trade both reversals and continuations of trends, so I do not get hung up on trying to classify myself as a particular type of trader. I just look for opportunities where my tools tell me to go and this would be one of them. I do wish the weekly was a bit better of a setup than it is. If it were I would be more aggressive with this one. Who knows we could just go straight down and never trade above today's high and the order would never be filled anyway. However, it is amazing how often when you see a reversal bar like this, that the high does get taken out the next day.
As I post this I have not decided if I am going to take this trade or not. It is a setup that I wanted to point out for readers here just in case it might line up with something they might use for triggers.
The stock market had a very interesting day today, trading up quite a bit and then reversing back down. We now have an inside bar with down close followed by an outside bar with a down close. So we really have 2 consecutive down closes in the futures indexes, which could almost be argued in this zainy move to be a pullback. My indicators say this could move down some but I don't like this bar pattern so I am going to sit on my hands here. I do think in general a pullback of some minor amount is coming followed by a move up into the 1235 zone for the SP 500. Once we get to that 1235 we will see what happens. That is the .618 to the all time high area, and a zone that alot of big money people have been waiting for during this whole move upward. It is possible we could start a big move down from there, but it is certainly too soon to make that type of call.