Monday, July 28, 2014

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How to Identify Trends & Key Levels for Day Trading

by Chart Shark

I use this method regularly on stocks on my core watch list, and every time I pick a new “in play” stock to add to my watch list. You can use this method to identify overall trends as well as key levels to trade from.

I have chosen one of my core stocks, Apple (no pun intended), to use as an example. I always keep an eye on Apple because it has loads of volume, plenty of daily price range, and it makes predictable moves.

Starting with the weekly stock chart above, you can see that Apple (as well as the rest of the market) had been in a downtrend, but seems to have bottomed out recently and has begun to trend upwards. Both the price & the new trend line have recently broken the weekly downtrend which gives the uptrend more credibility.

Also worth noting is that the current price is well above the trend line. This means that while the weekly trend is up, there’s plenty of room for some downward movement.

All right, now let’s zoom in and take a look at the daily chart.

AAPLDAILY

Here we see that the daily trend is also up. The price here is also significantly above the daily trend, which means there’s still plenty of room to head down. You should also note that the price is channeling sideways with a resistance level being established at 168.67. This could have been a great place for a swing short.

Let’s zoom in further to the hourly chart.

AAPL60Minute

It looks like the current trend in the hourly chart is also upward. Looking at this chart, we can see that Apple (AAPL) has created a new high of the year.  You can also see that it had great difficulty getting through this level.  This shows that there were some serious sellers sitting on that level, willing to give up their stock at that price.  There was probably also a decent amount of short speculation hoping for downward bounce.

Finally, let’s have a look at the recent action in the 5 minute chart.

AAPL5Minute

This chart also shows the current upward trend in the 5 minute chart.  It further illustartes the significance of that 168.67 level.  The amount of traders interested in this level will make it a very significant level in the upcoming week.  Above this level I would be long on this stock and below this level, I’d be short.  It depends on where it opens on Monday, and where the market takes it from there.

This is just an example of how I find significant trends and price levels in the stocks I trade.  You can apply this same type of evaluation to any stock that you trade.  Notice that you don’t see, nor do I talk about any other indicators.  That’s because I often find them unnecessary.  I like to keep things simple.

Go ahead and give this method a try, and note any significant levels you’ve found in the comments below.  Keep an eye on these levels and let us know if they worked out as you’d expected.

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