Monday, June 4, 2012

TF - Bounce into VPOC

/tf  hit the overnight lows to the tick with a dragonfly candle -- price hit the lows but there was basically no volume there.

This happened even though bonds were red, euro was strong and quite a few Nasdaq leaders were green. 

Taking the initiative and entering here instead of waiting for internals to shift was the correct strategy.  The correct target was to look for a bounce to  VPOC which is where /tf ran out of strength.

Sometimes -- in  a strong bear market, it's better to initiate at support if there are signs of divergence already in place.  Internals eventually strengthened  causing a surge to VPOC.  This was not an easy trade as it was definitely countertrend.  However, mean reversion always occurs and this trade is merely entering /tf until it returns back up to the dominant trendline.  Often the market gets ahead of itself and the correct trade will always feel slightly contrarian.

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