Since its design, I have used the following logo at the bottom of each one of my posts:
I do this for good reason. It is to remind me, and anyone who cares to read what I have to say, that trading is a daily battle in the war for financial survival; therefore, we all best be prepared. If you are thinking about trading you are about to enter a battlefield that few survive, especially if you enter with no clue as to how to defeat the enemy. Part of knowing how to defeat the enemy is knowing what weapons to use, how best to use them, and when it is best not to battle. This last point is what I wish to focus on today.
Let’s look at the following chart of USO (US Oil Fund).
This particular ETF is obviously in the midst of a battle between the bulls on one side and the bears on the other. There are potential support areas (green lines) and potential resistance areas (red lines) that are within a couple of dollars from one another; there are the three moving averages I watch (200,50,21 TANKS) which are going sideways with the ETF currently in the middle of both; and then there are all those gaps!
Bottom line: if a majority of traders and investors cannot make up their mind on which way this ETF should go then who am I to make the decision for them? I do not have the money to move this market, so I choose to simply stand aside and WAIT. When a decision is made one way or the other I will recognize it, look for the CROSSHAIR to form, and enter the battlefield with the strongest army (bull or bear) backing me up. If we lose we lose if we win we win. Either way I will make sure I live to trade for another day.
Same scenario is playing out right now in the major indices. Let’s use the S&P 500 as an example:
There are arguments on both sides: do we move back to recent support or even down to 50 TANKS or do we break through recent resistance and head higher? I guess we will just have to wait and see.
Me? I am listening to Tom Petty’s “The Waiting is the Hardest Part” while reading Sun Tzu who says, He who knows when he can fight and when he cannot will be victorious.
Either way I am covered.
