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This Is Why We Must Use Charts

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March 23, 2011 – Comments (0)

What kind of a trading day is this when the major stock market indexes trade higher with oil, gold, silver, and the U.S. Dollar Index? Most fundamental traders would think that high oil prices would bring down the major stock indexes. After all, oil is trading at $106.00 a barrel. Whenever, the U.S. Dollar Index has traded higher on the session most commodities have pulled back or at least stalled out. Not today, as copper, gold, and silver are all trading sharply higher. In fact, silver is trading at a new 35 year high today closing above $37.00 an ounce. This type of action is just something we would not conceive in these uncertain times. This is why we use charts.

The old legendary traders used to say that you should trade what they see and not what they think or believe as thinking just gets in the way. I have personally written this rule in my brain and it has served me better than any other rule over the past 10 years. Eventually, oil, gold, silver, copper, the U.S. Dollar Index, and the major stock market indexes will not trade higher together forever. They will eventually break apart and go back to their inverse relationships. As a trader we need to recognize that when it occurs and the best way to do that is by using the charts.


Nicholas Santiago
InTheMoneyStocks.com

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