DOW/Gap Plays:Fade/Trade/OR Just Observe ?

[michaelstuarts 10]

The Dow is above 1300

 

Many stock charts (e.g. AMZN) are giving mixed signals. Some stocks have shown exhaustion and overbought indications before the DOW reaching an all-time high. Now many stocks appear to have breakaway gaps and appear to to have new life to to them. I don't like to follow the crowd after news. Is this a breakaway gap ? Will this gap close in the next few weeks ? or Is this a new long-term trend ? Will the DOW keep making new highs or will the bubble burst ?

 

Will the investors holding this security be in for a surprise ?

Housing market is down and the dollar is weak, what other economic indicators

should I consider ?

 

Where can I learn more about gaps and gap plays ?

 

Thank you,

 

//Michael

 

 

 

Several stocks have this kind of pattern now.

[TinGull 10]

Might I suggest looking into Strategies (one of our sponsors, and my trading coach). He has some very great strategies for gap plays and can get you on your way.

[Guest cooter]

Where can I learn more about gaps and gap plays ?

 

TradeTheMarkets.com has an extensive library of training videos and commentaries on trading the gaps.

[MrPaul 10]

To add to what has already been mentioned...

 

A good book for gap fade plays is:

 

Amazon.com: Mastering the Trade (McGraw-Hill Trader's Edge): Books: John F. Carter

 

If you are looking to play continuation gaps on individual stocks look here:

 

Trader-X...views from a distorted mind.

 

[brownsfan019 17]

Many stock charts (e.g. AMZN) are giving mixed signals. Some stocks have shown exhaustion and overbought indications before the DOW reaching an all-time high.

 

Michael - in a trend - up or down - indicators are going to be useless in my opinion. Just look how long AMZN has been 'overbought'.

 

One thing I learned about indicators - they can stay overbought much longer than your account can stomach trying to short them. I don't use these types of indicators anymore for this very example. As soon as you get caught into a strong trend and your indicator keeps saying it's time to short, you will get hammered. Once the market takes a breather and/or enters more 'choppy' times, the indicator will look like gold assuming you and your account are still trading.