Take Action When Market Direction Shifts

Nobody should be puzzled as to whether a market is a bull or a bear market after it fairly starts. The trend is evident to a man who has an open mind and reasonably clear sight, for it is never wise for a speculator to fit his facts to his theories. Such a man will, or ought to, know whether it is a bull or bear market, and if he knows that he knows whether to buy or to sell. It is therefore at the very inception of the movement that a man needs to know whether to buy or to sell.
~ Jesse Livermore

The Cheetum Method will give you the buy or sell signal, but as stated above, awareness at the very inception of the move is key to steady gains. Entering mid-stream will be at your own risk. If this should happen, using simple key indicators should put the probability of success on your side. These indicators include a stochastic oscillator that gives an indication of overbought and oversold periods. A short stretch of three to four “down” days accompanied by decreasing volume or an approaching support level will also help in the decision making process when entering a position several days after the original buy signal is posted.

If a trailing stop is used and is suddenly triggered, these same indicators can be used to re-position. As stated in my previous post, the direction of the last signal should be the direction that you follow. A buy signal indicates ‘buy the QLD’. If stopped out of this position, and the buy signal still exists, it is best to wait for the counter-trend or retracement to end and buy the QLD again rather than try to time the short term retracement by buying the QID.

As promised before, a short primer on setting stops will be forthcoming.

All My Best,

Sigmund B. Cheetum