Use these Simple Indicators for Trade Confirmation
There is no such thing as the “Holy Grail” of trading and investing.
It just doesn’t exist. But you can give yourself a fighting chance, if you’re willing to trade smart with confirmation.
That’s because confirmation is key to trading success.
Without it, you’re driving with blinders.
A friend of mine swore that his favorite stock – Celgene (CELG) had fallen too much, too soon in October 2017 after gapping from $140 to $120 a share. So he bought 100 shares of the stock, thinking it was a guaranteed win.
They want you to think trading options is complicated or confusing. They’re wrong. There’s a safe, simple and sane way to get started trading options. Even if you’ve only got a small account. Download your free copy of Simple Options Trading For Beginners right here. Free download link expires soon.
Get it here.
Unfortunately, he never waited for confirmation of trend change.
Sure, relative strength, MACD and Williams’ %R were incredibly oversold, but he left out one critical component of confirmation. He never waited to see if this was truly the bottom. He wasn’t patient enough to wait for higher closes over multiple days prior to buying what appeared to be a change in trend.
You see if we fail to confirm the bottom is real, it’s a warning sign of a potential bear trap.
Plus, we also want to confirm if the break is real or not with a change in volume.
Consulting volume for confirmation of a potential break higher is essential to ensure changes in supply and demand.
Without waiting for any of that, my friend bought CELG at $120.
And then he watched it slip to $95 – a $25 per share loss in a day, or for him $2,500.
Granted, the stock did have a few things going for it technically.
For one, it was below the lower Bollinger Band. Typically, when a stock falls to or below the lower Band, we can make an argument that the stock is far too stretched in bearish territory and likely to revert to mean.
Plus, RSI was below its 30-line. When this happens, we can argue that the stock is far too oversold. The last time RSI on CELG was this low was May 2017 right before it jumped from $115 to more than $140.
Even MACD was incredibly over-extended in bearish territory. In fact, MACD had never been this low in this stock’s history. Williams’ %R was deep in oversold territory, too just under its 80 line.
All confirmed that shares of CELG were incredibly oversold and ready to bounce.
But none of that matters, especially when you’re not willing to wait for confirmation with higher highs and higher volume.
Be patient. Wait for the right time to buy.
Or you’ll unnecessarily lose thousands of dollars as my foolish friend did.
Bonus Offer: Free “dummies guide” to trading options. Did you know trading options can actually be safer and more profitable than buying and selling stocks? Best-selling author reveals his simple & safe way to start trading options in this FREE GUIDE. Access now.