It’s best to trade on what you see, not what you think
In these uncertain markets, instinct and common sense can be a trader’s best friend, says Sandy Jadeja
There is an old saying that we should trade what we see and not what we think. Now, I for one agree. The moment I start to think about what’s happening in the markets rather than trade based on my observations, I end up in trouble.
One of the things we can see is that oil is still falling and so we need to trade in that direction. Selling into weakness and buying into strength is the right way to trade. My forecasts have been that oil could reach down towards $115-$117 based on a number of Fibonacci support levels. I waited for a sell signal, which came in once it broke below $120.70 and the market had triggered my sell order. Now I’m short once again and looking to see how far down oil will go. Not thinking, just trading.
Now with this summer heat wave we just had, a nice cool refreshing drink that comes to mind is Coca-Cola. I just checked on the share price and noticed it had dropped 23.74 per cent from a high of $64.83 to a low of $51.61. It had reached a Fibonacci support level and I placed a buy stop-order at $53.00, which has been triggered. So far the stock has rallied to $55.36 which is a nice 236 points earned. The target is $57.13, if all goes well.
As for the Dow Jones and the FTSE 100, they’ve gone back into rally mode. I am on the sidelines at the moment, though. They have both been trading in a sideways channel and I need to see further evidence of strength before jumping on board with further trades.
If the indices continue to rally higher, then we should remember that this is a corrective move to the larger degree trend which has been down since last year. I’m going to wait until I can see a clearer picture.