Check this out on a daytrade you could have done with me on XM Satelite Radio (XMSR). First off, what I saw and was waiting for,
What you first want to take note of here is the MACD and Stochastics (both on bottom). First the MACD, click the chart to view the whole picture, and you can see the MACD has come almost ALL the way back down to 0, and the Red is almost pointing straight down. Sell offs like this almost ensure a reversal coming. Then, look at the Stochastic below that, and you can see it was under 20, which means the stock is temporarily oversold. The icing on the cake here was something that cannot be seen on this chart, but on a regular daily chart; the 50 Day Moving Average. The 50 DMA is slightly below $15, huge for support! If you were quicker than me you could have bought your shares as low as $14.77, but regardless let’s see what happened after,
Look at how fast we attained support below $15, and look at how the Stochastic shot up to over 80 now. This is where you can take profits, which in our case is about (15.34 - 14.91) $.43 or about 3% in a matter of minutes. Now, it is important to note the MACD still hasn’t crossed back into buying territory and begun its move up. It is 10:06 AM as I write this line, and will post another chart taken live…
Here we now have an even strong return as the MACD has begun to move back up (though very slightly still). For a quick daytrade I missed this opportunity to hold the stock longer for an added few % gain, but regardless the trade was still successful and fairly easy to pull off. It is now 10:09 AM and XMSR has traded above $15.90, may run into some short term resistance soon, we will see!
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