Market Reversal Timing according to Tony Turner

[stevenmac2]

As a newbie to the scene of stock investing, this morning I became curious about market reversals that I had read about in Toni Turner's book, "A Beginners Guide to Day Trading Online"

While I know the timing isn't exact, I thought I would share the first part of market open as observed this morning.

Tony said:
9:50 - 10:10 - First Reversal
If the market opens in a bullish mode and the indices trend up, by 9:50 they begin to retrace or pull back because when stocks opened up with strong buying, specialists and market makers were forced to take the other side of the longs and sell short. They have no intention of riding losing positions forevers. So they start dropping the bid (lowering the price at which they'll buy the stock for), about twenty minutes or so after the market opens so they can cover their shorts at a profit. If the market opens down, or in a bearish mode, when traders sell, specialists and market makers have to buy. Around 9:50 or so, many stocks that have been trending start to turn upwards. Specialists and market makers are selling at a profit.



Continued:
At about 10:10 or so, strong stocks that have pulled back slightly on a bullish day will again turn up. Bearish stocks on a negative day resume their growling.




While I am not attempting to day trade, I thought it was interesting to see this in effect as she had described.

So here is my question:

For most of you who trade/invest, typically, have you found a time that you find yourself buying a stock during/around the particular time of the day ? (assuming that everything is a go and you are at the point to buy). I would be interested in hearing your thoughts on this.

I placed a simulation trade shortly after market open, watched the gains, and then watch it retrace back/below opening price. I am going to continue watch and observe this to see how many times this type of reversal holds true.

I have also read never to place a trade at lunch time as it is a sure way to lose money.

Thanks,
Steven

[Stocktrading101]

It is always interesting to see theory in full affect. Nice catch

For most of you who trade/invest, typically, have you found a time that you find yourself buying a stock during/around the particular time of the day ? (assuming that everything is a go and you are at the point to buy). I would be interested in hearing your thoughts on this.

It is a fact that the first 30 minutes of the market and the last 30 minutes of the market are the most volatile times of any given day. I personally used to only try to make trades in the last hour of the day. Now though, I find myself making most of my buys either in the morning or late afternoon typically. Something to think about as well though, it really depends on the strategy your implementing. If you are daytrading then as long as the conditions are correct you are buying, while a CANSLIM trader will typically be trading in the morning as most breakouts come in the first 1-2 hours of the day. It all depends.

[stevenmac2]

This morning shows:

Toni Turner says:
"If the market opens down, or in a bearish mode, when traders sell, specialists and market makers have to buy. Around 9:50 or so, many stocks that have been trending down start to turn upwards. Specialists and market makers are selling at a profit."

[Stocktrading101]

Check out this chart of the NASDAQ intraday, look at the circled area and you can see today's movement thus far. Interesting to note how it opened down and then pulled back for a quick run, almost got back up even on the day before turning south again.

NASDAQ.JPG

[stevenmac2]

Blain,

Thanks for the graph posting. All of this is very interesting for me to see as a new guy. With you being an experienced trader/investor, I am sure you have seen all of this a million times, but I think that by just noting these actions in the market can save myself and others some painful mistakes.

The biggest thing that I can see from all of this is that one shouldn't place a buy order before market open. To me, it would be important to observe some movement in the market, get an idea what kind of day it may be, and then evaluate whether to sit on the hands or move forward with execution of a trade.

Thanks for the tip that you gave to me about when you place your trades. My style would be a CANSLIM approach. You said that if you do a trade, you find yourself executing in the morning or late afternoon. To be specific, do you find those times to be sometime after 10:30 am - 11:15 am or 2:30-3:00 pm for example?

If I don't hear back from you, I know you are busy as I am sure you are looking for some down time with friends and family with Christmas right around the corner, and will check back early next week. Have a Merry Christmas.

Steven