Question on Trading News

Please view the past two day's of market commentary for charts to accompany this discussion.

Toni

I hope you're doing well.
I was noting your chart of the phoenix yesterday on the NQ. Though it may look like a phoenix on the chart now, it was news that came out at the time, as you know (ambak). Is it your view that you should trade such things when, as you know, news is very unpredictable. You will note the huge decline after the initial reaction.
You would have had to be very fast to do that one and not get hurt.
Your views?

Thanks,
(name withheld to protect privacy)


Hey -----,

If there is a pattern setting up that combines with news then yes, I will still trade it. The thing with this phoenix yesterday was that the base of a Phoenix itself will have two moves quite often. In this one the second pullback had actually made a higher high instead of holding the entire base highs longer. This is not ideal, but does happen a lot. A risk is that if you take the early trigger, in this casearound 14:15, then it can do what it did around 13:00 and just pop a little and fail.

If you buy any signs of upside cont. after the second move though, then the risk is significantly less. So, had it triggered again at 13:30 for instance on that one, or in the case of the afternoon one, as soon as buying began on the news.

On Friday, even though news really ran the market that afternoon, I had already been buying because the market pattern was favoring an afternoon rally anyway. The news just fueled it further than it would have had it not had news. It's actually rather common for the market to show signs of favoring one way of the other into a news event. It can be very subtle, but still there.

Another way to play news is to take the first continuation pattern by buying the first pullback into support when it starts to bounce, or looking for the 2-wave cont. patterns such as the one into 15:30 ET.

All my best,
Toni