TradingGods.net

Strong Pro-Trending Movements Reversed into Counter-Trend Reactions

What began as strong pro-trending movements this morning reversed violently into counter-trend reactions.

 

By Corey Rosenbloom

I assume very few of us saw THAT coming!

What began as strong pro-trending movements this morning reversed violently into counter-trend reactions.

Let’s chart the short-term trends, today’s morning action, and the shocking reversals that busted the trends:

Retirement Day Trader - eBook

Sign up for our Newsletter & get the FREE eBook
Retirement Day Trader:
How to Sell Weekly Options for Steady Income

  • This field is for validation purposes and should be left unchanged.

For some perspective, take a look at this morning’s “Treasuries and Gold” update post.

In quick summary, Stocks continued to trade lower but violently gapped down and reversed higher today.

Gold (@GC)(NYSEARCA:GLD), US Treasury Notes (@TY), and the US Dollar Index (@DX) (NYSEARCA:UUP) all had been trending higher, all gapped up this morning, and all violently reversed under their opening levels by today’s close.

I don’t intend to discuss the intricacies of why or how this happened, but instead call your attention to these correlated trends and sharp retracement/reversals today.

It underscores our favorite trading quote:  “IF something should happen but does not, THEN it often leads to a larger movement in the opposite direction.”

When traders bet on logical trends continuing but instead price fails to continue, it leads to big reactions the other way as traders rush to limit losses.

For savvy/nimble and aggressive traders, the reversals can give rise to large potential intraday profits.