• 394 days Could Crypto Overtake Traditional Investment?
  • 399 days Americans Still Quitting Jobs At Record Pace
  • 401 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 404 days Is The Dollar Too Strong?
  • 404 days Big Tech Disappoints Investors on Earnings Calls
  • 405 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 407 days China Is Quietly Trying To Distance Itself From Russia
  • 407 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 411 days Crypto Investors Won Big In 2021
  • 411 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 412 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 414 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 415 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 418 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 419 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 419 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 421 days Are NFTs About To Take Over Gaming?
  • 422 days Europe’s Economy Is On The Brink As Putin’s War Escalates
  • 425 days What’s Causing Inflation In The United States?
  • 426 days Intel Joins Russian Exodus as Chip Shortage Digs In
  1. Home
  2. Markets
  3. Other

How Extreme Oversold Markets Can Be Profitable

The trading week was starting to look as though it was going to end without any excitement. Wow, did that ever change on Friday!

On Wednesday Aug 24th, the stock market sold off to a level which I consider to be an extreme oversold condition for the week. While I do have several criteria as to why and how I come to the conclusion, the chart and indicator below show me when the market is oversold and ready for a bounce.

The green shaded areas on the bar chart are oversold extremes. Wed, Aug 24th the SP500 closed at this extreme. The following day the market struggled to find support but eventually did with the big pop in price on Friday.

You will also notice the red line indicator near the top of the chart. This is a little volume ratio I use to help confirm when the market is getting overbought and profits should be taken.

S&P E-mini Futures 30-Minute Chart


Second Oversold Confirming Indicator - Price Spike

Not only was the market oversold based on my proprietary indicator above, but the market also flashed us a post-market price spike. I have talked about these many times before and how it's the market giving us insight into where the computers are likely to run the market or at least try to run the market in the next 48 hours. In less than two days the spike was filled for us to pocket another winning momentum trade.

S&P E-mini Futures 10-Minute Chart


Extreme Markets Conclusion:

In short, as traders we need to trade what see not think. It is easy to have market bias, meaning you want it to go in one direction and you favor your thinking and analysis that way. If you can completely avoid doing this, you will be highly profitable as a trader.

I see this time and time again, when the market gets oversold/overbought, or flashes us a price spike just before some news event. Its tough trading in front of pending news, but 80% of the time these moves play out just as expected.

The last big FED talk, gold flashed spike up a day before the news and it played out in a big way. This week both the SPY and GLD spiked up a day before and both reached their spike targets Friday big fast profits. I will post the gold spike on my blog this weekend.

 


Follow my Analysis, Forecasts and ETF Trades at: www.TheGoldAndOilGuy.com

 

Back to homepage

Leave a comment

Leave a comment