Page 315 - THE MARKET WHISPERER

THE MARKET WHISPERER 31 1
Intraday Reversal for the Fuel Company Occidental, OXY

In this example, you can see the intraday reversal traded in my trading
room. OXY opens strongly and rises when trade begins for four five-minute
candles, from $86.50 to $89, a rise of 2.9%. A stock rising almost 3% in 20
minutes with a volume of hundreds of thousands of shares has a strong
chance of reaching higher peaks. OXY did display strength at the start of
the day. Remember that a stock chart rising a half-percent looks similar to
the stock chart for a stock rising 2.9%, but they are not identical at all. Most
stocks will be traded with sharp highs or lows during the first ten minutes
of trading, which says nothing about what will occur later. However, a
stock’s rising more than 1% in large volumes causes me to understand
that something positive and not coincidental is happening. Clearly the
stock wants to keep rising, and its chances of preserving the uptrend are
very high. OXY pulls back for about half its high, displays a classic reversal
at [1], and then easily goes higher than its first peak.

Since I tend not to buy stock during the first ten minutes of trading,
and definitely do not “pursue” a stock rising quickly, I waited patiently
for the painful pullback. Why “painful”? Read what I wrote at the start of
this section: imagine a situation where you made the mistake of so many
novices and bought during the stock’s first jump, or even at its peak at $89,
then saw the stock drop halfway back to its starting point. How would you
feel to watch a pullback of $1.50? Would you stay steadfast, or sell? Would