Page 395 - THE MARKET WHISPERER

THE MARKET WHISPERER 39 1

an awkward situation,wait for a change in direction in five-minute candles
before you set your stop beyond the reversal point. In this case, that stop
was above $20.37, but only after a clear reversal was identified by being
comprised of at least three candles.

The stock was weak. It started low and continued dropping. The only
reason that the price temporarily moved against me was the unfortunate
fact that the market was moving in the direction of closing the gap and
dragged Moody’s, among others, along with it. Remember that Moody’s
had been weak at the open, and stayed weak until the close. It started with
lows and therefore chances were good it would continue down. Generally
speaking, a stock showing relative weakness compared to the market will
continue down, even if the market trends up.

Market Behavior at those Particular Points: Five-Minute Candles for
Two Days

On the market’s ETF (SPY), it is clear that [1] was the turning point
for upward movement, which matches [1] on Moody’s chart, the point at
which it dropped and stopped at the round number. At [1] Moody’s “wants

to continue down,” but gives in to the changed market direction and trends
up. When the market executes a reversal [2], the same reversal point [2]

shows on Moody’s chart, where Moody’s capitulates and returns to lows.
Summarizing, if I had not kept the five-minute reversal rule in mind,

I would have panicked from the uptrend, exited with losses higher than