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Parabolic Moves – Selling into Strength

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Scott asked 6 years ago
Hey Pat, me again.  Just wondering if you have any insight on the best Time Frame to trade Parabolic Moves?  Say you're in a stock and it goes up-up-up and ends up being quite high above The 8 Period EMA on The Daily Chart. Is there a Time Frame or indicator you like to use to signal "Now's the time to sell into strength."? Appreciate your time.
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Pat Walker Staff answered 6 years ago

Scott,
Good to hear from you! You ask a good question. I look at the daily first, as you stated. After a stock is EXTENDED above the 8 ema, I watch the PRICE ACTION and VOLUME ACTION on the daily chart. Is there a day it GAPS UP right at the open? Immediately after doing this, does it start to drop in price? You can even see this on the daily price bar. But you can also look at the 5 min, 10 min, 30 min chart. I combine the "extended" action on the daily with action on the shorter time frames. Also,  I look at the volume related to the daily price bars. Is it going up on DECREASING VOLUME? Means buying pressure is drying up. That also is a signal to be on "alert" for a drop.  Another point, study the PAST price action on the chart. In the past, does it usually go up 5 days and then stall? That can keep happening.  Charts truly have "personalities" and we monitor past "personality action" cuz is usually repeats. To a degree, it can almost become a "self fulfilling prophesy" cuz everyone sees it. Hope that helps!

Sincerely
Pat