Has this ever happened to you:

You find a setup you like, put a plan together to trade.

But before you can get in, prices move too fast, and you’re unable to enter. 

And you’re just left watching it move—WITHOUT YOU. 

Of course, as painful as it is… 

It’s better to stay disciplined than to chase up. 

Patience pays in a game as unforgiving as the stock market…

 

Sign up for my free masterclass to see if you can do this too.

 

What you need to do is have better tools so you don’t miss your entries and exits. 

Tools that will help you be more accurate, and allow you to take bigger pieces of the trading profits. 

The three simple rules I’ll teach you here will make you a better trader if you apply them.

 

Daily Deposits

 

Technical analysis is a tool used by many traders to time and predicts the direction of the markets.

If used correctly, a trader could pull down a 100% or more in just a single intraday trade.   

And to successfully hunt these kinds of returns, I have combined a unique set of indicators that pinpoint explosive moves in market ETFs!

Using this combination of technical indicators it has allowed me to win over 90% of all my trades in times of extreme volatility!

Let’s take a look at how to analyze the premarket momentum indicators to determine the direction of the markets.

 

Premarket Analysis 

 

Daily Deposits is based around a set of momentum indicators that were selected to identify market direction before the market open.  

And recently, these have been put to the test in one of the hardest markets to trade in history!

The pre-market analysis starts with:

  1. The global overnight outlook
  2. Sector review to identify strength in the US Markets
  3. Premarket momentum and technical analysis review on the SPY

But those are only 3 of 6 key premarket indicators used to get a better understanding of what is about to happen in the trading day ahead.  

When analyzing the premarket session there are two primary things you want to reference when determining the trend of the markets.

The two premarket trend signals are:

  1. The overall trend is positive or negative
  2. The moving averages support the direction of the trend

For example…

 

Source: Thinkorswim

 

In the chart above you can see that using my premarket momentum indicators you can quickly identify the trend of the markets.

Now that we notice the markets are in a strong uptrend, let’s try to identify key areas of support and resistance that prices may get impacted by.

 

Support and Resistance

 

By referencing support and resistance levels a trader will be able to uncover where price might stop or turn around.  

At these levels, it’s best to look for prices to exit your trade or even trail with a tighter stop loss.

Let’s take a look at how pre-market resistance levels can impact and cause the price to pivot in the future.

Here is a chart of a prior trading day in the SPY.

 

Source: Thinkorswim

 

These resistance levels or resistance zones are based on prior pivot areas and are essential to finding reversal zones that may impact the stock price in the future. 

Since these are zones, it is always important to give the trade room and adjust your stops accordingly.  

This is important and will prevent getting out of a trade too early.  

Here is an example of two places you can place your trades when looking to enter a short position in the markets.

Let’s see how this applies to the trade setup from earlier.

 

Source: Thinkorswim

 

There are a couple of things to pay attention to when looking to trade the SPY at the open.

  1. There is a strong upward trend in an overnight trading session
  2. Resistance is above the stock price and should expect the price to sell off at that level

And that’s exactly what happened, causing the stock price to fall over 1% at the open.

This means that blindly buying the open at highs that are at or near resistance levels is something to avoid.  

So what is the solution?

Waiting for confirmation of the uptrend and timing your entry to get in and ride the momentum.

The way to time the entry is to turn to breakout patterns.

 

The Breakout Pattern

 

What are breakout patterns?

A breakout pattern is a combination of candlesticks that allow traders to anticipate the sudden price movement of a stock.  

This provides analytical insight into current market conditions, trends, and other upcoming market movements that might be otherwise unknown.  

In this example, we are going to review a channel breakout and how that fueled momentum to the upside that was fueled by premarket momentum.

 

Source: Thinkorswim

 

As price bounced around at the open it created a channel that formed between 9:30am and 11am.

And until momentum decided which direction it was going to take the stock in, it sat in a range bouncing around.  

If you picked up a stock any time during that period would have resulted in you being whipped out of your trade and even taking a loss on your trade!

Instead, by waiting for a breakout and confirmation of the upper channel level, you get in at the best risk-to-reward area possible.

 

Trade of the Day

 

After analyzing all of the premarket information and momentum indicators, I have decided the direction I want to trade the markets and always lay my stops and targets out in advance.  

Here’s the trade information that members of Daily Deposits were alerted to in the premarket trading session.

 

 

Trade Recap

 

Even though there were a slight pullback and consolidation seen right at the open, this provided a great setup for the trade.

And when you combine premarket momentum indicators with strong technical analysis tools, you can see how the stock price reacts.

If you were able to time the markets and enter the trades at those levels, let’s take a look at the profit potential you may have had with this trading strategy.

 

Source: Thinkorswim

 

If you were able to time the markets using the strategy I defined earlier, you would have been able to land 100% ROI on this trade!

 

Wrapping up

 

Remember… a single indicator alone cannot predict the markets!  Only once you combine multiple indicators and trade signals are you able to generate strong trade setups.

This is why I always recommend combining premarket momentum indicators, technical analysis, and other price action analysis.  When you combine a strong set of indicators to analyze stock, you will gain an edge and can make smart trading decisions instead of gambling your money.

Click here to sign up to Daily Deposits

Author: Ben Sturgill

Ben leads two services at RagingBull. IPO Payday can help you pinpoint, position, and profit from IPOs. In Daily Profit Machine Ben guides day and swing traders to profit by trading the SPY Index. Ben hosts the RagingBull.com weekly podcast WealthWise where he shares thoughts on wealth and success with traders, businesspeople, entrepreneurs, and experts to uncover and share the wisdom needed to live a wealthy life.

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