I use two time frames to trade. One time frame which I make trading decisions off of based on anticipated setups and a faster time frame used to time entries (all covered in the document in the sidebar 3/10MACD Trading). So, I thought I would take a look at how you may have used the weekly & daily charts to trade a longer term positions these past few months.
Coming into our recent sell-off in the SPY we had a previous swing low being tested, leading to a higher low on a lower momentum reading (reverse divergence). This condition wasn't technically triggered until after the weekly bar's close when it was all but too late, which is why I use a faster time frame to act on the anticipation of such events (though I'll have you know I failed to anticipate this setup).
So, while the weekly chart was showing strong downside momentum all the while the previous swing low was still intact, our daily chart was showing a multi-swing divergence of its own at these lows (lower price lows on higher momentum lows).
Take a closer look at the daily chart and what price and momentum were telling us.
Now take a look at some previous swing type setups that occurred over these past few months. Using the weekly chart to alert you to a criteria and the daily chart to time an entry.
2b short setup (what's a "2b setup"?) on the weekly (left), timed entry on the daily (right) chart
and my favorite, 3d setup on the weekly going back to March '09 and the timed entry on the daily
The setups I include on this blog are used in conjunction with the 3/10macd and the criteria I ascribe to it as a way to alert me to an existing condition of price. The key concept to take away from this blog is that I try to anticipate what will happen on the higher time frame by using a faster time frame to trigger the trade setup. I do not trade a "system" I use two indicators to clue me in to price conditions. Please read the Disclaimer located in the sidebar of this site. I can be contacted via email at firstname.lastname@example.org
I am always open to questions, comments, or suggestions on how to improve this blog.