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SIGNAL M1: MONDAY MORNING stock trading SignalIf youlike content on this page, please do share with your friends on Facebook:Here is one important signal that gives you almost one trading signalevery week! This is a simple signal and all it takes to identify it isjust two prices -Friday's Close (FC) and Monday's Open (MO) prices! Alsobecause this signal is very simple, it tends to fail more often than thesignals discussed earlier. However, the Stop-loss is very narrow for thissignal and hence a losing position gets closed generally within a fewhours with minimal damage to our portfolio. Thus the success rate maybe lower for this signal, but this signal does have impressive payoffs.This signal gives many opportunities to earn profit two to three timesmore than the risk undertaken.Whatis the logic behind this signal?Thereare certain justifications for this signal that make it a powerful indicatorfor the subsequent few days' price trend.
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Download from danfoss.com/Product/Literature/Technical +Documentation.htm. For more information about EMC, see chapter 2.5.18 EMC.
Stock markets almost all over the world are usually closed on Saturdaysand Sundays but, as we know, things do happen on these days. What I amreferring to here are some natural, geographical, economical or some politicalevents that take place between Friday night and Monday morning. So allthat happens between Friday's Close and Monday's market opening get reflectedin Monday's Open price. So Monday's Open price Vs Friday's Close priceis a good summary of all that happened in between and how that impactedstock prices. Also, because of holidays, lot of regular traders as well as investorsfind time to analyze the market of the previous week. This is the timemany people come up with their game plan for the next week and createa wish list of what they want to buy, sell or trade during the upcomingweek.
This, on the aggregate level, influences the market on Monday. From Friday night to Sunday night, this is time for parties and socializing.This is time most interactions take place among friends, relatives, strangersetc and many times people discuss about stocks.
Though this may be ona smaller scale but it does influence the market of the subsequent week.This is one of the reasons behind strong market opens on Mondays duringa bull market. Last but not the least, influential weekly publications as well as privatepaid investment newsletters are published on Friday evenings and theymake to individual's homes, and minds, during the weekends. I am referringto Barron's and thousands other newsletters people subscribe to. They,and also the weekly Business section of almost every newspaper, talk aboutthe market and individual stocks in detail, and influence/shape quitea few people's investment actions for the coming week.This all gets reflectedin Monday's market opening as well in trading throughout the day. So Ithink Monday's open price is a powerful indicator for the stock pricesfor the subsequent few days. Let us know explore how to apply this signaland trade stocks based on it.Assaid earlier, this signal is not suitable forevery one. It makes sense for traderswho typically hold a position only for a few days from one to three/fivedays at most!
This signal is suitable for people who are in constanttouch with the market and who can open/close positions without any hesitationwithin a few hours.Withthis signal you get an indication to buy or sell a stock exactly onMonday morning. As soon as the market opens on Monday morning,you can execute a trade within the next few hours. Let us now see howto enter into a position using this signal. First,you need to know what trend the stock is currently in.
A stock can bein an up-trend, a downtrend, in a Reaction/Correction or in a Sidewaysmovement. Then you need to know Friday's Close price.FORA RISING STOCK (IN A BULL/UP TREND)CASE1: If the trend is up and Monday Morning Openprice (MO) is HIGHER than Friday's Close (FC), you cantake a long position as soon the stock/index trades HIGHER thanthe opening price. Keep a Stop-loss at Monday's Open price minus ½% (preferred Stop-loss) or Friday's Close price minus ½% (forpeople who hate to open and close positions too hastily).CONDITIONS:1. Trend is Up (One quick way is to look at the price chart and see thecurrent price trend).2.
MO FC, the stock price seems to be going up from today'sopening level.ACTION:You BUY this stock preferably after it starts trading higher than today'sopening price level. As trading during the first 10-15 minutes of a dayis usually unstable, it is also advisable to wait a few minutes (10 to30) before you take any action. This gives the stock/market sometime sothe trading becomes normal and we can feel the trend for the day moreconfidently.CASE2: If the trend is Up and Monday morning Open price(MO) is LOWER than Friday's Close (FC), you can takea short position as soon as the stock/index trades LOWER than theopening price/level.
Keep a Stop-loss at today's Open plus ½%(preferred Stop-loss) or Friday's Close price plus ½% (for peoplewho hate to open and close positions too fast).CONDITIONS:1. Trend is Up (One quick way is to look at the price chart and feel thecurrent trend).2.
MO FC, and it starts going up from the opening level.ACTION:You can COVER (or BUY for more active traders) this stock not atthe opening price but after it trades somewhat higher. It is also advisableto wait a few minutes (10 to 30) before trading to give the stock timeto cool down from the morning's choppy trading.Nowlet us see how we can apply this signal in real life. Following is a Chartfrom the famous NASDAQ market index ^IXIC. On the chart, vertical dottedlines represent candles/prices on Mondays.
Also to make it easy, I havemarked numbers from 1 to 17 to represent various signals we get on variousMondays.Lookat Number 1 above. On Monday, July 7 th, IXIC opened significantlyhigher than previous Friday's Close level. So we would apply CASE 1 discussedabove and would take long positions on that Monday morning.
Now as yousee IXIC kept going up over the next three days. So trades based on thissignal would give good profit here.Lookat Number 2 now for Monday, July 14 th. Again Monday's Openwas significantly higher than Friday's Close.
So as per CASE 1, we wouldgo long. Here, the index did not go higher but stayed around the samelevel for the next two days.
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So here we may or may not have good profit!Ifyou look at Number 3 on July 21 st, it told us to go short inthe morning as per CASE 3. Then the price did go lower and closed lowerfor the day. However if we did not book profit on the same day, we couldhave closed our short position on the very the next day as we had a FULLSTOP (BUY) signal pointing to the end of the Reaction the stock was goingthrough!
So we would have been able to close our short position withoutmuch profit/loss here.Nextsignal would not get us much profit or loss either. Now look at Number5 on Aug 4 th. The stock opened at almost the same rate as Friday'sClose.
However after going up few points, it started going down and whenit went below Friday's Close, we would go short as per CASE 3. Next fourdays would have brought us good profit here. Similarly Number 6 and 7would have told us to take long positions on those Monday mornings; andif you looked at the subsequent days, we would find good profit there.For Number 8, we would have been in and out of the trade quickly withoutany significant profit or loss. However Number 9 would have yielded usa handsome profit! Similarly Number 14, 15 and 17 were very profitableMONDAY MORNING signals.Ihope you are able to understand this signal clearly. I would like to emphasizefew things here.
Apply this signalto stocks that usually have powerful trends. Don't use them on stocksthat are cyclical and are range bound (Sideways) most of the time. MONDAY MORNINGsignal fails frequently. However when it fails, you are able to closeyour positions quickly and with small losses. When these signalssucceed, they usually generate attractive profit. When there issignificant GAP (difference) between Friday's Close and Monday's Open,the resultant signals tend to be more accurate and powerful. These signalsare useful for traders who usually settle their trades quickly, at most,within three to five days.If youliked content on this page, please do share with your friends on Facebook:(Note:If you get confused by some term(s) used on this page, you can read aboutit Don'tgive up.
Try to understand this signal because this can make you lotsof money.)Disclaimer:This trading system/signal, like any other system,may fail at times. Exercise caution when trading and decide suitabilityof any trade by taking into consideration market conditions, your financialsituation, investment objectives and circumstances. Always keep a stop-losswhen you are trading.Allcontent on this website and the ProfitFromPrices eBook are copyrightedmaterialCOPYRIGHT © 2004 by Jayesh PatelFor privacy policy, click.
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