MarcPMarkets

AAPL / SPY: HOW RELATIVE STRENGTH GUIDES TRADING BEHAVIOR

NASDAQ:AAPL   APPLE INC
I just wanted to post my observation of AAPL             and how it was relatively strong to the SPY             . This kind of intraday observation can be extremely helpful when considering the context of the market environment and factoring that information into your trading decisions.

The SPY             represents a broader market of stocks , If it is strong, generally stocks should be going higher, if it is weak, stocks should be going lower. What happens if the SPY             is weak, but your stock is not going lower? That is a sign of strength. Obviously there are buyers holding the stock up in the face of a weak market. What happens when that weak market reverses? Your stock should be the first to go to new highs, This can be very useful information for trading stocks intraday.

The concept of relative strength is nothing new and it is does not serve as a complete methodology. I enter a trade based on my setup, my validation and my perspective. This concept of relative strength adds to my perspective and let's me know that I should be looking to buy a stock that is strong in the face of a weak ,market. The sign of strength of obvious when the SPY             was pushing new lows while AAPL             refused to push lows.

So when do you enter this stock? And what type of expectation is reasonable as far as profit potential? That will all depend on the parameters defined by your methodology. I used 5 minute charts because I was interested in day trades, and AAPL             happen to be hovering around a large time frame Fibonacci level which presented a significant support. Once I saw it failing to push lows in the face of the weak SPY             , that was enough information to know to avoid shorts and look for longs.

To learn more about how I integrated my methodology into this trade scenario, read my article at http://www.unconventionaltrader.com/relative-strength-trading-aaplspy








Bart_S PRO
2 years ago
Marc, should we be able to see two overlayed charts, or just one from AAPL? I see one, but comments suggest there are two.
Thanks,
Bart S.
Reply
MarcPMarkets Bart_S
2 years ago
Yeah Bart I tried to capture the SPY chart but for some reason TradingView only allows me to show one chart for this item. So I was able to show the comparison on my blog: http://www.unconventionaltrader.com/relative-strength-trading-aaplspy
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Bart_S PRO
2 years ago
Marc, you are super knowledgeable guy. I recently saw a really interesting chart on Bloomberg. I respect your view and opinion very much and would like to ask you if you could comment this chart:
http://www.bloomberg.com/video/investors-take-gains-from-industrial-sector-pain-1LK6tHyeTZyKMA9sdRbVFw.html
Do you thinksimilar analysis could be applied in here, in TradingView?

Thanks,
Bart
Reply
MarcPMarkets Bart_S
2 years ago
Hi Bart,

Thanks for the technical help with the chart, I will do that next time I want to compare two charts. About the Bloomberg chart, honestly it's an interesting observation but completely irrelevant to the way I trade.

Remember their job is to attract attention. My job is to objectively identify opportunities and manage risk. If the Industrials are going provide a "buying opportunity" then it needs to be clear and valid on MY charts. And if it's going to be a longer term view such as the one they are presenting, then I would need to see validation on a 4 hour or larger time frame. There is nothing wrong with their idea of buying a dip, the problem is they do not present any specific way to buy it. They just say "It's a dip, should be buy it? It's kinda of scary."

My methodology provides an excellent source of trading ideas, that are objective and in line with what is more natural to the market I am observing. If the possible buying opportunity they are talking about has any validity, my framework will most likely show me something objective and that I can measure risk effectively from. Hope this helps.



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Bart_S PRO
2 years ago
BTW, this is where you add new symbol to the chart - click Compare in the top menu, then click the Add symbol option and there you can add more symbols to the chart.
Best regards,
Bart
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