Example of the importance of the Daily chart

Hello! My last blog discussed how to call a reversal in a stock that is extended to the downside. How to enter when the probabilities are already in your favor. This blog will show clearly what happens if you enter a stock for a reversal with the same intraday parameters and your trade fails. Why did it fail? Well first of all trading will have losses even if you follow your system to the T. In this case the trade didn't take the daily into account. 

Your best trades will take place when timeframes align that is the truth of it. If you have a bias for a long trade on the daily and you see a long set up intraday you can take it knowing that the probabilities are HIGH in your favor. What happens though when you see a great set up intraday that you know with all your being will rock your world! but you fail to look at the daily which was giving the opposite message. Well here is an example of this. Let's look at VRX. 

NOte that I am using stock charts here because for some reason the etrade daily for VRX is quite hard to see. This chart obviously was a short bias looking chart yesterday and it ended up as a great short trade. What I want to focus on is the intraday action. Remember that in my last blog I saw you charts that had nice reversals based on trendline breaks. Another form of reversal I use which I learned from Evan Lazarus is called a catch play. In it you want to see a stiock pop over its emas intraday and then pullback to them with weakness before running again. Lets look at VRX intraday 

VRX was a nice downtrender for the day. It then started moving sideways and as you see the first green arrow i placed on the chart you see it pop over its emas it then pulls back and sets again. Typically this is a catch play and you can take it long for a nice reversal long but notice what happens next. It fools people into the long and then reverses and falls back into its original downtrend. What happened?? That is why the daily chart is soooo important. If this had been day 3 ,4,5 of the downtrend and this set up had presented itself ok great! a nice reversal play which would warrant a little risk and you could take this long. This was however day 1, a big push down but still the first day. For the same reasons you dont short a day 1 move long you should never long a first day short, So the greater context is always more important than the intraday action you see , no matter how beautiful it looks. Top down approach is key