Forget the Fundamentals, Use the Charts

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With a constant barrage of USDA reports, weather, analyst expectations and actual market moves, figuring out where prices are headed soon enough to make the right decision can be overwhelming.

Mike Florez of Florez Trading tells AgDay host Clinton Griffiths it might be time to ditch the fundamentals and trade the chart. Doing that, however, requires knowing what technical indicators to look for amid the lines, bars and daily fluctuations. He says there are several tools he and other traders use that can help.

"The first [tool] is called a 1-2-3 bottom or an A-B-C bottom," says Florez. "The market goes down and makes a new low and then for whatever reason it goes up and gives you a rally before coming back down again." That's called a 123 bottom. 

"Where your buy signal comes in is where the first point is taken out on its way up," says Florez.  "As soon as you buy it your stop has to go blow that first low to ensure that a new low would take you out of the move."

Florez says the main key of this three-pronged approach is that the move back lower has to be a higher low than the first. These market moves can last an unspecified amount of time. It could happen in a week. It might take three weeks or longer before the three-move sequence gives the buy or sell signal says Florez.  It can also work going the opposite direction with markets making a high, a low and then a lower high. "This will give you a longer-term perspective on where the market is going.”

Florez says this 1-2-3 bottom boils down to watching for higher highs and lower lows as an indicator for market direction. 

For further information on how to trade using technical analysis call Mike Florez at 800-841-2108.