Afternoon Is Critical

The Qs are testing key hourly support as we approach midday and have essentially been in "prove it to me" mode all morning as the early intraday momentum has been down, likely causing more whipsaw headaches for anyone trying to trade anything other than intraday. (CSCO | Quote | Chart | News | PowerRating) has been a lead weight around the Q neck given analysts' cut in estimates as the Qs continue to search for any hint of a follow-through up day, which seems to be as elusive as a Red Sox championship.

In light of a potential cup-and-handle formation on the hourly chart and a midday handle base test, I view the afternoon as critical in determining whether or not we've truly turned up and can sustain yesterday's impressive showing, or whether we can chalk the recent rally more to short covering and simply another false bull start. As has been the case lately (yesterday case in point), a change in the intraday three- or 13-minute tide is paramount, the choice depending on the amount of price premium one chooses to pay for confirmation.

The recent "trend" (no pun intended) of trend days as reflected in full-bodied daily candles for those following candlestick charts has been interesting to watch play out in recent weeks. Picking up on such market rhythms and incorporating them into your own trading can do wonders for your trade selection and P&L.

Continued thanks for the e-mails in response to Friday's column, which has generated as much positive mail as any column over the past year. Knowing you're not alone in this business can provide great comfort, whether one is streaking or struggling, and is a key benefit of the TradingMarkets site and team.

Good Trading!

Don Miller