How to See Range Patterns

US markets have decided to head higher. OK, it might be a bit early to decide the fate of the stock markets, this after just 2 consecutive days of increases but for binary traders and stock traders alike, this could be the light at the end of a very long and dark tunnel. The last couple of months have been especially trying for day traders. In an attempt to consistently provide trading signals, we have noticed how difficult it can be in the fact of complete uncertainty in the financial markets. The Geo-Political landscape has been wrought with concerns, fears, and outright tumult. Ups and downs were met with capriciousness. A single day’s increases were later developed into drops in stock prices and all based on the same trading climate. “How can this be?” asked many of our readers. We don’t have a singular answer but we have tried to shed light on the overall picture.

Sometimes, trying to figure out the direction on a particular asset is a little like pulling the petals off of a daisy: “she loves me, she loves me not, she loves me, she loves me not.” That has been the general feeling felt by the majority of day traders. You analyze the market, notice the trend, place a trade, and later find yourself “unloved” by the prevailing market conditions. So what are binary traders to do in this anticlimactic climate ?

For starters, traders should focus entirely on assets that HAVE a trend. Look for those markets showing either an up or a down trend. Consolidation periods are great to see. They lead to the largest and safest trades. However, they take a long time to develop and watching an asset in a consolidation period is a bit like waiting for the water to boil. What we recommend as a binary options strategy, which can also be used by forex and stock traders, is to create a “watch list”. Write down on a piece of paper those assets exhibiting specific patterns you can easily recognize. You don’t need to be some guru trader to do this. Simply open up the chart (we offer free charts on this site or you can use the binary options charts for free at www.goptions.com/freecharts if you prefer). Open up charts on a daily graph and look for up, down, and consolidation trends.

Take for example Apple stock (AAPL) and look at the chart below to get a sense of how we look at the market; past and present. The facts:

1. The stock has been see in 2 consecutive consolidation periods of approximately 2 months each. The first began in mid-March and extended till mid May. That period was actually a period we call a Head and Shoulders pattern in technical analysis. It was later seen that the stock dropped below the support and fell exactly the amount of height from the support to the apex of the head (the highest point on the graph). Thereafter, the market again remained in a range which is another way of saying consolidation (where buyers and sellers are balancing themselves).

2. The next phase is the focus on the 2nd period. Since the drop seen on May 4th, the market has remained in this range between support at 530.4 and the resistance at 577.5. You will notice that this resistance has been broken already, but the market returned to the previous range. This leads us to believe that the market has yet to complete it’s phase of consolidation.

What does this mean for binary traders? Quite simply, Buy Signals. The trading signal we see now is one for taking Up options on any break of these 3 levels:

R1: 577.5

R2:  581.5

R3: 585

Look for these levels to break today. At least one should