My favorite and most active time frame is the hourly chart, flanked by the daily, and 15-minute. This is where I spend most of my time, states TG Watkins of Simpler Trading.
It’s crucial to know the context and bigger picture, otherwise you could be trading in a vacuum.
Any time I look at a ticker, I always have the monthly and weekly charts up so I can see what’s going on from the bigger picture. This view tells me the more major trends and what the bigger funds are looking at (since they are slower moving ships).
Essentially, there was nothing wrong with them. This wasn’t an indication of the market getting weaker and Covid about to catch up to it all. On the contrary, they were all super strong. Too strong...so, they finally needed a break as viewed from the monthly time frame. Many names such as Microsoft (MSFT), Amazon (AMZN), Apple (AAPL), Powershares QQQ Trust (QQQ), really exemplified this situation where you could see that price was extremely far off the monthly 10 SMA.
Where are they now? Either bouncing off the monthly 10 SMA or close enough that they are satisfied with the sideways consolidation. It seems to me that we are closer to the beginning of the next move up rather than running out of steam.
The market has been waiting desperately for the vaccine to come out and now that that looks as though it will happen, support is coming in. Barring any unseen news, which could derail that sentiment, I like what I see on the monthly time frame in some large sectors. So here's to 2021 being kind to our accounts.
TG Watkins is the director of stocks at Simpler Trading.
