99% Noise

The market throws a lot information at traders. 99% of it is noise. 1% is useful formation. 

If you pay attention to what's important, you'll be able to find setups in which several technical factors are all saying the same thing. 

Today's Chart of the Day is yet another interesting confirmation of how effectively the approach of looking for multiple factors to line up in a trading setup works. 

Gemstar (GMST | Quote | Chart | News | PowerRating) had three things going against it when it tried to move higher off a gap-up opening:

• The top of a trend channel.

• Its 200-day moving average.

• Its 61.8% Fibonnacci retracement off the May 26, 2000 low and the July 17, 2000 high.

From the confluence of these factors, GMST drifted downward over the hours the followed. 

Most successful traders I've talked to look for confluence in their trading setups. If you want to improve as a trader, I urge you to learn as much as you can about the markets rather than looking for some Holy Grail system. It is only through understanding the markets that you will be able to make the best use of the patterns and indicators that intertwine to form these setups.

Have great weekend,

Eddie