Use Dual Timeframes to Gain an Edge

Using dual timeframes is one of the major edges in trading. Commonly, the weekly timeframe (big picture) is combined with the daily timeframe (little picture) as seen in the two charts of Michael Kors (KORS) above. 

KORS was officially added to the S&P 500 on November 12th (red arrow, daily) and rose 1.2% on the day. The stock may look to high to buy on the daily, since it has gone from $76 to $82 in 5 days. However, when you look at the weekly chart, the weekly bar just broke above a 10-week, sideways base.

The weekly ADX (blue arrow) is at 26, and 25 is the level where price moves into strength, so the weekly has further upside potential. On the daily chart, ADX is low at 14 (blue arrow), and this means price could be just warming up, and KORS could take off if the daily ADX rises above 25. 

One more thing to note regarding ADX/DMI. On the daily chart, price made a new swing high and the +DMI made a higher high (green line). That is momentum convergence and implies that the current price highs have been made with increased momentum. As you've probably hear many times, "momentum precedes price." 

Currently, KORS is 5% above the breakout resistance level, so TradeLikeAPro rules say it can be bought here, but know that it could retest the resistance line for support. 

Trade smart,

Charles

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