In general, people sell down a stock when the stock has reached overbought level.
People buy up the stock when the stock has reached oversold level.
The common way most people trade the overbought level.
Traders spotted an overbought level in a particular stock. The Traders would initiate a sell position because of this overbought level (Sell high and buy lower). Most traders will initiate the position at (A) and some at (B).
For me, I would have gotten my entry at (C). How do I know (C) is the area to enter the Sell position?
For traders who have entered (A) and (B),
For Options Traders, the put options would have lost both intrinsic and time value (maybe stopped out too).
For CFD Traders, high chance that you would have been stopped out.
- Watch out for this stock that creates overbought level.
- Draw the trend line
- Initiate position …