What of the key elements to understanding stock price movement is to recognize the need to view charts in different timeframes. As a refresher to this important topic, I will provide an example here as to how crucial timeframe review can be. In looking at the Daily chart of PFG (Principal Financial Group) below you will notice an Inverted Hammer for trading on 6/3/2011:
This candle signals a TR (Trend Reversal) and will require confirmation on 6/6/2011 as to its validity. You will also notice that is has given up the 200 day SMA (Simple Moving Average). Will buyers step in here to buy?
To obtain a clearer view, it is time to expand your perspective and look at other timeframes. In reviewing the Weekly chart below, a much clearer picture emerges as the RED candlestick for the week shows downtrend movement:
A test of the 50 day SMA below appears imminent and is accompanied by some sell volume. Price is also sitting on the lower BB (Bollinger Band).
From this review, I would set a price alert for 29.25 to get long (play the 50 day SMA bounce). What would you do?
