Risk Management - The Price Map was designed as an aid in providing trade initiation and risk management. Liquid futures contracts such as the S&P500 and NASDAQ100, representing over $50 billion in notional value transacted each day, provide a good overview of the general market tone. By noting the key Price Map levels for the broad-based indices a trader can greatly enhance the execution proficiency in equity trading.
Beta is better – Stocks that have a high correlation with the broad-based indices, such as the SP, ND, DJI, will be influenced more by intra-day swings in these indices. Traders should note any divergences. For example; the ND goes negative on the day and is breaking down to its DP. CIEN, which is higher on the day, remains positive and is not breaking but is languishing in a sideways trade. As the ND approaches it’s DP and shows signs of finding support, by not being able to penetrate the DP price level, this would be a buying opportunity in CEIN. As the stock was not able to break when the underlying index broke and any positive or non-negative action should allow the stock to rally.
Conversely, JNPR takes a tumble when the ND starts to break down to its DP. As the ND starts to find support, the stock pauses. When the ND bounces off its support level JNPR continues its sideways trade unable to rally. When and if the ND approaches the directional <>, a test and rejection from this resistance would provide a selling opportunity in JNPR as the stock is already showing negative tendencies and any negative action in the index would expect and exaggerated effect in the stock. In addition a failure from the ND DP would be an aggressive sell signal in JNPR, as the general market is now in a strong negative posture, trading below the DP.