This is something I’ve never talked about before…
Because it’s powerful information we typically reserve for Hawkeye members.
But today I’ll share it with you because I know it will help you in your trading.
The opening price principle is paramount to the Hawkeye philosophy.
Here’s how it works… and how it can help you predict how price will move during the day…
Consider a hypothetical auction where you’ve got a piece of fine art that’s going for $100K.
The auctioneer stands up and says, “Do I hear $100,000?”
Because there’s no demand!
The silence means that no one wants that piece at $100K.
The price has to come down before anyone will be interested.
So the auctioneer tries again at $90K…
Finally, someone raises their hand at $70K and the bidding begins.
Price will probably fluctuate between $70K and $80K and close around $85K in the end.
That initial price set the basis for the session and affected the final outcome.
On the flip side, if the price starts at $100, people instantly raise their hands and generate a huge demand for that piece.
So with only one item and all those people wanting to buy it… the price will start soaring.
But again, the initial price set the basis for the session.
Well guess what?
The same happens in the stock market.
The opening price of a market will generally give a hint of where the market is trying to go.
Look at the example below:
In this case, the opening price was heavy to the downside and red.
What it’s doing is setting the basis…
Similar to the auction example where the price started at $100K, no buyers were interested in this ticker at the opening price, so sellers stepped in.
The price came down until it started to attract buyers…
Buyers started to go in (note the first green candle in the chart), and price started to go back up again.
But note how once the price started to get close to the opening price, it failed to go any higher and dropped once again.
Then it broke support and started to drop again throughout the day.
This example proves that the opening price was showing us that this market wants to go down for the day.
The opening price principle is very meaningful and helps you understand the intent or the sentiment of the current market.
And when this principle is combined with the Hawkeye suite of indicators, it’s a powerful combo that can help you predict how price will move during the day.
I hope you found this valuable and that you start using the Opening Price Principle in your analysis.
But if you’d like to learn more about how this principle works in conjunction with the Hawkeye tools and methodology, click here for an on-demand training session!