Did you know that the tendencies that occur in U.S. stocks can be broken down into sequential order for a “usual” trading day? While reviewing this information, remember that the times listed are approximations, which means you can’t expect to see a pullback/reversal each day at the exact same time. What you will see is that the pullbacks are common near the times listed.
Each of the times listed here are present in Eastern Standard time, with opening taking place at 9:30 AM and the close being at 4 PM.
The tendencies are also based on the index movement, which is actually an average of several stocks and there may be slight differences in some cases.
Opening time/bell is also when there is a push in a certain direction. The price may also begin to whipsaw to and from a few times, but in most cases, one direction is going to prevail.
If you don’t see too much movement in the initial 15 minutes, it may be a slow day overall. The initial hour is the most volatile time.
The dominate direction that the price moved in is usually the initial test. There’s either going to be a noticeable pullback or a complete reversal of the trend.
10 AM to 10:30 AM
This is another time when the “gut check” for the trend is going to come into play. This is when another major correction against the existing trend is going to occur. It can be a full reversal or a pullback. You can look at the context of the actual price moves to determine what to do.
11:15 AM to 11:30 AM
The London stock market will close at 11:30 AM ET. Between this time the European traders are getting out of their positions, which is when a new low or high is created or tested. These are usually the last significant moves prior to the price settling down over lunch.
1:30 PM to 2 PM
This is when the trends are most likely to be reasserted. Watch out for a breakout during this time.
2 PM to 2:45 PM
There isn’t too much to watch but you should be wary. It is getting closer to the end of the day, with many people shuffling for their positions.
3 PM to 3:30 PM
The trend may swiftly change during this time. In many cases, the period is a “shakeout” when individuals may begin to try and reassert themselves. In some cases, you can make money, but don’t count on it.
3:55 PM to 4 PM
Unless you have a certain strategy in place for trading in the last few minutes of the day, then you should finish up three to five minutes prior to closing. The US markets are going to have a closing auction and everything is done in a single transaction, which occurs at 4 PM.
As you can see, by knowing how stock prices usually behave at different times of the day, you will have a competitive advantage over those traders that don’t. This knowledge can lead to more profitable trades and to success in you trading.