Equifax Follow-up
In a recent post I talked about using the Range Expansion Index (REI) to time entries into flag patterns. Today, Equifax did exactly what I expected as it came up through the -45 line (buy signal) and broke through the top of the flag pattern today. ShareEmailPrintDigg
read moreCombining Sequential Signals and Gartley Patterns
I saw these two charts in my scan of the Russell 2000. Both are examples of how I like to combine separate signals, which in this case is a combination of a Sequential sell and a bearish Gartley pattern. So would I trade either of these? No, because the volume is not confirming the signals. Ideally, I would like to see volume shrinking at the highs and both of these charts have very strong volume near the highs. Sure, the trade might work, but I like to have volume confirming all of my bets. This link is a video of Tom O’Brien and it shows how I like to use volume with pattern...
read moreMarket Breadth: Nasdaq 100
Since I looked at the S&P 500 earlier this morning, I thought it would be helpful to look at the health of the Nasdaq 100 too. Like the SPX, the NDX is looking a little weak based upon the market monitor reading of 2.6. More importantly, there is a major divergence between the price and breadth. Remember that the market monitor looks at the number of stocks within 25% of their 65 day highs and divides it by the number of stocks within 25% of their 65 day lows. The current ratio of 2.6 is much lower than the reading of 15 back in November even though the current price is above...
read moreBreadth, Price Patterns and Sequential Scans
I was asked to take a look at the S&P 500 using my techniques and thought it would be a good time to explain how I look at the overall health of the market. Step 1: Look at my Market Monitor Breadth Chart The market monitor chart compares the number of highs vs. lows of every stock in an index. This is a powerful method and you can find an explanation in an post from 2008. As you can see, the momentum of the S&P 500 seems to be slowing and I would expect a pullback in the near future. Step 2: Look at price patterns The next thing I do is look for price patterns that can give...
read moreFinding Multiple Complex Patterns
With such light volume, I seem to be having a hard time finding an edge to trade with. As a result, I’m on the lookout for charts that have similar signals using multiple indicators. Most of the indicators that I use are rare and do not give very many buy or sell signals, so it is unusual for them to all line up within a few days. When they do, however, this is usually a good signal to trade off of. Here is a butterfly pattern that was suggested by David White of TFNN. Donaldson Co. Inc (DCI), hit the 1.272 expansion point today, which should mark a bearish turn. Interestingly,...
read moreApple’s Butterfly Pattern
Tom O’Brien has a new book called “The Art of Timing the Trade”. While much of it is a rehash of the methods detailed in his previous book, the final couple chapters include new information that goes over his scaling methods and pattern trading that he learned from Larry Pesavento. While reading the book and watching his webinar on pattern recognition, I was excited that he used an example from Apple’s chart to demonstrate the “Tiger Butterfly” pattern. You might recognize the pattern because it is the same one that is used as this website’s...
read more