|
PureBytes Links
Trading Reference Links
|
Hi Philip,
Here are a couple of general observations that you might think about:
- Larger consolidation areas often represent accumulation or distribution and precede mark-up phases (trends). Typically, these are low volatility environments. One useful way to identify this kind of area is through the ADX. Usually, technicians think of ADX as a trending indicator, which it is. But it also highlights consolidation areas quite nicely, as well. A 14-period ADX with a falling value below 15 or lower (12 seems to be a good value) would serve as a good screen for this kind of low volatility area. And usually, the longer the overall period of consolidation, the better, as the cause
for a larger move has been able to build.
- You then want to see price and volume expand out of the consolidation area, either up or down. This would be an impulse move up or down, and volatility would expand. You might use price penetrating through Bollinger Bands or Keltner Channel bands. Both indicate an expansion in volatility, or large standard deviation moves. (Try both to see which might work better. Because BBs tend to expand & contract so much, Keltners may work better). You also want to see a good increase in volume. A percentage over a moving average or a volume oscillator might be
useful.
- If these conditions are in place (long consolidation followed by strength or weakness), you can think about entry. I always like to enter on a pullback. Two common options might be just above a 50% retracement of the range of the impulse move or a pullback to just above a moving average. Stop would be under the bottom of the consolidation area.
V-spike reversals are infrequent events and are risky to trade. It seems that they are more predictable when they occur as shake outs in a higher time frame trend or at the end of a very long consolidation area. One way to think about trading them is to wait for price to move above the last rally high, and then have a good pullback on light volume and small ranges in the price bars to a 50% retracement level or a moving average.
Hope this is somewhat helpful.
Whit
Philip Schmitz <pschmi02@xxxxxxxxxxx> wrote:
Greetings All,
By the time many of the more popular trend indicators kick in (moving
averages of various flavors and combinations, the MACD, the ADX and even
the PDI/MDI) the trend itself can often be nicely underway. This seems to
apply especially when price action takes a sharp turn, as in a "V" bottom
or an inverted "V" top. The numbers feeding into the calculation of the
indicators cause a lag. Gradual changes in direction don't seem to pose a
problem.
I'm not trying to call tops and bottoms, but even a minor jump on
conventional trend indicators would be helpful. To date, my efforts to get
a handle on the initial phase of trends after sharp market turns have not
been rewarding. I can't seem to conceptualize it. Can anyone point me in
the direction of published thoughts on how one could approach this kind of
market
action? Or, would you be willing to share some basic observations of
your own? I can't imagine that this question hasn't occupied many traders
at one time or another.
If I should simply "fugeddaboudit," well, that's a possibility too. I may
be cross-posting this inquiry. My apologies in advance.
Do you Yahoo!?
Yahoo! Mail - You care about security. So do we.
| Yahoo! Groups Sponsor |
ADVERTISEMENT
![click here]() | |
![]() |
Yahoo! Groups Links
|