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SharePlanner (< 20)

SharePlanner Reversal Indicator

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November 20, 2011 – Comments (2) | RELATED TICKERS: SPY

This week, conditions didn't improve anymore for the bulls, and now we have a strong level of confidence that the market will be heading lower in the near-term. That doesn't mean we won't get some bounces out of this market, in fact I expect there to be plenty of them, but I do believe swing-trading long in this market will be rather difficult, and we will continue to get large overnight swings in the market. Breaking to the downside out of the triangle price pattern that had been formed over the past month, also adds to the bears and their favorable market conditions. 

I've fought this indicator plenty of times in the past, and have often times come up wrong when trying to do so. As a result, I would turn your attention to the short-side, and only look to go long on day-trades when the opportunity presents itself. 

For those of you who are not familiar with the SharePlanner Reversal Indicator, here's a quick tutorial...

The Indicator uses the advance/decline ratio with a stochastics overlay. The bottom half of the chart is the weekly candles of the S&P. The chart itself goes back two years. Some folks have criticized me for posting this chart in the past saying that it isn't 100% accurate - but if it was, as some think it must be, then I wouldn't be posting it - I'd save it all for myself and make an ungodly sum of money off of it. But it isn't perfect and there is always a level of error that you can expect from it. But overall, it is fairly accurate, and when the indicator hits certain extremes on the stochastics, it is often a good time to start hedging positions that are going against the direction of the indicators, or start loading up on short or long positions in-line with the direction that the indicator itself is pointing to.

Remember, the extremes are where you are wanting to pay the closest attention to, particularly where the %K & %D lines cross (i.e the red and green lines). This is typically where we begin to see changes in the behavior of the market - not always but quite often enough, to warrant our attention. What this tool is best for, in terms of what I use it for, is market timing and position building. When there is a crossover at one of the extremes that goes against the positions in my portfolio, I, often times, look to take profits in those positions or at least hedge against them

Here is the SharePlanner Reversal Indicator.

2 Comments – Post Your Own

#1) On November 20, 2011 at 8:18 PM, dbtheonly (< 20) wrote:

First, what is the definition of stochastic?

Then, with the apparent failure of the super-committee all over the news; it doesn't take a crystal ball to predict a rough week for the market.

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#2) On November 21, 2011 at 12:10 AM, SharePlanner (< 20) wrote:

The news tends to cause traders to form false opinions of what the market might do....just stick to the charts my friend. 

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