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SharePlanner (< 20)

SharePlanner Reversal Indicator

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January 29, 2012 – Comments (0) | RELATED TICKERS: SPY

For the bulls last week, it has to mark relief that despite the constant pressures that was seen throughout nearly every trading session last week, they managed to fight back and save face before the closing bell. What we ended up with was a nasty doji weekly candle that shows the market's bullish tendancies of late are becoming neutralized. While the bears are no doubt frustrated by the missed opportunities, and lost intraday gains, there is a lot of potential for them to clean house in the week ahead. In order to do that though, with the aforementioned doji candle and the overextended RSI, T2108 (Worden Chart) and SPRI, they will for once need to figure out how to quit letting the morning weakness slip away, in the first five minutes of trading or so. Also notice on the chart below, how often we've seen market reversals to both the upside and downside when we get these weekly doji candle patterns. It's worth paying attention to. 

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 to pay the closest attention to 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 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.

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