Pullback off lows – The only pattern you need to know in downtrending markets


As we go through the charts of the daily indexes and individual names we see a lot of Pullback Off Lows (POL) patterns.

Much like in uptrending markets Pullback Off Highs (POH) patterns are the only pattern you need to know, in downtrending markets the opposite applies.  In downtrending markets POL's are the only pattern you need to know for shorting. Those POL's are also the what to watch out for if you are long. That all said below are the daily charts of the indexes.  Continue reading "Pullback off lows – The only pattern you need to know in downtrending markets"

Using The Doji Indicator To Determine A Market Trend

Trader Larry Levin, President of Trading Advantage LLC, has agreed to share one of his favorite trading secrets as a special treat to our viewers. Determining a trend can often be tricky. Get Larry’s expert opinion on how to keep it simple. If you like this article, you won’t want to miss his secret one-time framing technique!

Using the Doji

On a candlestick chart, there is a pattern that technicians refer to as a doji. A doji has top and bottom shadows like a regular candlestick, but has practically no real body. This happens when the opening and closing price are the same, or so close that they just leave a sliver of a real body. A doji looks like a plus sign or cross.

Finding a Doji can tell a technical analyst key things about a market trend

Doji are considered a good sign of indecision in a market. Finding a doji with short and nearly identical shadow points suggests a neutral trading session. The market opened, had a small trading range, and then closed at the opening price. Neither bulls nor bears got the upper hand. Longer shadows show potentially greater indecision. They are neutral on their own, but paired with a trend, a doji can hint at a coming change. Continue reading "Using The Doji Indicator To Determine A Market Trend"

Traders Toolbox: Fibonacci - It's all about the numbers

Fibonacci Number Series: The work in mathematics by a thirteenth century Italian has had a profound impact on modern man and has yielded a useful technical analysis tool. Born Leonardo of Piza, he is better known in the trading community as Fibonacci. Fibonacci's best known work is Liber Abaci which is generally credited as having introduced the Arabic number system which we use today.

Fibonacci introduced a number sequence in Liber Abaci which is said to be a reflection of human nature. The series is as follows:1,1,2,3,5,8,13,21,34,55,89,144 and on to infinity. The series is arrived at by adding each number to the previous. For example, 1 plus 1 equals 2; 2 plus 1 equals 3; 3 plus 2 equals 5; 5 plus 3 equals 8; 8 plus 5 equals 13; and so on.

I use the Fibonacci series in a number of ways, in terms of both time and price movement. I will briefly discuss some basic time movements.

Watch a free video on Fibonacci.

The 13-week pattern in hogs is the simplest application of finding market turns based on a Fibonacci number. Markets will often turn on a time span which is a Fibonacci count from a previous important event. For example, look at the monthly cattle chart to see several turns on or about 21 months from a previous high or low.

Time counts can be done on virtually any type of chart. The turns can be counted in terms of days, weeks, months or even years. I have found weekly counts to be the most practical and very effective.

Another powerful method is to look for areas where Fibonacci time counts from various previous lows and highs converge.

In analyzing price action, the simplest way to use Fibonacci numbers (1,1,2,3,5,8,13,21,34,55,89,144...) is on support and resistance levels or pivot levels. For example: 5.00 and 8.00 soy- beans, 5.50 (55) soybeans, 3.00 corn, 500 gold, 5.00 silver, 1.44 oats, 34.00 hogs, 55.00 cattle, and so on.

Lengths of moves in terms of price commonly are a Fibonacci number. The down move on the weekly crude oil chart was $22, which was followed by a $13 rally. Livestock commonly move in increments of $5, $8 or $13. Grains like to move in 8<;, 13<t! and 21d; swings. Treasury bonds and Treasury bills often move in Fibonac- ci increments in terms of both time and price.

The most common application of Fibonacci numbers is the use of ratios within the number series. Many people do not realize that the common retracement levels are derivatives of Fibonacci relationships. Fifty percent is 1 - 2, 66% is 2 - 3 and thereafter, any number in the series divided by the next results in 62 %. Also, starting with 3, any number divided by the second number following it will result in 38% (3 - 8, 5 - 13, etc.).