Here is the description of the pattern with a few examples, as I promised.
I know, what your first question would be, so let's get this out of the way quickly.: Why is it called gekko??
Just because.
No, seriously, why is it called gekko?
Alright, I already have the Dragon pattern and I thought let's keep the names with similar spieces. Happy? Not? Well, if you want to believe that it is named after Gordon Gekko, I am fine with it, as long as we are talking about the same pattern.
OK, so let's get down to business. The gekko in short is a bullish pattern, when the market bottoms about 1 hour after the open, then a relentless quick rally follows and in the afternoon the market goes sideways, consolidating in a rather narrow range, most often between the Bollinger Bands (BB).
Currently it happens quite often, I would say 3-4 times a month, (3 times in the last 10 trading days), so if recognized early, one can take advantage of it...
Phases of the pattern:
1. The market could open going up a bit or dropping right from the star, nevertheless the general direction eventually is down. The bottom is usually between 10-11:15 am.
2. From that bottom a rather quick (less than 2 hours) and relentless (not many pullbacks) rally follows with a 8-12 pts gain in the S&P.
3. Once the rally gets tired, the market drops back a bit and a 4-5 pts wide sideways consolidation finishes the day. In the last hour it could break out of the range either way, but most often by the close it returns into the BB determined range.
The best example would be last Friday:
The bottom was at 10:30 from where in one hour the market went up almost 10 pts. After that a 3+ hours 4 pts wide sideways action nicely bouncing between the BBs with a late breakout upward but returning into the BBs by the close.
The obvious question are:
1. How to recognize it early?
2. How to play it?
1. I usually recognize it once we reach the upper BB in the rally phase and instead of turning back from it, the market goes through it. It is a bit late in the pattern, but the first phase is not so obvious, for example the SDD patern also bottoms around that time but doesn't rally that much.
2. If one is already long from around 10:30 (when the market likes to change direction) once reaching the upper BB it might pay off to stay long expecting the rally to continue, which is about 40-80% more than the width of the BB in the morning. Wider the morning width, less it goes above the upper BB. (On Friday the morning width was only 5 pts, so it went another 5 pts higher. If the width is 8 pts, I would expect only 4 more pts.) Once that 2nd part of the rally did realize, you can short it for a drop of 4-5 pts. The exit from that short is usually signaled by the Williams %R hitting -100 or hitting the lower BB. From there you just play the BB or W %R hits, the lower BB long, the upper BB short.
If it breaks out of the BB, you can average in (with crossing your fingers), because it tends to return to the established afternoon range by the close.
I know, what your first question would be, so let's get this out of the way quickly.: Why is it called gekko??
Just because.
No, seriously, why is it called gekko?
Alright, I already have the Dragon pattern and I thought let's keep the names with similar spieces. Happy? Not? Well, if you want to believe that it is named after Gordon Gekko, I am fine with it, as long as we are talking about the same pattern.
OK, so let's get down to business. The gekko in short is a bullish pattern, when the market bottoms about 1 hour after the open, then a relentless quick rally follows and in the afternoon the market goes sideways, consolidating in a rather narrow range, most often between the Bollinger Bands (BB).
Currently it happens quite often, I would say 3-4 times a month, (3 times in the last 10 trading days), so if recognized early, one can take advantage of it...
Phases of the pattern:
1. The market could open going up a bit or dropping right from the star, nevertheless the general direction eventually is down. The bottom is usually between 10-11:15 am.
2. From that bottom a rather quick (less than 2 hours) and relentless (not many pullbacks) rally follows with a 8-12 pts gain in the S&P.
3. Once the rally gets tired, the market drops back a bit and a 4-5 pts wide sideways consolidation finishes the day. In the last hour it could break out of the range either way, but most often by the close it returns into the BB determined range.
The best example would be last Friday:
The bottom was at 10:30 from where in one hour the market went up almost 10 pts. After that a 3+ hours 4 pts wide sideways action nicely bouncing between the BBs with a late breakout upward but returning into the BBs by the close.
The obvious question are:
1. How to recognize it early?
2. How to play it?
1. I usually recognize it once we reach the upper BB in the rally phase and instead of turning back from it, the market goes through it. It is a bit late in the pattern, but the first phase is not so obvious, for example the SDD patern also bottoms around that time but doesn't rally that much.
2. If one is already long from around 10:30 (when the market likes to change direction) once reaching the upper BB it might pay off to stay long expecting the rally to continue, which is about 40-80% more than the width of the BB in the morning. Wider the morning width, less it goes above the upper BB. (On Friday the morning width was only 5 pts, so it went another 5 pts higher. If the width is 8 pts, I would expect only 4 more pts.) Once that 2nd part of the rally did realize, you can short it for a drop of 4-5 pts. The exit from that short is usually signaled by the Williams %R hitting -100 or hitting the lower BB. From there you just play the BB or W %R hits, the lower BB long, the upper BB short.
If it breaks out of the BB, you can average in (with crossing your fingers), because it tends to return to the established afternoon range by the close.
