This thread is a repeat what I already said in the "ADU timeline" thread, but since lately we are having quite a lot of them, let's go over it again. Here is the original ADU pattern thread:
http://elitetrader.com/vb/showthread.php?s=&threadid=105035&highlight=adu+timeline
SDD is a certain chart pattern of weak markets, when the market sells off. It stands for Step Down Day, because the chart remembers me a step: first a drop, then sideways, then further drop. I like to use descriptive names.
SDD is pretty much the mirror of ADU (All Day Upper). Please note that not every selloff day is an SDD!!!! Here is how the SDD timeline goes:
1. Market drops a decent 150+ Dow points in the first 60-90 minutes.
2. After that it goes sideways for about 3 hours.
3. Further decent drop that usually starts around 2 pm.
The most profitable play (just like with ADU) is the lazy method, try to get short as soon as you can, and just let the market kill itself. One of the best short entries is around 11:30 or so when the Williams hits zero. If you can catch that, just stay short for the whole day, or at least until 3:30.
Quite often the SDD ends at the LOD, but that is not always the case. Decent profits can be taken around 3:30 pm. If the LOD is at the close, as an afterplay you can go long overnight, there is almost always a decent upgap in this case.
If we have back to back SDDs, the 2nd one rarely ends in a low, instead it usually rallies into the close.
Here is a classic example of SDD Oct 9th. October had 6 SDDs, and I estimate there are about 20+ or so a year.
If one wants to play the sideways part of the SDD, you can use Bollinger Bands and the Williams indicator to time the entries/exits...
<img src=http://elitetrader.com/vb/attachment.php?s=&postid=2173640>
http://elitetrader.com/vb/showthread.php?s=&threadid=105035&highlight=adu+timeline
SDD is a certain chart pattern of weak markets, when the market sells off. It stands for Step Down Day, because the chart remembers me a step: first a drop, then sideways, then further drop. I like to use descriptive names.
SDD is pretty much the mirror of ADU (All Day Upper). Please note that not every selloff day is an SDD!!!! Here is how the SDD timeline goes:
1. Market drops a decent 150+ Dow points in the first 60-90 minutes.
2. After that it goes sideways for about 3 hours.
3. Further decent drop that usually starts around 2 pm.
The most profitable play (just like with ADU) is the lazy method, try to get short as soon as you can, and just let the market kill itself. One of the best short entries is around 11:30 or so when the Williams hits zero. If you can catch that, just stay short for the whole day, or at least until 3:30.
Quite often the SDD ends at the LOD, but that is not always the case. Decent profits can be taken around 3:30 pm. If the LOD is at the close, as an afterplay you can go long overnight, there is almost always a decent upgap in this case.
If we have back to back SDDs, the 2nd one rarely ends in a low, instead it usually rallies into the close.
Here is a classic example of SDD Oct 9th. October had 6 SDDs, and I estimate there are about 20+ or so a year.
If one wants to play the sideways part of the SDD, you can use Bollinger Bands and the Williams indicator to time the entries/exits...
<img src=http://elitetrader.com/vb/attachment.php?s=&postid=2173640>
