Yeah I figured it was not a short term call. CL has been too choppy for my liking, but then I am looking from a swing / spread trade perspective. Day traders may like the yo-yo moves.
The ACD Method
- Thread starter sbrowne126
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Yeah I figured it was not a short term call. CL has been too choppy for my liking, but then I am looking from a swing / spread trade perspective. Day traders may like the yo-yo moves.
If you look at a 60 minute chart, on 1st October, 9th, 11th and 17th October CL sold off at around that level. On the 10th it broke through but reversed on the next bar.
Big timers maybe drew a line in the sand there for the start of Q4.
Watch the 5 day number lines to confirm. Currently I have Crude at 0 on my 5 day. I have noticed with momentum trades you want to see the 5 day confirm which for me is a + or - 5 reading. My 30 day for Crude is -13 which has come off nicely from -28. But that negative reading means it still needs more time to work off the selling. The good news is over the next 2 weeks it's going to be dropping a lot of negative values. But again, the key here is seeing the +5 on the 5 day if you are going to take the "breakout" trade.
On the fades, the failed monthly was solid down around 88, we got a nice 6 pt bounce on that. Now that was when the 30 day was sitting at the low reading but again, in that situation, what I do is check the 5 day. The 5 day was flat and showing that the momentum from the downside was subsiding. If the 5 day were -5 at the monthly A down I wouldn't go near it.
On the flip side, Natty Gas has been the opposite. Breaking weekly levels almost every week "with" a strong number line. The 5 day has been positive from +2 to +8 over the last 3 weeks and the 30 day number line is +20!!!!
These numbers are a godsend in my opinion for getting you in or keeping you out of trades. Sure you might miss a trade here or there but it definitely keeps the chop to a minimum.
Yea I've down work with the 5 days and have noticed something similar. This was more of a move out of that tight pattern...which in my experience can lead to a move with a very high r:r play cause you get in pretty early. There's obviously a trade off between getting good prices and getting in on confirmation. So just has to deal with what you are willing to trade off for.
BTW, if you guys are looking for a good natty equity ticker, BOIL is more commission friendly and moves more in price and it's optionable! Check it out.
I'm not a strict disciple of ACD but incorporate pieces of it in a system I am currently trading. Would like to find time to get more involved with it but you know how trying to find time goes.
I'm curious if the number lines any of you keep had been indicating index weakness prior to yesterday's 90% down day which I think is the first one of those we have seen in quite a while.
Thanks, John
I'm curious if the number lines any of you keep had been indicating index weakness prior to yesterday's 90% down day which I think is the first one of those we have seen in quite a while.
Thanks, John
Great question and the answer is yes! One of the best parts of the ACD system is the number line divergence. This is one of the areas where this really shines and where you are actually getting information that I believe other traders are NOT getting by analyzing price alone.
For example, on this last move, we saw some crazy divergences in the sector numbers lines. A few were very strong and continue to hold up really well on this sell off (healthcare, homebuilders, financials, transports) but many were getting absolutely crushed. What was odd about this last leg up was the index number lines were sharply negative while price was making higher highs.
Oct. 5th marked the previous swing high in the ES at 1466.
Here is what my 5 day lines were showing on the 5th.
SPY 0
DIA -1
QQQ -5
IWM -7
Those are NOT values you want to see when markets are making swing highs! In fact the nasdaq leading into that high had these values in reverse order: -3, -2, -5, -7
The nasdaq was already showing that it was breaking down. As I mention to Shan yesterday on the oil trade, these number lines in my opinion are giving you MORE information then the straight up weekly and monthly A values. The number lines are giving you the "health" of the market. In many ways you could say it's similar to market breath. Where technicians look at advancers vs decliners as price makes new highs.
Let me give another great example. The previous swing high in oil at at 100. Now in this case, that 100 level on 9/14 was also the failed monthly A up. But the 5 day momentum line was at -2! But they were even worse on the rally up to 100. Here are the values counting backwards going into the swing high: -2, -6,-7, -9, -9, -8
That's what the 5 day was showing you as oil was trading into par! Again, I have found these divergences to give one far more info then simply looking at the chart and drawing a trendline or making note that price is making higher highs and higher lows.
One more example. Gold. Gold traded up to it's swing high also around 10/4 and 10/5. The magical 1800 level everyone was watching. That also was right around the monthly A up. But let's look at the 5 day values leading into the 5th starting with 9/28: -3,-2, -1, 0, -2
So as Gold was trading higher and looking like it was going to break out above 1800, the number lines were telling you exactly the opposite!
One of the leading tells you have that price is bottoming is when you see the market making new lows but the 5 day number lines starting to move from negative to positive. Again, people are still panicking and trying to get short and the number lines are telling you to start buying. Same process in reverse.
Quote from Maverick74:
BTW, if you guys are looking for a good natty equity ticker, BOIL is more commission friendly and moves more in price and it's optionable! Check it out.
BOIL failing to take out the 60 level after 3 tries a big tell. Wish I listened to my gut and sold on friday, prob gonna sell if we get some bounce into.the close