Trading The Plan

Trends are like volatility, they go from periods of trendlessness to trendyness and back. My favorite way to measure a trend is with the ADX, and a very low ADX can tell you just as much as a very high one. When short term intraday (15, 5minute) ADX value's get low, this is a time to be cautious as many things will fail. Though it is a time to be cautious, its also a period of time to be alert as the market will likely swing out of this trendless period and give some nice moves as it swings back to a trending state for a short period of time.

Brandon
 
A few posts back you referred to a profitable setup called a Phoenix setup- might you elaborate a little bit on this- just a cursory explanation will do.
 
[10:04] {Brandon} 10:04:01 cst POSITION TRADE: (Based on weekly and monthly setups. Holding period = 2 weeks - three months) SHORT SETUP XOM can be taken short under 36.40, stops above $37.30. Target $35 for partials, $33 for remaining.

[10:16] <Brandon> This is the weekly chart of Exxon
[10:16] <Brandon> as you can see its in a fairly clearly established downtrend
[10:17] <Brandon> the ADX value (cirlced left) at 40 also shows us that the trend is faily strong
[10:17] <Brandon> I like to use the Keltner Channels to confirm any trend.
[10:17] <Brandon> so, when the lower band is pieced this confirms that we have a strong trend
[10:18] <Brandon> and that continuation patterns will provide trading opportunities in the direction of the trend
[10:18] <Brandon> can see that over the last 5 weeks it has rallied in a counter trend
[10:18] <Brandon> to both an area of prior price support
[10:18] <Brandon> which was broken and is now resistence
[10:18] <Brandon> and to the 20ema
[10:18] <Brandon> also R
[10:18] <Brandon> so now we are just waiting for it to trigger
[10:18] <Brandon> and get us into what should be a high % setup
[10:18] <Brandon> using the kelters along with strong trending ADX
[10:19] <Brandon> and simple pattern recognition
[10:19] <Brandon> you can hit your bullflags/bearflags at around 70%
[10:19] <Brandon> and they tend to offer the best Risk to Reward out there
[10:19] <Brandon> so its something to pay close attention to.
 

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Originally posted by Brandonf
Flags and Pennants are continuation patterns.

[snip]

Brandon
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This months issue of Active Trader has a fairly long and detailed article about traingles. I was kinda shocked as to how dense and lengthy some of those articles were. Pretty good reading, not the typical trader's magazine fluff.
 
Hi can someone help analyze the attached chart? It contains a triangle pattern that always stumps me. The pattern in question is circled in red.

The general market trend is a bullish and the pattern is a type of continuation pattern. By the markings you can see I've identified it as a declining wedge pattern which is a bearish pattern (not a bullish pattern). You may also classify it as a bullish flag pattern. Which pattern is this?

Also the series of lower highs and lower lows in the pattern always makes me think this market is going to break down, yet the move to the upside is usually very strong.

Why is it that lower lows and lower highs does not end up being ultimately bearish? Can someone describe the market psychology involved in such a pattern?
 

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i watched this today - first i also thought the uptrend was over (dow falling - trin rising ...) - but then it formed a very small higher low - before it broke to the upside - end of the story. the trend isn't over till it's over - i guess there is nothin' more to say about it. just an extended bull flag for me.
 
Originally posted by PuffyGums


By the markings you can see I've identified it as a declining wedge pattern which is a bearish pattern (not a bullish pattern). You may also classify it as a bullish flag pattern. Which pattern is this?
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by the way - declining wedges (at least in downmarkets) are often followed by a breakout to the upside.

but i might be wrong
 
Originally posted by gerry875


by the way - declining wedges (at least in downmarkets) are often followed by a breakout to the upside.

but i might be wrong
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A descending asymmetrical triangle is normally a bearish continuation pattern which is how I originally interpreted this. I thought the bearish pattern was a reversal. That pattern ends up as a kind of a downward waterfall and is normally bearish.

What this really was, was a bullish flag pattern where the tops and bottoms are parallel, but are descending. The last bottom broke the pattern and was higher than it 'should' have been signalling the breakout. You can take any bullish flag and turn it in to a descending triangle by mis-drawing the base which is what I did.

I would be interested in knowing the market psychology behind the bullish flag pattern and the bearing descending triangle pattern.
 
Originally posted by Brandonf
I don't use that many technical indicators in my trading because I find that price, volume and moving averages generally tell me what I need to know. One indicator that I do find to be fairly valuable though, is the Keltner Channels. This is a relatively unknown indicator, but one that I have found very good for confirming trends. The following is taken from an intraday lesson in our Live Trading Room. http://www.tradingfrommainstreet.com/member/class/kelts.asp

Brandon
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Brandon,

Would you mind telling me how you setup the Keltners with Average True Range in Realtick please?

I see RT has an option for Average Range and one for Range Channel.

I'm using the Average Range w/ 2.00 on a 20sma based on the close of the bar....just wanna check and see if I have this set correctly.

Thanks
 
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