Scan Price Performance Indicator

markd

I think you mean Feb 15 - yes, that is a good example. In that case, price tested the low of the HV (high volume) bar. Sometimes the test is the the high of the HV bar, sometimes the body. Another example on that chart - Jun 1 tested June 12. Another - not as clear - Dec 7 tested Dec 22 to the end of the month, then again Jan 23,24 ish, and Feb 3 is the last test.

Re grey volume bars, no example is perfect in every respect, and this one isn't either. Normally, you would not want to see those tall red bars (Nov, Dec, Feb). But you also have to consider something I call "good form" - that is, does the candle have at least normal range or better, considering the volume, does it have a long body (very small or no wicks and tails), and does it advance the trend. If a bar has higher volume and good form and makes a new new high in an up leg, or a new low in a down leg, then it shows there is strength in that direction.

The high volume red bars in Nov, Dec and Feb do not have good form. That means that, although sellers won the close, there was an awful lot of buying included in that volume. The breakout bar on Feb 15, on high volume and good form indicates buyers are not afraid of higher prices, and the low volume off the top shows higher prices have stopped attracting sellers as they did in December and February.

Andyt

Hi Markd

I see your analysis on price and volume bar much better now.

On the sell side, I assume the same principles in reverse applies.

For instance for PKI, recent price has tested the low of June 19 and price actually has broken the low of June 19 on August 4. Also the tall red volume bars on July 25 and July 26 and August 4 (?) have good price form.

Are these 2 signals enough to confirm PKI is now long-term sell ? Or is this just short term correction ? What other signals do you use to confirm that PKI is now a sell for long-term vs short term correction ?

Thanks again and look forward to your insight.

Andyt

Hi Markd

I also noticed on PKI chart,

you had several MAs of Force (251) and !GT200XLV, !GT50XLV and !GT20XLV.

Can you please explain how you use these 2 indicators ?

Thanks in advance.

markd

The sell strength on PKI is not good news for the up side, but it doesn't prove a long term down trend is in place. By long term, I assume you mean several months. The up trend will often find support around the 63 LPC (lower price channel), or the 251 MA or MPC (middle price channel). According to Dow theory, you would need to see a leg up to a lower high from a lower low and then a break of that lower low. Sometimes the pattern of highs and lows is hard to pick out. But, it often works out that once the 63 price channel lines both turn down, a longer term down trend is in place. The reasoning is, if it can't make a new price in three months, and can't hold support at a three month low, then buyers are probably gone, at least for a while. But there are no hard and fast rules, only probabilities (no matter what the books say).

MAs of Force - we've discussed the 63 MA. 251 is similar, but on a larger time frame. Basically, in a well behaved (institutionally dominated) stock, they can work like support and resistance - when Force hits them, it bounces off; or, you can use them to gauge where a stock is in its cycle - if Force gets above an MA and stays there on a decline in prices, that shows strength, or if it gets below an MA and stays below it on a rally that shows weakness. But those events are only evidence, they are not conclusive.

!GT200XL?, - These are indicators from Decisionpoint, a technical analysis site which recently merged with Stockcharts. As far as I know, you cannot scan for these indicators. The represent the per cent of stocks in a sector (or index) current trading above (GT - greater than) an MA (like 200, 50, 20). This is not an "official" use, but I've noticed when the 50 or 20 cross below 50 or 20 while the sector is in an up trend, it is often a bottom. Stocks trading in sync with the sector SPDR will often bottom at that point. Another piece of evidence, again not conclusive by itself.

mokurum

This is a very very useful discussion you had here!
markd, the force and the roc indicator parameters you provided are for the daily charts right? Could you provide your parameters for weekly, and maybe possibly hourly charts?

A brief explanation on how you select the parameters would be even more awesome. Is it completely discretionary?

markd

Hi @mokurum

All parameters are based on calendar intervals. 251 is about the number of trading days in the year, 63 in a quarter, 21 in a month, 10 in half a month. So weekly would be 52 in a year and 13 in quarter, 4 in a month.

I don't keep hourly charts, but for 5 min charts the parameters are 12 (number of 5 min bars in an hour), 24 (two hours), 78 in a day and 390 in a week.

The reason for using calendar and "clock" based parameters is based on the assumption that trader psychology is affected by the passage of time. In other words the time it takes to resolve our feelings and come to a decision in some way reflects natural cycles. Or, maybe it has something to do with accounting and performance cycles - earnings are reported quarterly, traders and fund statements are evaluated monthly and annually, so everybody is thinking ahead to those events and how their decisions today will affect or be affected by them.

I have absolutely nothing to back this up, it just looks right and feel right to me on the chart.

mokurum

Makes sense. Thanks for the insight.

I am interested in the Wyckoff Method. I am reading and applying what I learn from Bruce Frasier's blog on Stockcharts (I am at 40/100+ blog entries). It is the best method that I came across so far that puts everything in a meaningful context. The reason I bring this up is because I saw you mention "Wyckoff method" in this thread and I did a search on s.c.a.n and saw lots of posts that I will go through.

In the meantime, what is/are your favorite indicator(s) that puts things into a Wyckoff perspective? Anything that would help identify phases of a CO campaign would be invaluable.

mokurum

I also wanted to clarify what I really meant with my earlier question. Why for example on the daily chart, for the ROC as an example, you are using the ROC(126) and ROC(63)? I understand that these are calendar related but I am curios as to why you compare 2 quarters(126) to 1 quarter(63) and not 1 quarter(63) to 1 week(5) or 1 year(251) to 1 month(21) etc..

In that sense, what are significant time periods to compare for indicators such as the ones you mentioned i.e. ROC, Force (or any indicator for that matter, e.g. RSI, Slow Sto etc.) when looking at different time frames?

markd

Re Wyckoff, also read the chart school articles on Wyckoff:

https://stockcharts.com/school/doku.php?id=chart_school:market_analysis

Scroll down to Wyckoff Analysis Articles.

The Hutson book recommended at the bottom of one article is also worthwhile; also Pruden's book, Three Skills of Top Traders. You can also get Wyckoff's original course in pdf on line, although it takes some searching. Also be sure you have your security software up to date if you go to a pdf site.

Useful tools to supplement Wyckoff analysis are Price Performance vs industry, sector and market (see my Aug 5 entry PKI chart); Price channels - an upper price channel 63 breakout is a pretty good indicator of the mark up period beginning or extending. Force shows accumulation and distribution, sometimes. But, keep in mind, not every stock that goes up follows the Wyckoff pattern (I think Bruce over-applies it - but just my opinion). I think it's too easy to fit Wyckoff events to the chart in hindsight. I think you are likely to find really good examples more often in small or mid caps.

I dropped the ROC 126 and 63 idea. I think I mentioned that it might have been an artifact of the market at the time, and it seems that it was. I was just trying various combinations of parameters more or less at random to see what would happen.

mokurum

Excellent. Thank you very much for the information. I already went through SC articles and own the books:
Jack K. Hutson - Charting the Stock Market The Wyckoff Method
Hank Pruden - The Three Skills of Top Trading Behavioral Systems Building, Pattern Recognition, and Mental State Management

I must admit I haven't finished neither and it is on my long to do/read list.

Could you touch on my second post as well when you get a chance?

I also wanted to clarify what I really meant with my earlier question. Why for example on the daily chart, for the ROC as an example, you are using the ROC(126) and ROC(63)? I understand that these are calendar related but I am curios as to why you compare 2 quarters(126) to 1 quarter(63) and not 1 quarter(63) to 1 week(5) or 1 year(251) to 1 month(21) etc..

In that sense, what are significant time periods to compare for indicators such as the ones you mentioned i.e. ROC, Force (or any indicator for that matter, e.g. RSI, Slow Sto etc.) when looking at different time frames?

I realize there is no one answer to this question and personal preferences play a role and that's exactly what I am interested in, your preferred parameters for different parameters.

markd

I think I did answer that. No reason. I was just playing around to see what might work - that is, with what combination of parameters do indicator events - crossovers, divergences - correspond - more or less - with price events - bottoms or tops or safe entries. Markets seem to have certain cycles of various durations. The question is, what parameters capture, or best represent, those cycles

mokurum

Thanks a lot for sharing your insight and experience @markd
Much appreciated.

lmkwin

Re: Wyckoff, I find adding the Zig Zag overlays onto the chart, and reducing the Opacity of the chart assists in seeing the Wyckoff lines a little better. I use a Zig Zag 6 and a 14. The smaller one:"fits" on higher priced issues (>$50) and the higher one on lower priced issues. I also add the "magic numbers" as horizontal line overlays on my line charts. Magic numbers were developed by Gerald Appel from his observations on price movements. He created MACD, with is a popular TA indicator. I've included the numbers below in comma separated format.

With a less opaque chart and with dark magic number horizontal lines and the zig zag overlays, the Wyckoff activity becomes more visually clear for me.

8,10,12.25,14,16,20.25,24.5,28.75,33,38.5,44,49.5,55,65,77,88,99,110,130,154

mokurum

@lmkwin - thanks a lot ! Could you share a live chart here? On older setup that worked for you would be invaluable.

lmkwin

@mokurum, how do you post a live chart?

mokurum

@lmkwin - I am sure there is a better way of doing this but there is a "share" button near the bottom of the chart (near annotate) - I clicked on it and clicked on mail - in the email preview you should see a link created for your chart. Pasting that here would work. Thanks in advance

lmkwin

@mokurum - Maybe? This should be an lite example of a chart style that can show the zig zag lines to make the Wyckoff movements a little clearer in my mind. On lower priced issues I use the Red lines. Higher priced issues are more in sync with the blue lines. I think that they both "add value" on any analysis. Adding Gerald Appel's magic numbers as horizontal lines provide useful level markings as well. The stock chosen shows a distribution phase and an accumulation in my opinion.

mokurum

very late thank you @lmkwin