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Scanning for "Pinch Plays"

I most of Joe Rabil's video, he talks about MACD pinch plays. Is there a way to scan for those?
For long, a pinch play is when the MACD signal line goes down and barely touches the MACD line and bounces up. The entry point would be the next day (for daily entries.)


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    MACD Hist measures the distance between Line and Signal, so you might try looking for something like 3 consecutive shorter Hist bars. For positive Hist it would be Hist > 0, Hist less than 1 day ago Hist, 1 day ago Hist > 0, 1 day ago Hist < 2 days ago Hist, etc. For Hist below zero, it would be the reverse - Hist < 0, Hist > (greater than) 1 day ago Hist.
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    lmkwinlmkwin ✭✭
    Looks like the 'pinch' is when the macd hist moves closer to zero or pinching in.

    And the 'play' is the reversal back in the other direction As in macd hist was closer to zero and now the macd hist moved further away from zero than it was?

    His explanation and examples are so subjective, and subjective is tough to code in a scan. Is the zero line a criteria? He seems to say it is but then his pinch plays are both prior and after the zero cross. Is the 'pinch' a minor move or narrowing, or a significant change/movement. If I had to guess, and it's only a guess, he doesn't scan for them but tries to observe them.

    aaaannnnd in Rabil-esque fashion you need to add scan code lines for 'but only if the green ADX is above the red and there isn't a gap creating the pinch and there is weakness at the open and strength into the close and count the prior pinches before or after the zero line cross and also only if confirmed on the weekly or monthly' .......

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    I don't follow him, but based on this video he is like a lot of others in that he doesn't show how the chart looks before, during and after the setup, and then during the holding period until exit. Charts look very different before the entry vs after the exit. So in real time, when you actually have to recognize whether you have a valid set up or not, you don't have much to go on.

    Also, you would want to know the odds for the set up: you need to create a random sample of like set ups, maybe a hundred or so, over a long enough period of time (a year or so - long enough to have up and down markets) and from a representative set of similar symbols (similar market caps, trading volumes, and industry characteristics e.g. mid cap oil and gas exploration companies), maybe a hundred or so, and then total up the outcomes, using uniform entry and exit rules.

    Otherwise, although you may think you have a reliable set up because you've seen it work a few times in a few different stocks, it may be only an artifact of the current general market - lots of stocks moving alike because the whole market is moving that way. In other words, its not a pattern recurring over time produced by the psychology of supply and demand, but a product of news stories around that particular time and not likely to persist over time.
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    Thanks for all good points. And indeed, subjectivity is a tough cookie to scan!
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    Mark D ... you said this VERY WELL ..... Charts look very different before the entry vs after the exit. So in real time, when you actually have to recognize whether you have a valid set up or not, you don't have much to go on. ..... THIS IS VERY TRUE.
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    lmkwinlmkwin ✭✭
    I'm so glad to be a recovering trader. Been mostly 'clean' for a decade or so. It changed my life for the better for sure.
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    @lmkwin: What do you mean by a recovering trader, and what did change your life for the better?
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    lmkwinlmkwin ✭✭

    Since I opened my 1st online brokerage account and started buying individual stocks in the 90's I did what I learned to do from magazines and newspapers and business news. I did OK as a trader. Wasn't using technicals at all. I'd say my average holding period was measured in days to weeks to months at most.

    Fast forward to late 90's and it was a great time to be investing in story stocks. Unbelievable returns in a matter of days. It was wild. I won 3 monthly "investing championships" in 8 months on, the website for Individual Investor Magazine. I didn't get too hurt by Y2K but the going got tougher in my 1st bear market. I used to discuss stocks with my dad. I'd tell him what I was doing and when I was doing it. Sometimes he'd join along and get out when I did. Sometimes he didn't. We had a lot of fun though. Fast forward to 2007 when the market started rolling over again I started to wonder if there was a better way to create long term wealth and why was I working so hard at investing. I figured out that I wasn't investing, I was trading. How could be I investing by hopping in and out of the market?

    Around that period my dad was dying from cancer and we went over all the finances so I could make sure my mother was going to be ok. My father's dying wish regarding his brokerage account was, you can sell everything in there, but don't sell Apple. He had bought it in 2004 as did I but I had bought and sold and bought and sold it many times over. He didn't. It's still in that brokerage account today.

    In 2008 I heard about Point and Figure charts, and how they provide a clearer picture by removing the day to day noise from the charts. So I did a little investigating and joined Dorsey Wright Associates website in 2009. Read several books on the topic and started my quest to learn PnF and become a Point and Figure craftsman.

    DWA had a forum, similar to this forum but populated by mostly financial advisors who used PnF in their practice. So it was a great on line learning environment. I was reading and re-reading books and trying to learn PnF-ese. Their method was to only buy things in established uptrends, which is a great trading idea. I started to become a technical trader at this point. By 2011 I evolved into a triple top with a change in trend trader. I was talking the talk and walking the walk with the PnF crowd. It wasn't until 2013 when an advisor shared a strategy that he had been developing since 2000 on the message board. It intrigued me as his signals often preceded my signals. Who doesn't like an opportunity for a lower cost basis? This changed my entire thought process.

    I started asking questions and he shared everything with me and a small group of people that wanted to learn and use his CSS Strategy. He gave me copies of charts, and Chartcraft newsletters and Weinstein's old newsletter. He suggested books like Dynamic Trend Line Charting by Howard Prenzel, and Asset Allocation Techniques and Financial Market Timing by Aby and Vaughn. I studied his strategy, creating spreadsheets and test portfolios to track the results for a full year before I quantified the great results. I told my wife that I was going to change our investment process to use this method I was learning from some guy I never met from Illinois.

    So 2014 I feel that I finaly learned how to really use PnF to my best ability at the time. Took a long time and a lot of unlearning what I thought was right. Patterns and patience always resulted in the best results. Patience is the hardest part of any good strategy. That's why most people don't stick with anything for long, no patience. My holding periods increased to months and years over time. As my portfolio turnover went down, my portfolio value went up more. It was an epiphany, and I have never felt more comfortable and at ease with the markets than I did when I became fluent in the CSS Strategy.

    I chuckle inside when I see questions on the best way to capture intraday movements. On the thinkorswim forums, they talk about 1 minute vs 5 minute charts. It's crazy in my opinion. As an Alcoholic who no long drinks is a recovering Alcoholic, I am a recovering Trader. I may lapse from time to time. We are all humans subjected to similar emotions after all. But since I became a recovering Trader my results have never been more satisfying. I owe a lot to that DWA message board, and to @markd and others on this one. People who will share their knowledge and experiences have helped me immensely. I try to do the same. We are all in this together.

    Prologue: In 2015 I learned that the guy from Illinios was originally from my neck of the woods in western New England. His family and my wife's family are well acquainted through farming. I got to meet with him when he came back to visit his family. I created the Dynamic CSS Pattern as a thank you to him for changing my financial life for the better. He said that the pattern takes his strategy to the next level. I've tutored other financial advisors on my process as well. I'm just a guy, not a credentialed professional financial anything. Just someone who wanted to learn and strive to do better tomorrow than I do today. It's so much more fun this way.

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