Scanning for "Pinch Plays"

PeterPan8

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.)

https://youtu.be/HPMm2r65Sds?t=102

markd

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.

lmkwin

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' .......

markd

Agree.

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.

PeterPan8

Thanks for all good points. And indeed, subjectivity is a tough cookie to scan!

azb

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.

lmkwin

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.