What does
Trading Range mean?
The spread between the high and low prices traded during a
period of time. When a stock breaks through or falls below its
trading range after several days of trading in a range, it
usually means there is momentum (positive or negative)
building.
What does Channel mean?
A stock that trades in a range for an extended period of time
is sometimes said to be in a channel. The technical range
between support and resistance levels that a stock price has
traded in for a specific period of time. A breakout of a
technical channel is seen as a bullish (on an upward breakout)
or bearish signal (on a downward breakout). This may not sound
as glamorous as selling at the top and buying at the bottom
but that’s basically what it is, just at a smaller level.
Resistance
Level (sell signal)
The stock or market stops rising because sellers start to
outnumber buyers.
Support Level (buy signal)
If the price of a stock falls towards a support level it is a
test for the stock: the support will either be reconfirmed or
wiped out. It will be reconfirmed if a lot of buyers move into
the stock, causing it to rise and move away from the support
level. It will be wiped out if buyers will not enter the stock
and the stock falls below the support.
How to use a
Trading Channel
A pro-active approach is to identify significant support or
resistance levels one should use a daily candlestick chart.
Since the market tends to react to major resistance levels, it
is prudent to sell against resistance while buying
against support. Support/resistance levels are fractal and
can be used by long-term investors as well as swing traders. I
like to sell my swing
positions when trading nears a resistance level. I take the
market one trading range (channel) at a time. Using incremental trading
ranges preserves all the up side potential but limits down
side risk.
|
Fibonacci
Retracement
Fibonacci retracement is a very popular tool among technical
traders and is based on the key numbers identified by
mathematician Leonardo Fibonacci in the thirteenth century.
However, Fibonacci's sequence of numbers is not as important
as the mathematical relationships, expressed as ratios,
between the numbers in the series. In technical analysis,
Fibonacci retracement is created by taking two extreme points
(usually a major peak and trough) on a stock chart and
dividing the vertical distance by the key Fibonacci ratios of
23.6%, 38.2%, 50%, 61.8% [78.6%] and 100%. Once these levels are
identified, horizontal lines are drawn and used to identify
possible support and resistance levels.
Now, there are different approaches to arrive at some
consensus of what the market may does, I happen to like this one.
One must be flexible and should not hesitate to revise the
approach as needed.
|
|
Buy Signal
is triggered when the stock trades about 1-2% above support
level on an up-tick (green candle).
Sell Signal
is triggered when the stock trades near the resistance level.
At this time, I place a 1% tight stop/limit when the market is
closed, or a limit order while the market is still open. I
usually sell 1/2 of my position.
 current buy/sell values...
Trading
Range/Channel: The Trading Range levels are drawn,
using the Fibonacci Retracement.
The current trading
range will be redrawn when the
support or resistance level is violated - stocks trading
above/below +2% the support or resistance level of the current
trading range/channel.
Market Timing Model ~ Total Stock Market ETF (VTI)
3300+ Stocks
~~~ Hold
Positions - some or all Positions may Stop-Out - keep Cash on the sideline ~~~
|
|
21-Feb -Red
Candlestick
with higher closing
value -update Stop loss |
|
16-Feb -Risk
Management -update Stop loss -trading near resistance |
|
14-Feb -Confirmed down-trend
-MACD|EMA crossover -verify Stop Loss |
|
10-Feb -potential down-trend
-RSI|SMA crossover
-update Stop loss |
|
6-Feb -Red
Candlestick
with higher closing
value -update Stop loss |
|
3-Jan -Confirmed up-trend -MACD|EMA
crossover |
|
2-Jan -potential up-trend
-RSI|SMA crossover -update Stop Loss |
|
30-Jan -Confirmed down-trend
-MACD|EMA crossover -verify Stop Loss |
|
26-Jan -potential down-trend
-RSI|SMA crossover
-updated Stop Loss |
|
24-Jan
-Red
Candlestick
with higher closing
value -update Stop loss |
|
20-Jan
-Red
Candlestick
with higher closing
value -update Stop loss |
|
19-Jan -up-trend
continued -RSI and MACD crossover to the upside |
|
13-Jan -potential down-trend
-RSI|SMA crossover
-updated Stop Loss |
|
6-Jan -Red
Candlestick
with higher closing
value -update Stop loss |
|
3-Jan -up-trend
continued -RSI and MACD crossover to the upside |
|
30-Dec -potential down-trend
-RSI|SMA crossover
-updated Stop Loss |
|
28-Dec -Red
Candlestick
with higher closing
value -update Stop loss |
|
22-Dec
-Confirmed up-trend -MACD|EMA crossover |
|
21-Dec -Red
Candlestick
with higher closing
value -update Stop loss |
|
20-Dec -potential up-trend
-RSI|SMA crossover -update Stop Loss |
|
14-Dec -Confirmed down-trend
-MACD|EMA crossover -verify Stop Loss |
|
8-Dec -potential down-trend -RSI|SMA
crossover |
|
2-Dec -Red
Candlestick
with higher closing
value -update Stop loss |
|
28-Nov -potential up-trend -RSI|SMA crossover -update Stop Loss |
|
17-Nov
-Market correction -trading inverse ETFs -updated Stop Loss daily |
|
14-Nov
-Red
Candlestick
with higher closing
value -update Stop loss |
|
9-Nov -potential down-trend -RSI|SMA crossover
-updated Stop Loss |
|
8-Nov -potential up-trend -RSI|SMA crossover -update Stop Loss |
|
4-Nov -Red
Candlestick
with higher closing
value -update Stop loss |
|
2-Nov -Confirmed down-trend
-MACD|EMA crossover -verify Stop Loss |
NOTE: the Market Timing
Model is updated at the end of the trading day.
|
|
