Swing trading with three indicators by donald pendergast

What it does extremely well is identify topping and bottoming conditions before the top or bottom commences.

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The detrending indicator forms lower cyclical highs with failed peaks and lower troughs just before a top commences. The extreme peak tends to shorten the cycle timeline. Extreme trough: An unusually deep downward cycle pattern beyond the normal range of prior cycle peaks. The extreme trough tends to shorten the cycle timeline. Extended peak: An upward cycle pattern that extends far beyond the normal range of the cycle. The extended peak lengthens the cycle timeline.

Extended trough: A downward cycle pattern that extends far beyond the normal range of prior cycle troughs. The extended trough lengthens the cycle timeline.

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Reverberating cycles: Cycles that have experienced an extreme or extended pattern on the peak and trough tend to reverberate afterward. This means that neither a peak nor trough forms. Instead, the cycle becomes narrow in scope and choppy. Failed peaks: A peak that fails to rise to the prior normal-range level of the cycle.

Failed trough: A trough that fails to move down to the prior, normal-range level of the cycle. In the DJIA, the detrending indicator forms an extreme trough prior to the final low of , allowing traders to prepare for the end of the downtrend. A failed peak develops, which indicates a weakness in the weekly cycle. Then the detrending indicator signals the absolute low has been reached in as a higher trough forms.

As the higher trough of moves into a peak mode, the troughs become shallower, which indicates an uptrend with momentum is underway. The cycle reverberates after the extreme trough with no true peak or trough from July to April The DJIA moves up to a high value in but a lower detrending cycle peak gives an early warning that a correction is beginning.

The W bottom trough is a strong signal the lows have been reached for the correction. The high of the DJIA in once again shows cycle peaks that are lower and shallower with lower troughs. This cycle is also shortened and compressed, a signal that a more significant correction is about to occur. The last trough of has higher lows preceding the move up in late The detrending cycle analysis exposes cyclical patterns that often diverge from the price action far ahead of the trend shifts.

This can be an invaluable tool for traders trading stocks or options. Notice the failed peaks preceding downturns and corrections. The extreme trough on the detrending cycle in precedes the final low of The lowest low of the bear market for the NASDAQ has a higher trough cycle pattern indicating the conclusion of the downtrend.

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Contact us today: On this chart of Apple, Inc. A weaker peak occurs in June and a trough in September , followed by a peak in December. Then the cycle reverberates again, losing all peak and trough patterns until late During reverberation periods, the cycle lost its timeline. They exist in equities The detrending indicator works well on stocks, providing valuable information in shorter time frames.

On the chart of Apple Inc. AAPL in Figure 4, you see how a cycle can change dynamics and how extreme patterns reverberate and can eventually return the cycle. In after an extended peak pattern, AAPL formed an extreme trough, followed by an extreme peak, which is typical when an extreme trough forms. The extreme peak was followed by another extreme trough. In , the cycle has a reverberation. Reverberations simply mean the cycle has been disrupted.

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The cycles were not disrupted even though it developed a few extended peaks and troughs. The trough to trough of the cycle shortened considerably during the extreme peaks and troughs. Here you see a consistent daily cyclical pattern with an extended trough in August Extreme peaks and troughs reverberate similarly to the after- setting.

DIS has a consistent daily cyclical pattern with an exeffects of an earthquake. Reverberating cycles do not form tended trough in August ; then the cycle quickly returns defined peaks or troughs. Whenever a reverberation occurs, it to its normal pattern. The deepest trough precedes the final low indicates a disrupted cycle. Then in , the cycle resumes but with more sharply defined peaks and troughs than before, with steeper peaks and shallower troughs. A trader needs to watch these sharper cycles to see if lower peaks and lower Come visit one of the most popular trading troughs form.

If that occurs, then the stock chat rooms for Breakout Trading. MCD had a different reaction to the stock market collapse Figure 5.

What did happen is the trough to trough of the cycle shortened considerably during the extreme peaks and troughs. Now it is starting Momentum Stocks Pivot Points to lengthen that trough-to-trough cycle. However, it is still a shorter time frame than pre This analysis can help a Swing Trading Key Reversals trader during volatile market conditions.

It allows traders to anticipate the shorter cycle trough to trough and allow for the steeper peaks and shallower troughs. Meanwhile, daily charts can reveal patterns to assist in he anger eporT identifying the lows of bottoms and the highs of tops. The detrending indicator has an extended trough prior to the bottom low in October.

The cycle reverberates in November and then resumes a trough-to-peak cycle. In the chart of General Electric GE in Figure 7, the detrending indicator has an extended trough prior to the bottom low in October. Detrending indicators detrend a trending stock or index, so they work best in moderately trending and velocity market conditions. The detrending indicator exposes the cycle within a trend.

Cycle patterns can be studied to find extreme peaks, extreme troughs, extended peaks or troughs, reverberations in cycles, and other deviations of normal cycle patterns. The detrending indicator shows when a cycle has shifted its timeline, whether it is shorter or longer, and any deviations that move in opposition to price. Deviations in a cyclical pattern, especially extreme or truncated troughs or peaks, are an early warning to traders. As with all sophisticated indicators, the detrending oscillator requires skill and practice to interpret properly.

To use this indicator correctly, traders should study charts of stocks and indexes before attempting to employ it in their trading analysis. Martha Stokes, CMT, is a lecturer and author of cycle evolution theory. She is a technical analyst for TechiTrader stock market trading courses, workshops, and virtual classes. In addition, she writes several educational newsletters for active traders. To learn more, visit technitrader.

Further reading Winner 12 years in a row! S by Donald W. In Figure 1, you get a closer look at an interesting and attractive long swing entry setup in UGI Corp. If you are a new or struggling trader and still need help in sorting out your ideal trading strategy, consider whether this kind of trading model makes sense to you: 1. You only take long positions when the dominant long-term trend is up — as defined by a period exponential moving average EMA.

A list of liquid, large- and mid-cap stocks or even small-caps, if you love volatility with an average day trading volume of one million shares. The stock had a fantastic Q2 earnings release on July 30, but had virtually no follow-through — and then sold off hard. UGI shares may be setting up for a bullish reversal; a break back above Choose those stocks with the highest four-week comparative relative strength vs. SPX 2. Choose from industry groups that are also far outperforming the.

SPX 3. The answer is simple: You wait for the two-period RSI to dip below 5. In the case of the UGI example, that means looking for the stock to turn higher, taking out Once filled on the trade, place your initial stop beneath the most recent swing low near Then hold the position until you get a close back below the six-period EMA; at that point, you would go back into cash.

The moving average filter will also help limit the amount of portfolio positions in times of extreme bear markets, which is yet another big plus for risk-averse traders. Take plenty of time and tweak this basic trading framework until you can personally witness its potential for producing The moving average filter will help limit the amount of portfolio positions in times of extreme bear markets. Donald W. He may be reached at [email protected] yahoo.

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Further reading Pendergast Jr. Inflation-Adjusted Market Returns Does inflation explain why markets are higher in dollar value and why they seem to be worth less in purchasing value?