Final Post...

 ...on the matter of the 3/10 MACD oscillator and how to effectively use it for intra-day trading.  Other posts on the subject can be referenced  HERE and HERE.   While previous posts dealt mostly with the construction of the indicator and price relationships used with it, this post will be a bit different.

If you are unfamiliar with this blog then you may also want to refer to the "Doc.s on Request" (sidebar to the right) for further 3/10 macd references.

What we know-
  There are two lines on the 3/10 macd; one indicates the difference between two moving averages (3- & 10-period), known as the "Fast Line" (also represented by the histogram) and one which indicates a moving average of that difference (a 16-period moving average of the 3- & 10-period differential) known as the "Slow Line".  Think of it this way:
Slow Line = an intermediate-term trend indication
Fast Line = short-term trend indication.
(as an aside; a Long-term trend indication can be a reasonably reliable Moving Average, like the 50-period, or a 20- & 50-period Moving Average that takes into account the orientation and slope of the two MA's (20- above 50-period and Up is bullish).
  So, the 3/10 MACD provides 2 layers of price; one which directly reflects price (the Fast Line),  and one which is slightly removed from price, being that it's a moving average of the difference between two moving averages (the Slow Line).
The above concepts are slightly less important than the one to follow regarding time frame layers.

Time Frame Layers:
  We learn early on that it is important to understand what higher time frames are doing if we intend to trade a lower time frame.  For the purpose of intraday trading we can not ignore the one chart which is likely studied upon, and made decisions off of the most in our line of work, the Daily chart.  We have to know where we stand in the daily time frame before all else.  In so doing, we should try to keep things simple.  Are we trending or within a range?  Where is likely support/resistance?  With those questions answered we can then approach our intraday analysis.
  My personal preference is for having a 15-min and 5-min chart as an Intermediate and Short-term indication of price.  Trades are taken off of the 5-min chart but only if the other two charts confirm my interpretation of price.  The way in which I like to set screens up is my own, most important is to use what you feel comfortable with.  That being said, my screen for the 3/10 MACD strategy is set up as follows:

   I use a 65-min chart simply because it divides into 390 evenly (the number of minutes in a trading day) and so we have each bar containing the same amount of data.  On this 65-min. chart I have two moving averages and the 3/10 macd set up so that they reflect the DAILY chart.  So, this 65-min chart shows me what it is the 20- & 50-Day moving averages are doing, as well as what the Daily 3/10 indicator is doing.  The other two charts (15-min & 5-min) only contain the 3/10 oscillator, reflective of their individual time frame.

How it works:
  First and foremost I want to know what the Daily chart is telling me.  Is the long-term trend (reasonably reliable Moving Averages) up, down or sideways?  Is the Intermediate-term trend (the Slow Line) up, down, or sideways?  Is the short-term trend (Fast Line) pointing up, down, or sideways?
I'm using the symbol APA simply because that is what opened up when starting my charting program.  So, I'll just stick with my original example from above.
  In the above example it is easy to see that the trend is Up.  We have both the 20- & 50-day Moving Averages sloping up and we have a green (Up) histogram with a slow line above the zero-line and sloping Up.
  Since continuation is more likely than change in trading, I only want to look for long entries when the Daily chart meets the above criteria (bullish Moving Average orientation, Slow & Fast Line above zero).  There are some nuances that will amend the previous sentence, but I'll get into more complex situations later.

Entries:
  OK, so we are bullish on APA because the daily meets the previously explained criteria.  Where do we enter?
  First, we want the Intermediate-term trend (in this case the 15-min chart) to tell us when price is starting to look bullish.  Second, the short-term trend will tell us when to enter (since this IS short-term trading) in anticipation of price continuing on it's already determined bullish course.

  Keep in mind; there are at least two approaches to this strategy; the aggressive (anticipatory) entries and the conservative (confirmed) entries.  Instinct and personal preference will dictate which you follow.  So in the above chart we have two highlighted up arrows on the 15-min chart to tell you when things are looking bullish in terms of the 3/10 oscillator.
Two signals:
  - Fast Line crosses the Slow Line
  - Fast Line crosses the zero-line (histogram changes from negative to positive or from red to green).

  Being that we have a strongly bullish Daily chart we may consider a more aggressive third signal:
  - Fast Line begins to move counter to the previous trend (in the chart above, the middle 15-min chart has an up arrow that is not highlighted.  This up arrow indicates where the 3/10 histogram began to "tick up" and move counter to the previous lower low readings one bar before the fast line crosses above the slow line.
   The reason for this discretionary third signal is due to the fact that the 5-min chart is showing a momentum buy divergence on a double-bottom, and if we can anticipate an early entry our Risk:Reward will be greatly maximized.

  Here's another example, using the SPY.  Again, the higher time frame was bullish (fast line above slow line and above zero), so it was a matter of waiting for the intermediate term to confirm and the traded time frame to signal an entry.

The 15-min chart indicated a bullish bias right at the open (actually showed a bullish divergence on the close of the previous day setting up a buy entry for the next bar) while the 5-min chart was a matter of waiting for the first pullback to enter.

 Now on to some less straightforward examples (though it makes a lot more sense to me to only search for and trade charts that show a straightforward bias ;)

Taking it to the next level
Context:
  Starting with the Daily chart helps to keep everything faster than a daily chart within context.  So, what are the two lines doing on our daily 3/10?  There are a combination of scenarios possible for our 3/10 MACD indicator, and each scenario tells us something about what price is doing (bare with me here):
 We can have the following scenarios:
1). A Positive Slow Line (above zero) trending higher, with:
  (a) a positive Fast Line ticking higher
  (b) a positive Fast line ticking lower
  (c) a negative Fast line ticking lower
  (d) a negative Fast Line ticking higher
2). A positive Slow Line trending Down, with the same set of criteria as above (a through d) for the Fast Line.
3). A negative Slow Line that is trending Up, while the Fast Line meets one of the above criteria (a through d).
  And, finally,
4). A negative Slow Line which is trending Down, while the Fast Line meets one of the aforementioned situations (a through d).
  In all, a total of 16-possible scenarios, and I intend on covering them all (there was a reason this was intended to be my last post on this subject).  I made this spreadsheet to reference (just request viewing permission) so you don't have to scroll back up.

1a.  Positive Slow Line trending Up with a Positive Fast Line ticking higher, like so:

This condition illustrates trend continuation or breakout moves which happen to be MOST dramatic when it is occurring in tandem with a Slow line crossing positive (as was the case in March '10, shown above more closely), they can also indicate short-term tops once the Fast Line begins to tick lower:

 
1b. Positive Slow Line trending higher, with the Fast line positive and ticking lower;  This happens a lot more frequently, and often indicates a mean regression of some sort, or a consolidation phase.  like so:

1c. Positive Slow Line trending Up, with the Fast line negative and ticking Down.
This isn't a frequent occurrence either.  For a similar reason as 1c, typically the Slow Line will be trending down.  Consolidation or pullbacks, but watch for breakouts/breakdowns.

1d. Slow Line positive and trending Up with the Fast Line Negative but trending Up, I don't really see this combination happening since when the fast line is negative trending up the Slow Line will typically be trending down.   So if you see it, you may be in a choppy range.

2a.  A positive Slow Line trending Down with a Positive Fast Line trending Up.  Typical of range expansion or continuation of trend.  Watch for a double top and/or divergence.

2b. A positive Slow Line trending Down with a Positive Fast Line trending Down.   Indicative of range or waning momentum, but watch for breakouts/breakdowns.

2c. A positive Slow Line trending Down with a Negative Fast Line trending Down.  Strong pullback of the previous trend that can lead to a bottoming move.  Look for reverse divergence.  If the slow line is dragged negative a lower high could start a bearish trend.

2d. A positive Slow Line trending Down with a Negative Fast Line trending Up.   Doesn't occur very often (on the daily timeframe), but often indicative of a pullback prior to a continuation of previous momentum. This will often set up criteria 4c where the slow line is dragged negative.  Can lead to the fast line resetting green and trapping shorts.
Notice on the last highlighted rectangle in Nov., price pulled back and moved for a continuation, but then squeezed longs in the morning star pattern that followed, so it technically didn't "work".

 3a. Negative Slow Line trending Up with a Positive Fast Line trending Up.  Could be a pullback of previous momentum, or test of Resistance? Could be a breakout move following a divergence if slow line is near zero. Should momentum carry the Slow line positive, the first pullback is a high expectancy setup long.

3b. Negative Slow Line trending Up with a positive Fast Line trending Down.  Usually highlights a consolidation pullback or test of Support.  Price can drift higher as the momentum wanes. 

3c. Negative Slow Line trending Up with a Negative Fast Line ticking Down.  Didn't find but a handful of these on the past two years of the SPY.  They almost always highlight a divergence or pullback after a momentum move.  Where is Support?

3d. Negative Slow Line trending Up with a Negative Fast Line trending Up.  Another infrequent occurrence (on the daily); infrequent because it's not long before the fast line crosses zero (histogram turns green) setting up a 3a.  If all we can do as a trader is "anticipate" a move then this is a valuable condition to be aware of. 

4a. A Negative Slow Line trending Down with a Positive Fast Line trending Up.  A pullback following an initial impulse move.  The histogram turning green is typically brief.

4b. A Negative Slow Line trending Down with a Positive Fast Line trending Down.  I would clump this one together with 4a. Watch for continuation of previous momentum.

4c. A Negative Slow Line trending Down with a Negative Fast Line trending Down.   Bearish trend continuation.  Trade in the direction of the trend.

4d. A Negative Slow Line trending Down with a Negative Fast Line trending Up.  Pullbacks. Consolidation. Know your range.

So, there you have it!  If we know the context of price we can have a clearer idea of what to anticipate.

Intraday Fib.s

I've put together a brief Google Document on using intraday Fibonacci retracements, with a focus on the 50% level.   Though it is brief, I'm expecting to add to it as time goes by, with more reference charts and notes.  The document is "private" but if you would like access just click on the linked image below and put in a request to view it and I'll open it up on an individual basis.

perhaps I'm drunk...

...but I just have to share some charts employing a very simple indicator; the Highest and Lowest Close of the last 4-bars.  I started watching this paintbar on the 3-minute using the Highest/Lowest Close of the last 7-bars, but the 5-minute reflects similar effects and has a more comfortable tempo.  Used in conjuction with Support/Resistance levels, this can indicate some really great trade potential, while referring to previous swing highs/lows for stop placement.
  The following charts have White and Yellow paintbars.  A white bar indicates the Highest Close of the last 4-bars (HC4).  A yellow paintbar indicates the Lowest Close of the last 4-bars (LC4).

The Obvious
     The HC4 & LC4 indicate the highest and lowest close of the last 20-minutes (on a 5-minute chart).

  Working on an intraday timeframe this paintbar often indicates high probability turning points within our daily market stages.  Here is APA over the last 6-days

Here is HES over the last 6-days

RIMM over the last 6-days

p.s. In times of trend when one is looking for a dip to buy, oftentimes the LC4 (in times of long entries) can be a good fade candle, and the opposite for HC4.

Andrew's Pitchfork

I've been playing (and having loads of fun) with the Andrew's "Pitchfork" (or Andrews Median Lines as they are also known as) lately. There are plenty of links (well links within the links) to visit at the bottom of this post. For now, start with the basics,
Drawing the Andrews Pitchfork: see this link- Choose two alternating swing high/low pivots, label "B" and "C"- Construct the Median Line (ML) to connect "BC" with a third pivot. "This pivot usually immediately [precedes] price swing BC but it can be any pivot [preceding] BC."
So, essentially, you have two pivots that are bisected with a prior pivot, while extensions off of your "B" & "C" pivots become your Upper & Lower Median Lines (UML/LML) like so:There's also the Schiff Variation:
-Both share the same "BC" line, however the Schiff Meridian Line originates from the midpoint between A & B, like so:
This Schiff variation is good for using with gaps.

There's also the concept of including Upper and Lower Trigger Lines:
- Simply extending lines off of the AB point and AC point, like so:See this link for Trigger Line setups.

There's also the "Sliding Parallel Method" which I'm yet unable to comprehend.

Now some fun with charts: SPY Daily

The Schiff version - the handle (center line) originates at the mid-point between the A and B points:The Modified Schiff version - the handle (center line) originates 50% between the A-B points and directly above the "A" point.
Tradestation also gives you the ability to add parallel bands to the pitchfork (use for the Sliding Parallel Method?) to give midpoints between the BC lines or percentage extensions off of the pivots.Here are 3 forks in the recent SPY price action. I included a stochastic for the sake of strategy development which one might base trades off of, like those indicated by vertical dash lines.
Some more key concepts include:
- Median Lines should be tested before being traded off of.

"How do I know which pivots or swings to choose? The answer sounds simple-minded, yet it is the single best answer I can give: Draw many lines and use the lines that prices respect when you trade. Draw as many lines as your eye sees as pivots because, often, the first or second or third combination will not 'describe' any of the action of price when you first draw the MLs...I try different pivots, starting with major pivots in the weekly or monthly mode...and then draw MLs off of lesser and lesser pivots. I do erase MLs that are not of major pivots and do not 'describe' price."

"The first simple rule is that downward sloping MLs indicate prices in a downtrend--downtrends are made to be sold and the Lower ML of a downward sloping ML describes prices that will trend lower. Upward sloping MLs describe uptrends."

"Most traders think that MLs are a stand-alone tool, but I was taught to always use them along with many other signs of support and resistance and it is the integration and interaction of these many tools that can make the techniques valuable.""...it would intuitively seem that major swings or pivots make the 'best' points to use for all Median lines. But in practice, the best points to use are the points or pivots that describe or contain the price action. I know there are 'purist' chartists and if that's your preference, then by all means, draw the lines that suit you. But the goal of the Median line is to contain or describe action as it unfolds--and so by all means, be creative. Often, it's the obvious pivots that work the best, but at times, you have to get your hands dirty. I'll give a few creativity hints: If all else fails or if you are looking to use these techniques on 'short term' trading, try using the highs of the three pivot points, or the low. Or use the extreme of a gap. Or use an extremely wide day as the high and low of an A-B-C. Try it. You can always erase it if it doesn't describe or contain action."
"Don't blindly trust an untested line, unless you have other reasons to expect that support or resistance to hold. But once it has been tested and even better, when you can add the 'confluence' of other indicators like trend lines, fib projections and retracements, chart formations--then you can have much more confidence in the Upper and Lower Median and Center Median lines.""Actually, though it is very seldom taught, you can draw and use a Median line using the open high and close of a bar. Period. Does it work? It can. That depends on what you are trying to use it for. It can be great for setting stops, for example."


Click on all the links on this page, a wealth of information; http://www.trading-naked.com/AndrewsPitchfork.htm

no news necessary

With the Fed announcement after the close on Thursday I found myself reading various threads on a few web sites, and the consensus seemed to be impending doom for equities come Friday. Well, it sure seemed to start off that way, but perhaps some perspective and ignoring all of the news might have kept you out of some trouble. I'll admit that I didn't take any trades on Friday, the result of a head cold and it being OpEx mixed with the news from Thursday that was sure to make for a tricky day, but I did sit through the session in watch and learn mode.
Allow me to digress:
First of all, I plot Moving Averages on my charts for a reason. That reason being as a determinant of intraday trend direction and strength (and perhaps to a lesser degree for Support/Resistance potential). The length Moving Average you use and whether it's Exponential or Simple is less of a consideration than those points mentioned above. For me, the 20- & 50-EMA works just fine. Now a consideration which goes hand-in-hand with the choice of Moving Averages, is what time frame do you trade? The 15-minute works good enough for me (though I'm finding it a little too "slow" for me these days, but that's neither here nor there). So, take a look at this 15-min chart with 20- & 50-EMA's and you tell me, what's the intraday trend here?
Based on what I just explained, the moving averages are sloping up with some healthy space between the fast and slow average (the more space between the averages the more momentum behind the previous moves). So, even before going into Friday's session we have a clear instance of higher highs and higher lows, telling us the trend (for our traded time frame) is up.
Now, let's go to the open.
Internals started off fairly negative. We had Advancing/Declining issues within a fairly bearish range, while Up/Down volume was below zero, but not in what we should consider a clearly bearish level, more of a neutral-bearish level.The gap down open was nearly filled before selling off, but the most negative TICK reading was quickly faded. The strong extension above and beyond vwap was a no looking back move that happened to occur right within intraday trend support (see the 15-minute chart above).
Towards the early afternoon price began to stall at a level that was reasonable to expect potential resistance.So, depending on what type of trader you choose to be, a possible short setup was taking shape (Head & Shoulders pattern on the trigger chart). So long as you keep in mind that this short setup is a counter-trend trade you have some decisions to make.
- Sit on your hands if you prefer to only trade with the trend
- Be aggressive and go short on a high a TICK reading with a stop at the highs of the day
- Wait for a move to take shape (break of a range) and enter on a pullback
Keeping in mind that this is a counter-trend trade (and that this is a very volatile OpEx session) a clear target (or targets if scaling) should be in mind. What might those targets be?
- VWAP
- Previous day's High (PDH)
- Previous day's Close (PDC)
- Moving Average or Bollinger Band Support
This was a session that rewarded quick profit-taking. The most important concept to take from this as an intraday trader was knowing whether you were going with or against the higher time frame trend. In the early morning you were buying a dip in a prevailing up trend. While in the afternoon you were recognizing weakness at a higher time frame resistance level while the broad markets were showing bearish TICK divergences, and fading breadth (see the $ADD/$VOLD chart above). However, because those weakening breadth internals were still above zero and the higher time frame was bullish, you should have been aware that a counter-trend trade required clear targets and quick profit-taking.
Keep your perspective and ignore the news.

Stevenson PTT

I'll be adding more charts onto this post (and perhaps other content modifications) over the weekend, so check back if you're interested in this topic.

I recently read the manual Precision Trading with Stevenson Price and Time Targets, and found it interesting enough to want to summarize it here. The concepts presented deal with cycle analysis, which is often overlooked in technical trading, but is just as important next to price and volume. I'm going to try and make this as simple and straightforward as possible.
First of all, the concept of cycles is fractal, in that within large cycles there are smaller cycles, and within smaller cycles there are yet even smaller cycles. Fortunately for the purpose of trading we don't necessarily need to worry ourselves with the overly large or small cycles behaving within price. We don't want to get caught up in the minutia of the 1-minute price cycles (unless we're a manic scalping robot) and, unless you're an "investor" large dominant cycles aren't going to help you trade intra-day.
So, as presented in the book by John R. Stevenson, here's how he explains it:

There are two cycles; a Regular Cycle (RC) and an Inverted Cycle (IC).
Each of these two cycles can have three variations: a Regular Cycle is either in an Up, Down, or Sideways trend. The same goes for an Inverted Cycle (can be up, down, or flat), like this:
The characteristics of a RC are that it will have two swing lows with a swing high in between (think of a pyramid, bell-shape, or upside down "U").
While an IC will have two swing highs with a swing low in between (think of an upside down pyramid or a "U" shape), like this:
Some key concepts include:
- An Inverted Cycle always follows a Regular Cycle, a Regular Cycle always follows an Inverted Cycle, and because of this they can be examined in terms of "units" (see the illustrations that follow).
- The IC & RC are expected to be relatively the same length of bars.
- Stevenson mentions that the technique he introduces (I'm getting to it) can be used on cycles as small as 3-bars (5-min chart), but explains that a minimum of 8-10 bars produces better results.
- It is not important for swing highs/lows be in the exact middle of an RC/IC.

Being that an Inverted Cycle follows a Regular Cycle (and vice versa) they are considered a unit. Seen in the diagrams below, a RC (A-B-C) is followed by an IC (B-C-T) in their respective units, and an IC (B-C-D) is followed by it's paired RC (C-D-T).
So, there are two concepts J.R. Stevenson lays out in his manual for making, what he refers to as, Price and Time Targets (PTT).
Concept #1:
-If your observation tells you that you're in a Regular Cycle you will label the most recent swing low with a "C", the previous swing high a "B" and the swing low prior to that an "A".
- Once you have identified and labeled the RC, draw a line connecting points A and C, clone this line, then project off of A to arrive at a PTT. Like so:A couple of things to mention at this point. I'm not benefiting financially in any way for this blog post, so I'm not going to cherry-pick the examples. The example above did not meet the Price and Time Target, but it did come close, and there is information to be gained from price not reaching it's particular PTT.
Also, ALWAYS USE STOPS! This is not an all-inclusive trading strategy. It's simply a guide to help you be on the right side of a trade by going with the dominant cycle in the market. As such, you should rely on price patterns for entries based on your cycle analysis, not the other way around.
So, that's the basic premise behind making PTT's. You identify the cycle, draw a line between the swing lows (if it's a Regular Cycle) and project off the swing high (or low if working with an IC) to arrive at a target for price in time.

The second Concept in this manual is referred to as a Cyclic Trend Line (CTL). It is used to help identify when one cycle has ended and another has begun. In keeping with the above chart with a Regular Cycle as an example we produce a CTL as follows:
- Draw a line through the price bars of the B-C line, connecting the highs to the lows.
- Clone this parallel line and shift it outwards, so that it touches only one price bar point. This is your CTL! When price closes outside of this parallel line, the cycle is considered ended.
Here's the same chart as before, only this time adding the CTL:So, we can see that price closed outside of the CTL, ending the Regular Cycle. That wouldn't necessarily be a trigger for entry. We would want to look for a price pattern to emerge to take action. In this example we got a retest of the CTL with a steep (78.6%) retracement (or "Phoenix", whatever you want to call it), so we would look to buy a breakout from that retracement.
One word of advice regarding the CTL; though it can be used on small cycles, more accurate results can be obtained by using it on cycle lengths of 10-bars or more.
OK, now time for some charts.
I pulled up a daily chart of FCX and there was a really straightforward Inverted Cycle that jumped out at me right away. So, included in the chart below are an Inverted Cycle, followed by a Regular Cycle (which comprises an Inverted Cycle Unit). The red lines represent the Price Time Targets:Seems simple enough, right? Well, here's where my brain starts to itch. Following this move in FCX price begins an upward consolidation cycle throughout much of August. All of a sudden we have these small (3-6 bars) RC/IC's, which produce targets that, though mostly hit, aren't very profitable on this time frame. So, it may be best to avoid this stock for the time being, or drill down into a smaller time frame to time entries/exits.
Overlooking the smaller cycles on this Daily chart, we give the stock some time to for investors/traders to determine whether they like price higher or lower from here, and in so doing we allow the predominant cycle to work itself out. Here's what things look like:
One more thing worth mentioning, if I haven't already; Regular Cycles and their mirror opposite (Inverted Cycle) will have approximately the same number of bars, take a look:
Well, if you have stuck with me thus far, you would probably like to know just how the heck you might approach trading these Concepts. Well, thankfully J.R. Stevenson included some very simple strategies for trading both with the trend, and counter to the trend. Here's what he says:

For trading with the trend;

If an RC is up, Buy a CTL break
If an RC is down, sell the PTT
If an IC is up, Buy the PTT
If an IC is down, sell a CTL break

Got that? Good!

Now if you prefer to counter-trend trade the cycle, he suggests;

If an RC is up, Sell the PTT
If an RC is down, buy a CTL break
If an IC is up, sell CTL break
If an RC is down, buy the PTT

Simple right?

Just keep in mind that to determine the direction of the cycle's trend from the slope of the A -C line (if a Regular Cycle) or the slope of the B-D line (if in a IE).

OK, OK, I'll demonstrate:

So, these are three good examples that demonstrate relative accuracy, but also the important matter of discretion that should come into play with these strategies.
- The first trade worked, so long as you bought on the close outside of that CTL (after all it was a strong bullish candle).
- The second trade didn't quite reach the PTT, so if you were eager you might have gotten in and perhaps quickly stopped out. Or, you might have waited for a pattern to develop.
- The third trade I included two purple CTL lines. If you would have bought the close outside of the CTL you would have been profitable in two days, before price broke down (fakeout breakout). Price continued lower, so you would have re-drawn the CTL to include these two consecutive new lows. In which case you got a break of the new CTL, and if you were hesitant to get in at this point (because you're still not out of that price range!) you would have (hopefully) waited for the breakout day to enter. If that were the case you would be sitting through a tight flag pattern before extending the initial impulse move. bravo! This measured move brought you right into the PTT target!

Needless to say, I'll be looking for a breakdown within this current Regular Cycle we appear to be in at this point.

OK, so one more example and then I'm ending this dissertation.
Looking at GS on a 5-minute time frame over the last two days (Thursday, Friday).
Here's what I see:Going in a little closer, here's what I'm looking at:
- The first trade coming out of the Regular Cycle down was to sell the PTT (that was not happening with such a steep selloff, as the PTT was skewed). However, you might have bought the retracement off the lows after breaking consolidation and testing the most recent swing high.
- Next trade, going into a Inverted Cyle was to sell the CTL line break, which occurred on the retracement from the morning's sell-off. Target the lows of the day for at least half a position. Price doesn't make it to the PTT, instead double-bottoms at the Low of the day.
- Trade three: Buying a close outside of the CTL. Otherwise, look for a retracement back to this CTL to buy. We get a "Phoenix" setup and expand higher into our PTT!
- Trade four: Go short from the CTL break (and mini bear flag), target the PTT or lows of the day, which is what we got into the end of the day.

A word regarding failure:
These examples all look well and good, but taking action in real-time is another thing entirely. For one, your CTL is going to be changing with price. Say you have a close outside of the CTL, and you're thinking the cycle is over, well price may still continue lower/higher, in which case you may get stopped out. You will be readjusting the CTL accordingly, and it's best to rely on pullbacks, price patterns, and/or candlestick patterns to base your trading decisions rather than solely the CTL break.
Also, the PTT isn't going to be a hard and fast target. It would seem that price failing to make it to a PTT can be telling you a valuable lesson in what the pace of the market is doing, and perhaps that sentiment may be shifting.

So there ya have it! It's a fascinating study. I have enjoyed it very much and look forward to sharing what I find from here on out. I hope you stuck with me through, what I was hoping to be, a straightforward look into this concept. After all, it's really just a look into the wave structure of buying/selling that's generated across the tape, showing which has more weight to it, the buyers or the sellers. All a series of measured moves.

Here's another example using the past few days in SPY (5-min). What's worth noticing is that price arrived at the PTT early (Red line on lower right). Also, the CTL's (purple lines) are all retraced against sharply before price breaks down/out, providing an excellent low-risk entry.