Update: Bank Of America: My Personal "Rules Of Engagement"

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This is an update for-BAC. I published a strong buy analysis three days ago.
What determines whether or not I take a position, up or down, in a stock , commodity, or futures contract?

To me the answer is simple. Is what I am reviewing "TRENDING" or "RANGE BOUND"?
I need to know if a stock or commodity is trending. Why? RANGE BOUND assets are very hard to make money, long or short.
Is-BAC TRENDING? Yes. How do I know?
Several things tell me. The buy Fractals. The rising Ichimoku Cloud . The rising trend-line. The Alligator is feeding in the up trend.
IMPORTANT: to determine the STRENGTH of the trend I use CHOP, (lower indicator below chart). The lower the red line the stronger the trend.
The higher the red line the more likely I will see "choppiness", or range bound trading. (It is harder to make money with lots of chop).
Right now CHOP tells me-BAC has a trend, the trend is very strong (it is below the shaded area).
The dashed line is the price trend in CHOP, so the trend will likely remain strong.
The lower the line is below the shaded area, the stronger the trend.
Here are the positives for-BAC:
1. Currently a buy Fractal .
2. The lower indicator under the chart is CHOP; readings below the shaded area (38.2) indicate a strong trend.
Authors Note: yesterday I reviewed almost 200 charts for trend. I found only 12 CHARTS THAT HAD CHOP READINGS UNDER THE SHADED AREA.
This told me that only about 5% of what I reviewed are trending. If you have had trouble with your trades lately, ask yourself the TREND question.
Then I would suggest you add trend analysis to your own "Rules of Engagement". It will most likely keep you out of frustrating range bound trades.

3. The top lower indicator is phase energy, and this is positive. Very strong.
4. The alligator is feeding in the uptrend.
5. RSI / Stochastic (top indicator) is strong.
6. Prices are trading above the Ichimoku Cloud .
7. Prices are trading above the thick red Ichimoku Cloud conversion line.
8. Prices are trading above the Ki jun-Sen baseline of the Ichimoku Cloud and this has been HEADING SHARPLY HIGHER.
9. The 5/34 Momentum indicator (top middle) is strong.
In my opinion, BAC-is in a solid uptrend.
I hope you establish your own "Rules of Engagement" and stand by them.
Two final thought:s if you swing trade and look left for structure, an understanding of trend enhances your probabilities of being correct.
If the CHOP is below the shaded area and you have sell Fractals and a falling cloud, and other indicators are falling,
CHOP is still valid in telling you the strength of the down-trend.

Good luck to you. Don.
And which Indicator is phase energy? What color?
649bruno kakola
A buy fractal is a series of five consecutive bars where the highest high is preceded by two lower highs and is followed by two lower highs. Fractals are valid until they are triggered by a new fractal in the same direction or a valid sell fractal occurs. A buy fractal IS NOT VALID if it is formed below the Alligator's teeth. A sell fractal IS NOT VALID if it formed above the Alligator's teeth. On the Bank of America chart the last valid fractal was a buy, and I placed it in the green box for you to see. The three red fractals after this WERE NOT VALID because they were formed above the alligator’s teeth, inside the jaw.
On August 24th please note that the lower indicator under the chart (CHOP) went below the shaded area at the same time the phase energy (green bars, lower top indicator) were rising. THIS IS A CONFIRMATION OF A BREAKOUT TO THE UPSIDE. As the green bars were rising the CHOP indicator was telling me the up-trend was getting stronger.
Phase energy is the “Awesome Oscillator”. Awesome Oscillator (AO) determines market momentum at a given time on the last 5 bars, comparing them to the momentum on the last 34 bars.
When I review a trade, the very first thing I want to know is trend or no trend? CHOP (the bottom indicator, when viewed on a daily chart) tells me this (trend or no trend). How?
If the red line is headed lower, out of the shaded area, there is a trend. The lower the red line goes the stronger the trend.
If I do not see a trend in the stock or commodity I am viewing, up or down, I look for something else. If I detect a trend, like I did with Bank of America, then the fractal told me to buy, the alligator jaws woke up and expanded, and the phase energy green bars got longer and longer.
All of these events happened on August 24th. This was a textbook breakout.
One other tip: when CHOP is heading down below the shaded area it indicates a stronger trend is very likely. This trend can be up or down. For example, If I saw a red sell fractal, red phase energy bars heading below zero, and the alligator jaws were heading down, or the Ichimoku Cloud was falling, then the CHOP would indicate strength in the down trend, not in the up.
I hope this helps. Good luck to you in all your trades. Don.
+1 Reply
kakola 649bruno
Okay thanks for the explanation. So look at the Sell Fractal on 8-12. That one is resting right on top of the alligator's teeth. Do you wait until the entire bar is completely below the teeth in order to consider it valid?
649bruno kakola
You ask very good questions.
Here is the structure of the Alligator and why the fractals are important:
The Alligator's Jaw is a 13-period moving average at the mid price (High+Low)/2, which is offset 8 bars into the future;
The Alligator's Teeth are an 8-period moving average at the mid price (High+Low)/2, which is offset 5 bars into the future;
The Alligator's Lips are a 5-period moving average at the mid price (High+Low)/2, which is offset 2 bars into the future.
So, if you violate the teeth to the downside you have breached an eight period moving average. Because markets can whipsaw us, I would rather wait until the price action is completely out of the jaw, lips, and teeth.

If the sell price action causes a fractal, and any part of the candle touches the teeth, it is not valid. As a general rule, (because of the structure of the alligator as explained above) I would consider the sell fractal not valid if anywhere inside the jaw. One more tip: the chart we are looking at is a four hour. I used this for better timing. I do the first fractal screens on a daily chart. So, when in doubt, go a time interval higher. For example, if you get a sell fractal on a 15 minute chart, check the one hour. If you get a sell fractal on a four hour chart, check the daily.
If you check the Bank of America chart on August 12 for the sell fractal (daily chart, which is stronger), the price is not only above the teeth, it is above the entire jaw. This tells me the sell fractal is not valid.
Daily charts are stronger than 4 hours. For timing purposes, a breakout is more easily seen on the shorter time duration charts. Don.
+1 Reply
Currently a buy fractal means that the last fractal signal, no matter how long ago, was green?
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