Hello.Yes I agree with your analysis,if price breaks below last low and W%R falls below the midpoint then there will be a correction.Money flow and divergences are leading indicators.Most of what people put on their charts are lagging indicators.Divergences are most powerful on weekly charts.
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SubZero
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kudos for you Nmike sharing and explaining this!
TNT1
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You guys don't believe the MACD indicator ?
timwest
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Would you consider putting something actionable on the chart? Do you sell short with a close stop? Do you go long on a dip? It is easy to make comments about past divergences, but seeing them as they happen and then making a judgement as to what to do and taking a trade are very different. Make sense?
nmike
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You've got to be kidding.You mean to tell me that this system isn't clear to you?Then just follow the under and over the moving average and you'll still make money,just not as much.
By the way do you see any divergence at the moment?The answer is no.Stay long the SPY.
timwest
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Just asking because you made such a nice looking chart. Actionable to me means: where did you buy, what was your stop, where is your stop now, how do I change my position, etc. So for now the stop is down at 129, under the moving average or you will exit if you see a divergence occurring. Will you go short on a divergence or will you wait for the moving average to break? That's the beauty of technical analysis - there are a million ways to look at everything. Tim
nmike
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Hello timwest,first of all I don't use physical stops.In the past I always got stopped out too early. I let the indicators stop me out.
As you probably know volume flow is a leading indicator so is divergence .When you put the two together you have a highest probability set up,especially on a weekly chart.I also use candlestick patterns. If I see a divergence I open a position. I well add more shares when either the price crosses the MA and or the W%R crosses the midway point. I also follow the VIX.
If you have an established uptrend, you can enter a position when the W%R dips near it’s mid point, or price dips near the MA. The system isn’t perfect as you can see there is some loosing trades. I do change the look back periods of the CMF & W%R for different stocks and different time frames.
I see no divergence at the moment.Hope that helps.
timwest
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Thanks nmike. It does help. I appreciate the more in-depth explanation of your process and I especially like how you slowly enter a position and build it over time as the trade progresses. I don't think that stops will hurt you in a huge, liquid market like SPY, but I hear what you are saying. 3 times the average daily range is my "general stop" for any position, which works nicely enough for me. As for programming "dips near the ..." - well, feel free to post your continuing thoughts on how to stay with this trade. We all appreciate when you type out your reasoning. Cheers. Tim
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