During the past several weeks, I've noticed something evolve in crude oil
on the daily ADX
called a 'change in dominance'. This is where the ADX
is above 20 and the +/-DMI swap dominance resulting is a 'V' type ending to a trend. The setup for the pattern was an ADX
reading below 20 resulting in a consolidation in price. Then, price broke out and ADX
began to move up. Then, without much of a pullback, price reversed and the -DMI
crossed up over the +DMI
causing the change in dominance. During this time, price was pulling back but the +DMI
was still up so waiting for the two DMI's to cross would have resulted in missed trade.
Looking out across other markets now, I see a similar setup in Soybean Oil
(which I'm trading on short side). If this is a similar pattern, then two of the three steps have completed and this week should see price move down.
is another market that could be setting up the same pattern. It will be interesting this week to see how this plays out. Should it work, it could be an interesting pattern to tuck away for future reference
British Pound may be another candidate for this pattern.