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Stock Market Proprietary Indicators Part 4
Trading with SVAPO
Just looking at price and SVAPO it is possible to find early entries for buying or selling a stock.
Figure 8.13: AMD lower tops in price made a hidden divergence with higher tops in SVAPO.
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In figure 8.13, a chart of AMD, there was a big down move for the last 6 months.
Notice how lower tops in price during July and August made a hidden divergence with higher tops in SVAPO. A nice indication that the downtrend would continue.
Until the end of December price went further down in a convergent move. But beginning 2001 price is now making a divergent move with lower bottoms in price and higher bottoms in SVAPO.
This is a buying signal that is further confirmed by price breaking the last downtrend line and price breaking out of a falling wedge reversal pattern.
Figure 8.14: AMD further up trend evolution.
In figure 8.14 we can see the evolution of the up trend.
Price moved up until the beginning of February when a correction started. This correction brought price back to a support level and beginning of March a hidden divergence is visible with higher bottoms in price and lower bottoms in SVAPO pointing to a continuation of the up trend.
Price moved up in a convergent way, with another correction to the support level until the beginning of May. Here we have a small divergence between price and SVAPO with higher tops in price and lower tops in SVAPO.
This could be a selling moment. However if missed there is a second more explicit divergence by the end of May. Time to close the position.
Only just looking at price and SVAPO is however not a good idea. As you know you must always also use an initial and a trailing stop to get you out of a trade with a minimum loss in case SVAPO is not giving a sell signal.
Proprietary Technical Indicators Next -Previous -Part 1 -Part 2 -Part 3 -Part 4 -Part 5
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Hypothetical Performance Disclosure: Hypothetical performance results have many inherent limitations, some of which are described below. no representation is being made that any account will or is likely to achieve profits or losses similar to those shown; in fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk of actual trading. for example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all which can adversely affect trading results.
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