Number Lines Hey guys, something I've noticed about the number line, (and something that's been working for me lately) has been the relationships between the various number line time frames. So currently my 30 day lines show strength in XLF, XLK, and XLY. Over the last week or so, the 5 days lines for XLF and XLY looked pretty weak though. What I've been experimenting with is using the 30 day line as something of a 200 day moving avg, (not really, but I think you'll probably see what I mean) and using the 5 day line as almost like a 10 day moving avg. What I'm finding is that when the strongest 30 day lines pull back via the 5 day line it offers up good opportunities to get long for swing trades on longer time frames, (weeklies especially). My first "test" with this theory was GS. I got long on a failed weekly A down on February 23rd, and held the last of the position, (trimming here and there) until the big move on Thursday March 1st. When I got long GS, the 30 day number line was something like 15 or 16, and the 5 day was relatively weak, (I want to say it was like a 2). Now, the XLF is outperforming the broad market, so I'm looking to rotate elsewhere. Obviously this strategy is specific to my preferred time frame, and it's certainly not a good way to get long while the market is tanking, but in the case of Feb which was a slow grind, (but a slow grind higher) it offered me good opportunities to get long underlying strength while it was also rather "weak." Hope this falls into the "no wrong way to use ACD" category and I'm not missing the point of the price action tells that the method offers, but I'm pretty satisfied with the results thus far. Any critique/suggestions/comments are very welcome. Like everyone else, I'm here to get better!
Interesting observation. I'm not sure I would use it like that. I've thought about the MACD type of approach to the 5 and 30 when I realized that it defeats the purpose of it. Moving averages are very different from number lines in that moving averages are backward looking and the number lines are forward looking. If you have a longer term number line at plus 18 and the 5 day at minus 3, I would not want to be long because what the 5 day is telling me is price is going lower, not higher. I would much rather wait for the 5 day to go to plus 5 when the 30 day is at plus 18. Of course anytime you buy something strong on a pullback it's going to work most of the time regardless of what methodology you are using. I truly believe in the keep it simple stupid mentality. I don't want to have lines all over my charts and 5 different number lines. Look, at the end of the day, price is either acting well or it isn't. I really don't think there is any in between. What I have noticed is actually quite the opposite. For example, say you have a stock at plus 18 on a 30 day number line. Say you also have a 5 day at plus 5. Many times price has actually pulled back while "maintaining" a strong number line. This is actually the type of pullback I want to buy. Guys, this happens a lot. Just as it happened last few weeks where price went higher despite the number lines "dropping". Remember, price does not always move in the same direction of the number line. In many cases, they move in opposite directions!
Thanks for all your posts on ACD Maverick. I have read most, if not all of this thread more than once and the book many times. It is quite amazing how this stuff works and as many people have said in the past, it is about layers. These don't appear straight away, but the more screentime I get, the more nuances of the system I see. I hate having to resort to asking a question, but I'm having trouble with the number line. I understand your ideas relating to the 5 day and monthly and starting afresh at the beginning of each period, but my question is on calculating the number line. I may have missed something on the book, or I may be being too specific, but I am unable to see in the MF book the following scenarios: 1./ Stays all day within the OR - I'm assuming = 0 2./ Makes an A up, but then closes below the A, but above the OR - does this have equal weight to an A up that stays above the A level? 3./ Makes a failed A up during the day and the last bar of the day is at the A level - and therefore failed due to lack of time. 4./ Makes an A down and later in the day attempts to make a C up, but fails due to limited time at the C level, but market closes above the OR. Thanks in advance for your help. Simon
Let me further add this about the number line. I don't want to speak for Mark Fisher but I think the value he found using the number line was not just using the raw number but more the confirmation at +9. As he stated in his book, the real tell was when the number line was going from 0 to +9 and then confirming. In other words, when it was going from low to high. Once the number line was high, there really was no tell. It wasn't so much that you would just buy anything that has a really high + number but more the transition from negative to positive and then to confirming at two consecutive +9 days. So I would be nervous if the number line was already at +18 as I basically missed the move. And if the number line starts going down, that is a bearish sign as even he stated. He never really quantified this in the book as I have mentioned before. So I would just be really careful about buying anything with a declining number line and certainly would be worried that perhaps I missed the move if something was already at plus 18.
One final add here, I think one of the most common problems most people have with the number line is they use it as a relative strength indicator. They basically take what they learned in technical analysis 101 and move it over to the number line. In my humble opinion, the number line was always about spotting tells before others do. That is the foundation behind everything I believe about trading. Once something is at plus 18 or 25 or 30. I think the whole world knows that product is strong. I really don't know what edge you think you have over another trader. I mean even my mom knows that product looks good at that point. LOL. The idea for me has always been to catch that "early" strength. BEFORE everyone catches on. I want to be the one selling to the latecomers. So the number line allows one to see things that are breaking out "before" everyone else does. Simply buying pullbacks in strong stocks is really something that every Joe on the street does and all in all, it does work most of the time. I'm always looking to find things that other people don't find. I just find trading easier that way.
chart of aapl still in a very well defined uptrend, so far it has touched the 20 day once on Jan 24, time will tell. 510 would be the first stop for the bears IF it gets there.
Correct. There is just one thing to be aware of. One must develop a filter to eliminate the most bearish reversals which can occur just before the pullback ( in still existing uptrend ) the trader would enter at.