Trend Day Tuesday

Today (Monday) was a perfect example of a chop chop kinda day. We traded high to low and low to high all day. The kind of action that drives many traders crazy (and to the poor house). At the end of the day we ended up with an NR7 in the nasdaq which shows us a good range constriction. Also on the longer term intraday charts the ADX values have gotten fairly low. This shows us the prevelance of a choppy type of market. Like volatility, trending is mean reverting, so after a period of low trendyness there tends to be a period of strong trends. When you have a period of low volatility and low trendyness together often there will be a trend day. Looking at the charts I really dont have a strong bias as to which way we would go (id say 60% Chance up, 40% chance down), but the direction is not what matters. What matters is the action and how you trade it. Trend days have the potential to make your month.

A few stocks.
Longside
BRCM
AMGN
CHINA

Shortside
QLGC
CTXS
BBBY
INTU
ESRX
PFE
GE
JPM
CCU

Brandon

 

Your right it doesn't matter which way it breaks, but with the low adx and vix i would expect at least a 15 pt pop tomorrow. Those kind of days i like.

Thx,

Wavetrader

 

The great thing is is that this statement is testable.

Looking at all NR7 days, with ADX < 20 and VIX < 10% below its 50 day moving average

Buying at the open the next day and selling at the close the next day:

On Nasdaq futures since 1988, 70 occurrences, average return of -0.09% (not statistically significant).

Holding for one week, average return of -0.52% with 54% successful. modestly statistically significant with z = -1.88 (random buying and holding for one week is average return of 0.33% on 56% success). The result does not change much if you use ADX < 30 instead of ADX < 20.

I also get completely random results buying at the day-before high, shorting at the day-before low, stops on the other side, etc. Nor does the result change at all if I set the day to Tuesday.

So maybe we do get a 15 point pop - but it will have nothing to do with the range, the ADX, or the VIX.

 

You can say that again! This is the kinda day where any notions of me taking 2% risks had to be quickly dismissed and where I had to scale back to 0.5% in order to get into defense mode... not a nice day...

 

Yup. If I had been scalping 1 pointers, it would've been a good day. Since I didn't, it wasn't.

 

I wish someone would do a study to see how many strong trend days and how many "up down days" there has been in a recent time period. I don't have the foggyist how to do it efficiently.

Move up is definitely coming.

Have you looked at the hourly chart of the ES. Looks like a dragon head getting ready to orgasm.

 

BrandonF, I thought you mentioned that you did a study like this, didn't you ?

 

I barely traded monday, too many price bar overlaps and no "clean set ups.

I have been in not lose money mode for a week.

Pete

 

Excellent 'pete.

I know you have seen the number of posts that confess to over-trading, or trading when the setups weren't clean and doing nothing but building losses.

Good for you man! Nice discipline.

 

The only thing I see right now that is of concern, which would say NO TREND DAY TODAY is that we are getting a very small gap. A typical TD will start off with a large gap, but we will see, we still do have the other criteria in place.

Brandon