PLUNGER  PATTERNS

FP = Forward Plunger
RP = Reverse Plunger

Reverse Plungers can occur at or near short-term tops, occasionally occurring at major turning points.
Forward Plungers can occur at or near short-term bottoms, occasionally occurring at major turning points.

* Keep in mind that this pattern, not unlike other patterns, will not work 100% of the time.  Sometimes plunger patterns will occur and the market will move in the opposite direction (opposite of what we anticipate when a plunger occurs).  This happens with all identifiable price patterns and is normal.  

Description of the pattern(s) and graphic examples from our proprietary charting software

Figure 1.

How and when/where to enter based on this pattern alone, and where to place the stop.

One of the things I really like about this particular pattern is the identifiable stops.  It is clear with this pattern where the stops must be.  They must be above or below the plunger highs or lows.  See examples below in figures 1.2, 1.3 and 1.4.  The entry is also very straight forward.  The trader can enter as soon as the pattern is discovered, but must enter before a significant move has occurred and before the market turns back the other way, taking out the plunger high or low (shown below).  I would avoid buying or selling gap opens, or sharp moves immediately following the pattern.   Market orders, limit orders and stop orders can be used for entry.  The pattern would be negated (voided) if the opposing plunger high or low is taken out.  Again also, I would avoid buying or selling sharp gap openings that immediately following the formation. 

Figure 1.4

Plunger Pattern Criteria -  A plunger pattern occurs when a 10-day high or low is reached or breached and the market reverses itself intra-day and closes at the opposite end of the 10-day high or low.  For the plunger to officially occur the closing price must finish in the top or bottom 30% of the day's entire range.  The specifics for both Forward Plungers (FP) and Reverse Plungers (RP) are provided below.

Forward Plunger (FP) - This will occur when a market meets or exceeds its 10-day low and then reverses intra-day and closes in the upper 30% of the day's range.  A market's full range is 0 to 100% with the low of the day corresponding to 0% and the high of the day corresponding to 100%.  Thus a market that finishes on its high finishes at 100% and a market that finishes on its low finishes at 0%.  This percentage figure (close as a percent of range or cl%ran) is provided daily in all markets in the daily excel report.  The figures are listed in column "L" of the daily excel report.   The same criteria applies to weekly plungers as well with the only difference being weekly plungers consist of weekly data and daily plungers consist of daily data. The cl%ran for weekly data is also provided in the weekly excel report which is also updated daily.  It should be noted that the weekly plungers are not officially complete until Friday's close.  Nevertheless however the day to day cl%ran figures for the weekly closes are updated automatically each day in the weekly excel report (column 7).   The weekly excel report is only available on the automated reports page.  

Reverse Plunger (RP) - This will occur when a market meets or exceeds its 10-day high and then reverses intra-day and closes in the lower 30% of the day's range.  A market's full range is 0 to 100% with the low of the day corresponding to 0% and the high of the day corresponding to 100%.  Thus a market that finishes on its high finishes at 100% and a market that finishes on its low finishes at 0%.  This percentage figure (close as a percent of range or cl%ran) is provided daily in all markets in the daily excel report.  The figures are listed in column "L" of the daily excel report.   The same criteria applies to weekly plungers as well with the only difference being weekly plungers consist of weekly data and daily plungers consist of daily data. The cl%ran for weekly data is also provided in the weekly excel report which is also updated daily.  It should be noted that the weekly plungers are not officially complete until Friday's close.  Nevertheless however the day to day cl%ran figures for the weekly closes are updated automatically each day in the weekly excel report (column 7).   The weekly excel report is only available on the automated reports page.  

Plunger Pattern Expectations - Plunger patterns on average are expected to produce a market reaction (in the direction of the plunger) with a duration of 1 to 3 trading days. 

The 3-day Rule as applied to Plungers:
The market must follow through in the direction of the plunger pattern (forward=up, reverse=down) within 3 days following its formation.  In the case of a forward plunger, the market must exceed the plunger day high within 3 days following the plunger, else the plunger expires.  In the case of a reverse plunger, the market must exceed the plunger day low within 3 days following the plunger formation, else the plunger expires.  During the 3-day period, the opposing plunger day high or low must not be exceeded on a closing basis.  We will address that below.  However, it is possible for a secondary plunger to occur within 3 days of the initial plunger formation.  In that case, the new lows and highs of the secondary plunger pattern take precedence over the prior plunger day high and low. 

The High / Low Rule as applied to Plungers:
The high and low that is struck on the day a plunger pattern is formed are very important.  In the case of a forward plunger, the low struck on the day the plunger pattern forms becomes important support or what I refer to as "the logical stop area".  An example is the 7/24/02 Forward Plunger low of 773 in the September S&P500 futures.  If this low is exceeded on a closing basis, the plunger is no longer valid.   In the case of a reverse plunger, the high struck on the day the reverse plunger forms becomes very important resistance (logical stop area).  If that high is exceeded on a closing basis, the plunger will no longer be valid.  

Failed Plunger Patterns - Plunger Patterns that immediately fail indicate a potential trade in the opposite direction (i.e. a forward plunger than immediate fails is often a good sell signal).   

Real example of Plungers identified on our proprietary price graphs

MORE REAL EXAMPLES VIA RECENT REAL MARKET CONDITIONS (our graphs as it happened).
* Past performance is not indicative of future results, no trading system can guarantee profitable results. 

* The reverse plunger (red carrot following A) FAILED via a close higher which turned that RP into a BUY too!  

Click here to Review Color Changing Feature of the Daily Trend/Swing Price graph

Daily Trend/Swing graph with associated Detrended study while trend from A to B still unfolding on 9/14/04.

 Core UCL/LCL graph for Russell.  Note August net-com peak exceeds EUCL (extreme buy trigger)!