Swing Trading Information
The Pattern Recognition
program (Plungers) identifies current forward (bullish) and reverse (bearish)
plunger days and generates a daily report showing the markets that currently
exhibit these patterns. This report provides reversals, stops, and potential
profit objectives.
The criteria for the daily
plungers is that we must meet or exceed a new 10-day high or 10-day low and
then close in the top or bottom 30% of that days range. The entire price range
for that day must also be at least 1/3 of an average days range (this used to
be 1/2) for that market. This eliminates plungers with extremely tiny intra-day
ranges. The criteria for the weekly plungers are again essentially the same,
except we are evaluating the data on a weekly basis as opposed to daily. Just
as the close of each day is the most important price of the day, the close on
Friday is the most important price of the week.
One of the benefits of identifying
plunger formations and using them as “springs for any entry
into a position is the logical protective stop they provide. If
it turns out that the plunger pattern did identify a turning point,
the low/high of the plunger should not be penetrated. In other words,
if the market moves higher following a forward plunger day, the
low of the plunger day should not be penetrated. Thus, this is a
logical area for a protective stop (sell stop). Likewise on a reverse
plunger day, if the market moves lower, the high of the reverse
plunger day should not be penetrated. This is also a logical place
for the protective stop (buy stop).
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