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Tick chart orientation
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Tick chart orientation

  #11 (permalink)
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And now...

Pop quiz time!

I've attached a couple of charts below. In both cases, take a look at the last bar on the right; the "hard right edge." You'll see that the bar is currently approaching or touching the SMA.

For each chart, here's the question: Based on what I discussed in the prior post concerning when to assume trend versus chop, should you expect that price will bounce off the SMA?

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Tick chart orientation-quiz__1.jpg   Tick chart orientation-quiz__2.jpg  
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Pop Quiz Attempt


worldwary View Post
And now...

Pop quiz time!

I've attached a couple of charts below. In both cases, take a look at the last bar on the right; the "hard right edge." You'll see that the bar is currently approaching or touching the SMA.

For each chart, here's the question: Based on what I discussed in the prior post concerning when to assume trend versus chop, should you expect that price will bounce off the SMA?

I do love a pop quiz on a Friday.

PIC 1:
I do not think there is enough info to do anything yet. You say in one of your pics in a previous post "After first couple of reactions you have a basis to assume trend," and I happen to agree with this. In Pic 1 you've touched the moving average, but it's the first touch of MA. From here I don't think you can really assume what is to happen next. I'd be no more inclined to think that price will bounce higher than I would be to assume that it's going to drop several ticks from here. Sadly, in my younger days as a trader, I've tried to guess before based on this little (or less) data, and the result has not been profitable.

PIC 2:
I'm not sure that I would enter short here (take the trade), but yes I would assume that we were going lower from here. We had a reversal where the price went below the SMA, and since then it's been "reacting" as you describe it elsewhere in the thread, I am (at least based on using the methods discussed) bias toward a move lower.

How'd I do?

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Humor



worldwary View Post
And now...

Pop quiz time!

If quizzes are quizzical, what are tests?

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Based on your heuristic rules, on PIC1 price should not bounce. On PIC2 price should bounce. What do i win ?

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HowardCohodas View Post
If quizzes are quizzical, what are tests?

Testi...

Hey, wait...

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-- Edgar Fiedler
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Chart 1 I don't like, there is no notice able trend to me, maybe short term, but nothing of any time period. So I would not trade this chart right now. On Chart 2, it does look like we have a trend in place, so assuming the trend does continue, it is a good entry place. Of course we all know about what ass u me means...... Thanks for making us think.

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test

1st chart,because of angle of trend,the tick charts you can read,momentuem by the angle,I once read on a blog ,us the clock face,,,12thru6... 6being falling knife ,,,and 3 being sideways,,1:30 and 4;30 being perfect...so my guess. the, real answer is the angle of move ,and u did not break the sma,,,but I would have to see next bar,,,but this might be a breakout.and it is trending up..

2nd,,,your rules,,, good down move,,penetrated sma,,and distrance of move,,,I would guess you probally would not take?also fast bounce,the last 3 or 4 candles are not trending...

Love the tests,great way to learn..

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worldwary View Post
As discussed above, during a trend, the 12SMA on the base tick chart tends to act as support/resistance. Thus, during a trend, price will tend to bounce off the 12SMA rather than slice through it.

I've attached some charts below to show some examples of trending versus choppy behavior.

Took the chart from your example.

At the left side of the chart wouldn't the two times the candles are touching the SMA (and respecting it) let you assume a strong trend is established?

Attached Thumbnails
Tick chart orientation-tick-orientation.jpg  
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uexkuell View Post
Took the chart from your example.

At the left side of the chart wouldn't the two times the candles are touching the SMA (and respecting it) let you assume a strong trend is established?

Yes, this is correct. That's a good example of a trend move.

I'll talk more later in the thread about some specific methods I use to trade these moves. Generally, if I'm looking at this chart alone and not trading based on some longer-term trend premise, I'm primarily looking for small moves, 15-20 ticks maybe, getting in and out as price pushes along in its trend. This generally means trying to enter at or below the SMA during an uptrend.

In this case, the next entry opportunity would have come when the SMA was tested a few bars later around 12265. Price pierced through the SMA for several ticks before reversing, resuming the trend, and making a new swing high. This one probably would have been a successful trade, although that dip below the SMA might have threatened to take out a stop depending on exactly where you got in and how tight a stop you were using. If you gave the trade enough room by keeping the stop below the prior swing low (and if you exited at or beyond the prior swing high), this one would have worked out okay.

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Thanks all who responded to the pop quiz. Most of the answers were in line with my thinking.

Here's how I would analyze the two situations:

Chart #1: I would not expect price to bounce off the SMA in this case. Remember that the general rule is to look at how price reacted to the SMA in the recent past and assume that this will continue until proven otherwise. On each of the previous few touches of the SMA on this chart, price pierced right through to the other side without bouncing. I regard this as choppy behavior, and so I assume we're still in chop mode the next time the SMA is tested at the bar I based the question on. Chop mode means that the SMA will not act as support/resistance, so therefore I would not assume a bounce here.

It might be tempting to go long here since price has been moving up for several bars and the SMA is sloping upward, which could be seen as indicative of an uptrend. In my experience, however, that trade would be a mistake since you do not have sufficient evidence yet that price is ready to break out of its consolidation range and begin trending again.

Chart #2: I would expect price to bounce off the SMA and head lower in this case. The last couple of times the SMA was tested, it held as resistance (more or less -- one of the touches was "sloppy" and pierced through for several ticks before heading to a lower low, the other was clean). That's enough evidence for me to treat this as a downtrend and thus expect resistance the next time the SMA is tested.

I'll post updated charts later today once I get logged into my other computer.

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"If you must forecast, forecast often."

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