John and Michael... capitalizing on reversals like that which occured with GEHL on 9/18 requires experience, having the right tools, some luck and, perhaps most important, the confidence and/or "guts" to make the call. I posted a weekly and 75 Vol Bars chart of GEHL on 9/18, complete with comments, as a "textbook" example of BNS at its best. Let's review that chart again before proceeding.
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Some facts... GEHL had been in a strong uptrend on both daily and weekly charts for several months. However, in the last month, GEHL began moving sideways with slight downward bias and, according to GET, had completed an Alternate Count Wave3 (possibly beginning a Wave4 pullback). I noted that GEHL had strong Price Cluster support at $19.86 and Cardinal Square support at $19.59 and that GET was projecting a Wave4 target of $20.51 and an extended Wave4 target of $18.37 (actual Low was $19.75).
Clearly, it was time to start looking for signs of a reversal so directed my attention to a "shorter" time frame... first 60-minutes, then 20-minutes and finally 5-minutes while at the same time closely monitoring TradeStation's Vol Bars charts for actual trade execution. BNS seems to work exceedingly well with Vol Bars charts in identifying key reversals.
Here's what I saw using TradeStation's 75 and 100 Vol Bars Chart as the reversal point approached (use chart below to follow events). Price was in an accelerating short-term downtrend confirmed by Bressert's Trend and RedLine indicators, MACD, Chaikin's Oscillator, Bollinger Bands and CCI. Additionally, Selling Pressure was increasing while Buying Pressure was decreasing (DMI indicator), all strong indications that things were rapidly deteriorating with GEHL. Then suddenly, at 3:50pm on 9/17 (75 Vol Bars Chart), CCI reversed from a deeply oversold area after reaching a value of -248.57. This was my "wake-up" call. However, it would be some time before MACD would confirm. The only other positive at this point was that Bressert's RedLine Indicator had just reached oversold levels.
At this point, I'm looking for other indicators to begin turning positive. First was decreasing volume followed by "doji" candlestick at 10:22am on 9/18. Also got my first look at AvgPrice1 and StdDev (both at oversold levels... good) and the AvgPrice Overlay (appeared all indicators were in same general (bullish) area.
Things were really getting exciting... enter computer generated order but hold off executing for the moment.
10:26am... Selling Pressure shows first decline and StdDev moving up (both positives). However, the doji was followed by a bearish candle but did have a "higher" low. The doji was confirmed by a "bullish" engulfing pattern on the 100 Vol Bars chart albeit a bit later.
10:33am...Selling Pressure continues to decline and we see first indication that "buyers" are returning (green moving up on DMI indicator). Also note that the ADX is beginning to roll over indicating weakness in previous trend. Also had another doji further confirmation of possible end of trend). MACD had also changed its downward bias and was starting up. Really getting nervous now... want to push that "enter" key to place the order.
10:56am... push the "enter" key and place the buy order. Everything is now green. MACD has just "confirmed" CCI's Buy Alert, strong "bullish" candle on increasing volume, AvgPrice1 and Chaikin turned positive and Selling Pressure falls below ADX while Buying Pressure accelerating , further confirmation downtrend rapidly coming to an end.
BTW, one could have entered this trade between $20.125 Low and $20.75 High by 10:56am on 9/18. Here's two charts to help understand my comments. One is a 100 Vol Bars Chart (10k min shares) and the other a 75 Vol Bars Chart.
mindspring.com
Hope this helps in understanding how I use my tools for maximum benefit.
Good trading,
Bill |
