- Sequential®
Analysis main page -
Sequential®
Analysis
An indicator
designed to identify market exhaustion using price
patterns. It can help to anticipate trend reversals.
Overview
- Developed and trade
marked by Tom DeMark, this indicator helps identify
market exhaustion (based on the premise that price
reversals are the result of market exhaustion).
Interpretation
Sequential
Analysis involves a three step process of counting
the daily bars on a bar chart:
Set Up:
- Buy set up:
count nine consecutive daily price closes which
are lower than the close four days earlier.
- Sell set up:
count nine consecutive daily price closes which
are higher than the close four days earlier.
Requisite filter
(Intersection):
This step is designed
to filter-out false expectations of a reversal when
the trend is strong.
- To confirm a buy set
up the highs of day 8 or 9 must intersect the
lows of three or four days previous.
- To confirm a sell
set up the lows of day 8 or 9 must intersect the
highs of three or four days previous.
- A buy set up is 13
closes lower than or equal to the close 2 periods
earlier (unlikely that these will be consecutive)
- A sell set up is 13
closes higher than or equal to the close 2 periods
earlier (unlikely to be consecutive).
Signals
Only after
the entire three-step process has unfolded, would
you enter the market.
|
