The Chart Pattern Trader

Ron Walker Has Had Over 200 FollowersHas Been a Top Public ChartList for Over 1 MonthPrevious "Hall of Fame" ChartList Author Rank: 8 Followers: 269 Votes: 328 Years Member: 10 Last Update: 27 July 2016, 2:41 Categories: Trend Analysis
Chart Patterns
Swing Trading

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7/8 Post Brexit Rally Likely a Bull Trap to Complete a Broadenng Formation. It Looks Like Bull Trap - A Breakout Above the Trendline On Low Volume.


7/6 The ideal time to enter a long term short positon is when the market is transitioning for a stage 3 top into a stage 4 deciline. This gets you short a the very beginning of the bear market, which gives the greatest potential for the largest return. Which is what we've seen set up over the last year or so. Prices have not been able to make new highs since May of 2015. My cycle counts all pointed to the May high as a top and so did the S&P 500 monthly chart. I continue to believe that the market has topped and in a large stage 3 topping process.

Once the stage 3 top has conclude, prices will move into a new long-term down trend in a bear market. I continue to believe that we will see drop to about 1400 or 1500 by the end of 2016 on SPX. Then more lows in 2017 and 2018. I think the bear market will last to at least 2018. I also believe that the S&P 500 will take out the 2009 lows at 666 with a target of 550. My indicators suggest a great reset to long term trendlines going back to the 1929 crash lows.

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The Extreme Point Rule

The directional movement indicator is a powerful tool for spotting shifts in market momentum. A buy signal is given when the positive directional indicator ( DI) crosses above the negative directional indicator (-DI), and conversely, when negative directional indicator crosses above the positive directional indicator a sell signal is generated. When the market is trendless the DI lines crisscross back and forth, which can generate false signals.

Solely following the DI and -DI cross signals by themselves can lead to whipsaws and overtrading. Steven Achelis offers a solution to this problem using the 'extreme point rule' in his marvelous book, Technical Analysis From A To Z. Achelis points to the creator of the directional movement system J. Welles Wilder, and his simple trading rule, to help prevent whipsaws and reduce the number of signals that a trader acts upon.


The extreme point rule requires a trader to mark the extreme price point the day in which the DI and -DI cross. According to Achelis, the extreme point is highest of point of a session when DI crosses above -DI and is the lowest point of the session when -DI crosses above DI. Buy or sell signals are triggered when prices move beyond the extreme point.

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