Period extensions

         Use the period extensions question to determine the significance of intra-day range extensions.

Example:

         The market extends more than 4 ticks beyond the day’s first half hour range in the second half hour.

Questions from Traders:

         Does a breakout from the first half hour’s trading hold? Should I go with the breakout or fade it?

Setting Up the Search:

Click on the parts of the box below where appears for explanations of features.

Answers:

         This is a great opportunity to use the Refine button in the Search Results window to establish key price levels for the day. First we look for all those days when the market extends more than 4 ticks beyond the first half hour’s trading in the second half hour. Our search yielded 36 days (or about once per month) over a three-year time period. We then use the Refine button to see how many days out of the 36 the market closed higher than the opening. In 27 out of 36 days, when the market made an early 4 tick extension, it closed higher than where it had opened. Our traders can look to buy price weakness during the day since a high percentage of the time (75%) the market maintains higher levels on the day.

Profile Analyzer Hint: Examine the low percentage trades for patterns and key price levels.

         In this case a look at the low percentage trades is very revealing. In almost all cases where the market closes lower than the opening, a break below the opening price leads to the market building value for the day below the opening price. Thus, traders can use the opening price as a key stop and reversal point on days when the market has an early 4 tick extension.

Profile Analyzer Hint: Use the period range extension question to determine key price levels during the day. (For example, test for 4 tick extensions from <G> to <H> period. Then, refine the search to see how often the market closes above the longest TPO price or any other key price level.)