For Daytraders Only: the TICKQ

[DbPhoenix 42]

Trading by price can sometimes seem like trying to negotiate Manhattan with a map drawn in 1625. Any confirmation, weak as it may be, any landmark would be helpful in determining whether or not one was making the correct choices: turn here? there? move forward? go back?

 

The trader who trades via daily charts has a number of aids at his disposal to help him make his choices: a variety of charts of indexes, sectors, groups, sister stocks and "indicator" stocks, measures of trading activity and so on.

 

The intraday trader, however, has very little to aid him in his trading decisions that does not involve settings, calculations, or massaging of some sort, none of which are of interest to the "naked" trader. One aid, however, which requries nothing of the trader other than to plot it is the TICK (for NYSE stocks) or TICKQ (for Nasdaq stocks).

 

 

The TICK(Q) is a simple, straightforward measure of market breadth (again, either the NYSE or Nasdaq), the difference between the number of stocks trading on an uptick and the number of stocks trading on a downtick throughout the day. Therefore, if a greater number of stocks are rising, so does the TICK(Q). If a greater number of stocks are falling, so does the TICK(Q).

 

This feature of the market landscape, then, tells the trader whether or not whatever it is that he's trading is in synch with the broader market. In the application to be described here (and referred to as well in some of the Dailies entries), the TICKQ is used to spot divergences between it and the NQ at predetermined support and resistance to confirm (within the context of unavoidable uncertainty) potential reversals and continuations. Or, to put it more simply, if your work has led you to expect a reversal at support level X and the TICKQ shows absolutely no inclination whatsoever toward reversal when the time comes, you may be well-advised to hold back from hitting that Transmit button. On the other hand, if the TICKQ reverses ahead of that test of support, you may be that much more confident that what you thought would be supoort really will be support and transmit that entry.

 

Note: the fact that these charts start on what appears to be the same date as the charts in the Dailies section is pure coincidence (if you look closely, you'll see that they are in fact a year apart). These TICKQ charts are two months old because I started this project two months ago and got sidetracked and don't want to start over. However, almost any chart from any day will yield these same divergences and confirmations as long as support and resistance are being tested (sometimes price just sits there, thinking about what it's going to have for lunch).

 

In order to alleviate clutter, I've taken a pass on flagging every congestion, every swing point, every possible source of support or resistance. Instead I've focused solely on those features which are most likely to directly influence the trading decisions I will have to make that day, in this case the 11th.

 

 

After the open, price and the TICKQ (plotted here as a line rather than as "dots") glide southward together, not stopping dead on 1110 (it happens), but extending the test into the previous trading range's territory by almost four points. The TICKQ, however, rebounds at 09:36:30, more than a minute before price does so, and while this is not the best example of a tradeable TICKQ divergence (TD) since there's no retest of 1106 (+/-), the fact that this is all taking place at or about predetermined support may increase the probability of a successful reversal enough to provide you with the confidence to take the trade.

 

http://www.traderslaboratory.com/forums/attachments/255/28560d1336537576-daytraders-only-tickq-chart1a.gif' alt='28560d1336537576-daytraders-only-tickq-chart1a.gif'>

 

Price then rises almost without pause all the way to 1118, off which it bounces as if from a rubber wall. The TICKQ also turns weak here, though whatever divergence there may be is squidgy since there has not yet been a retest of 1118 (I'm tempted to call these "single dips" as if there isn't enough jargon floating around already). However, as with the bounce off support a few minutes earlier, the fact that this is predetermined resistance must be a factor in the trading decision (or management decision, if one is already in a trade). If one is trading multiple contracts, he can cash in one or more of them. If he's trading only one, he can exit and look for a subsequent re-entry. Or he can hold on for a bit to see if this is nothing more than a pause before a continuation. When price tests 1118 again at 09:43, the TICKQ also makes a lower high, this time a clear divergence. If one has not already exited, this is a perfectly legitimate and justifiable place to do so (particularly if trading only one contract).

 

 

Whether one has exited or not, he'll see when price drops to 1116 that the TICKQ makes a higher low. Price then rallies again to 1118. If the trader is short, he'd be wise to cover. If he exited his long and didn't short, now's the time to look for a re-entry. If he's still holding the original long, he can lean back and feel satisfied with himself.

 

But to address and track every possible management option from here on out would result in a very long post (and, for me, an organizational nightmare). And the point of this, after all, is primarily to explore TDs at support and resistance. What the individual then chooses to do about them – even if he chooses to do nothing – is entirely up to him according to his style, his goals, his strategy, his risk tolerance, and so on.

 

So, keeping our eye on the TD ball, we see that price spurts away from this level once (first arrow), then again (second arrow), then sails all the way to 1128.

 

 

Now the resistance here was predetermined and expected (see the macro chart at the beginning of this post), but is this all there is? Might price move all the way to the more important range high at 1135? It's only six points away, but when price makes a higher high, there is a TD (the double arrow). This resistance is more important than the one at 1118, but it's not the brass ring, either. By now, however, there are a couple more things to look at that may help one hold onto his winner (or at least discourage him from shorting) if he is determined to be patient without being irrationally stubborn.

 

First, you clearly are in an uptrend by now and can therefore draw a guiding trendline. Until that trendline is broken, there's no compelling reason to exit (though given the TD, one should at least know where the exit is).

 

 

But, second, there is also the matter of the last swing low at 1125. Until that's broken, your uptrend is intact. And when 1125 is tested at 09:53, 1125 holds, and on the trip back to 1130, the TICKQ joins in enthusiastically.

 

Several minutes later, however, at 10:01, there is another TD, and one has to ask himself whether the 5 extra points he might get if price moves all the way to the upper limit of the range is worth the 7 points lost if he moves his stop to just under 25 and watches it get tripped. There is also the amount of time it will take for all of this to play out, which could be a few minutes or much longer.

 

 

But, again, the purpose here is to describe the landscape, not to detail how to go about finding one's way through it. If one holds on, he will see that, when price drops below 1125, the TICKQ makes a higher low. When price tests 1125 again five minutes later, the TICKQ drops like a hot knife through butter. BUT price holds at 1125 and doesn't go along for the ride down, a subtle divergence but one worth of attention nonetheless (also called The Dog That Didn't Bark, when what you expect to happen, doesn't). All of these events in combination suggest that the line of lest resistance is up, not down, and after one more test of 1130 and a half-hearted test of 1125, price takes off for the eventual resistance at 1136.

 

 

Now at last we get to our final level of predetermined resistance at 1136. There is a slight divergence at 10:29:30 and one can exit there or place a sell stop just below 1133. If the latter, there is a much clearer TD at 1032 and again at 10:32:30. To hang on after this would be more than a bit hopeful.

 

 

But what about a short? You're at serious resistance, you've got your TD, and you've done quite well so far. And it's only 10:30. And the target, according to AMT, is at least the other side of the is range, or 1120, sixteen points away.

 

 

Once price gets there, however, at 13:00, there's no TD. What to do? First remember that the TICKQ is not 100%. If it were, we'd all be rich. Nor is it a "signal" as indicators are (or try to be). It is a measure of market breadth, nothing more. As such, it can serve as a heads up if it diverges from or confirms movements at predetermined support and resistance, the operative word being "can". Sometimes it is mum, and one must use what else he knows in order to make a trading decision.

 

In this particular case, you've got price at demonstrated support. You also find yourself at the midway (50%) level in the move from the previous day's last swing low to the just-completed swing high. You've also got quite a lot of the house's money in your account and nothing else to do for the rest of the day since it's raining and there's nothing on TV.

 

So you pat the TICKQ on the head and let it rest for a while and you either take the trade or you don't. As you then watch price take off with or without you, you watch and wait to see what happens if and when it gets to the first level of resistance, our old friend 1127 (or 26 or 28; we're not talking statistical precision here). And forty minutes later, it reaches resistance and presents you with an unmistakeable TD.

 

 

Now we embark on a return trip to support, dropping below the last swing low by one point at 14:19, and, again, we have an unmistakeable TD.

 

 

 

Taking the long, we then watch to see how far price gets to the upside before hitting some level of resistance and perhaps creating another TD. And demonstrating that you just never know, price gets all the way back to the high of the day before diverging from the TICKQ at 15:43.

 

 

 

A strong suggestion to exit, certainly. A "signal" to short? 15m before the close? I'll leave that one up to you (though price does drop back to 1123 . . . ).

 

Price waffles around in this area for several hours, probes lower a few times, then opens the next morning at about this level. It tests resistance at the 1127 level, diverges with the TICKQ by 09:38, then drops to test the 1116 level, diverging with the TICKQ by 09:47 (by 10:22, it's back to resistance at 1136).

[imahippi 10]

I love the way you write about the market DB. Thank you for this post it was very helpful for me.

I sure have learnt a lot from Theresa Lo as well

thanks for the guidance

Jay

[DbPhoenix 42]

I love the way you write about the market DB. Thank you for this post it was very helpful for me.

I sure have learnt a lot from Theresa Lo as well

thanks for the guidance

Jay

 

You betcha. I hope you can run with it.

[Alex5000 10]

I have been following you writing.........

 

All i can say: Thank you for the gift of knowledge and sharing

 

Alex

[DbPhoenix 42]

I have been following you writing.........

 

All i can say: Thank you for the gift of knowledge and sharing

 

Alex

 

You're welcome. I hope it will be helpful.

[Alex5000 10]

I'm trying to apply to the Australia Futures Market SPI200 Futures contract.

 

I noticed you are using a 5 and 15 second charts in conjunction with tick

 

Any reason why those two time frames?

 

Alex

[DbPhoenix 42]

I'm trying to apply to the Australia Futures Market SPI200 Futures contract.

 

I noticed you are using a 5 and 15 second charts in conjunction with tick

 

Any reason why those two time frames?

 

Alex

 

Actually I'm using only two now: a 1t to follow the price action and a 30s for context. But there's nothing "best" about this. Experiment and find what's most useful to you.

[SorryForMyEnglish 10]

Hi All,

I don't see charts in attachement... normal please ?

thank you.

[phoenix01 10]

Hi All,

I don't see charts in attachement... normal please ?

thank you.

 

I cannot see the chart either. Which i click on them it says that the thread has been removed.

[SorryForMyEnglish 10]

I cannot see the chart either. Which i click on them it says that the thread has been removed.

thank you phoenix, same here.

maybe a moderator will help us...

[MadMarketScientist 11]

We are working on resolving the problem - thanks for the heads up

 

MMS

[SunTrader 10]

Divergences like OB/OS levels work fine, except when they don't.

 

How do you determine when they will and will not?

[Lcmeyer 10]

I like what I read! On which platform can I see the Tick?

[DbPhoenix 42]

Hi All,

I don't see charts in attachement... normal please ?

thank you.

 

My blog was transformed into a series of articles last week. Unfortunately, quite a few charts appear to have been lost, and since my blog no longer exists, what you see is what you get, and since I can't edit these articles (as they're no longer in my blog), I can't fix them.

 

Fortunately, I saved all of this in pdf form due to a fundamental mistrust of the ether. The section on the TICKQ starts on page 20.

 

Knock yourself out

24Trading Nakedr.pdf