To Trend, or Not To Trend…

//To Trend, or Not To Trend…

Hawk’s Scan Sentry Report January 28, 2013

Welcome back to “Hawk’s Scan Sentry Report”. I recently found myself chuckling as many pundits, some with expensive subscriptions, are finally coming around to re-confirming the bullish trend that has been rallying since early December 2012. “Really”, I think to myself, “you are just now confirming this?”. Identifying a trend is one of the most important parts of trading successfully, and the earlier you can identify a trend the longer you can trade with it instead of against it. In case any of those writers are reading this, I’ll share a secret little trend identifier with you.  On almost every chart that I demonstrate you will find mention of the Triple Trender. The Triple Trender is a good way of looking at the orientation of the trend from a micro, a medium, and a macro perspective at the same time.  It is based on the award-winning Arps Trender which is a volatility based calculation designed to plot a stair-step line that will stay just far enough away from the likely closes (or highs/lows if you prefer) of the price bars to enable you to ride the trend as far as it can carry you. When the close finally crosses the Trender it will “flip” to the other side of the price identifying the trend in the opposite direction. The Trender has a sensitivity setting which allows you to adjust how much the price must move against the existing trend before the trend is redefined in the opposite direction. This makes the Trender a premium stop loss indicator which can be conformed to varying risk tolerances; but it also serves well to identify the Trend orientation from near-term to longer-term perspectives. Unlike moving average proximities or other trend identifying methods, the Trender is not lagging by a lookback length, so it makes it easier to get into trending trades much earlier.

(an ETF with the Arps Trender set at sensitivity 3.5)

Furthermore, if you run the Trender three times simultaneously using three different sensitivity settings you can then identify the Long-term trend, the Medium-term trend, and the Short-term Trend with one quick glance. This is the concept behind the Triple Trender which you can see on the chart displayed below.

(same ETF with the Triple Trender applied)

When trend trading, you may want to look for the first opportunity when all three Trenders are on the same side of the price before entering a trade. At best, you then look for a pullback into the short-term Trender to get a better entry price. This initial pullback happens about 50% of the time. Depending on your objectives and risk tolerance you can then use the long term Trender to keep you in the trade until you get a trend exhaustion signal, or you can exit at the first break of the short-term Trender for a quick profit.  We can discuss trend exhaustion signals at another time.

Let’s take a look at charts for some of the American index futures to see the current state of some of these markets.

Index Futures:

S&P  Futures

(Everything is bullish about this chart, so beware. Even the Radar1 Fear/Greed indicator is greater than it was at the previous high in September  which means that we can’t get a bearish pivot divergence in that indicator until after the price eventually pulls back and then retests it’s highest high. If the Radar2 Price Leader rolls over a little bit more we will see a bearish divergence in that oscillator which could signal a pullback.  Therefore the best trade in this market is to wait for a pullback into the Triple Trender before entering long.  ) 

NASDAQ Futures

(This chart is oddly out of sync with the rest of the American markets. While the other indexes are rallying, this is moving sideways. The trend is bullish as identified by the Radar3 Trend Strength and Triple Trender indicators; but if the Radar1 Fear/Greed rolls over we will be looking at a significant bearish ‘Pivot Divergence’ from the December highs.) 

A couple of weeks a go I pointed out a nice long trade that was setting up in the USDCAD, as well as one in Crude Oil futures contract which are both up now nicely. Last week I also called the downward move in gold and am still looking to ride that short on down to support as described in the chart below. This week has some exciting trades setting up as well which I will describe in the subsequent charts. On the examples below I explain my analysis for some of the most commonly traded symbols using some of the most highly regarded technical indicators available. These tools are used by both institutional and private traders across the globe and are built into many of today’s most popular trading platforms. However, if you are not familiar with these indicators please follow this link to a legend describing these tools.

Other Charts and Analysis

Equities Setups:

(Buy) MWV- MeadWestvaco Corp.

(A Here is a pullback 23 buying opportunity accompanied by a bullish ‘Pullback Divergence’ in both Radar1Fear/Greed  and Radar2 Price Leader. This move occurs as the NewYear’s gap is filled. We will, of course, meet resistance at $33.24, but I think that this could continue beyond that.  )

Commodities:

GOLD

(Last week we anticipated the bearish Pullback 23 signal which has already netted 1.7%.  All of our trend indicators are still bearish so we are very likely to see a continuation down to at least $1637.80 where I expect to find major support. )

CRUDE OIL

(Last week I pointed out the Bull Flag breakout which has a target at $100.16. On Tuesday we got a Trend Exhaustion 3 signal which gave us a warning that this rally may be stalling out. Given the bearish divergence in the Radar2 Price Leader, I would not be surprised to see a pullback into the short-term Trender this week. )

Forex:

EURAUD

(Here I anticipate a move upward in the near term as far as resistance at 1.30295 and eventually higher. Radar3 Trend Strength and Triple Trender both identify a bullish trend and we just got a Pullback 23 buy opportunity. The price just broke above the down trendline with increasing buying identified in the Radar1 Fear/Greed. The recent ‘Pullback Divergence’ in Radar2 also supports a bullish inclination for this currency pair.  )

May the trend be with you,

Hawk

Jan Arps’ Traders’ Toolbox is not an investment advisory service nor a registered investment advisor or broker-dealer and does not purport to tell or suggest which securities customers should buy or sell for themselves. Examples presented on this site are for educational purposes only.  It should not be assumed that the methods, techniques, or indicators presented in these examples will be profitable or that they will not result in losses. There is a high degree of risk in trading.  Readers using this information are solely responsible for their actions and trade at their own risk. Readers should always check with their licensed financial advisor .

2018-01-08T07:06:03+00:00 January 28th, 2013|Hawk's Picks|