Thursday 20 December 2007

Using the TRIN Indicator to Signal Emini Turning Points

A sequence of 3 charts today, showing how the TRIN (Trading Index or Arms Index) can be used to highlight Emini turning points.

The first chart below shows daily Emini bars with the Better TRIN indicator below. There's nothing fancy about this simple indicator - it makes TRIN data easier to understand in 2 ways:

Positive values indicate buying and negative values indicate selling
The values range from roughly -100 to +100 and are linear, not a ratio like the raw TRIN data

If you're interested in how this is done, it's all explained in the Better TRIN indicator article here.

TRIN Day 1 Image

Emini: TRIN Bullish Divergence Signal

Last Friday we had the first warning of a possible bullish divergence setting up. The Better TRIN indicator identifies possible divergence patterns with a red dot for bullish and white dot for bearish. The Emini continues to make lower lows on Monday and Tuesday but the TRIN is making higher lows.

TRIN Day 2 Image

Emini: More TRIN Bullish Divergence Signals

On Tuesday the Emini closes the 1,443 to 1,451 gap mentioned in the last post and rallies hard in the afternoon. The Better TRIN value is positive, indicating buying, but the Emini closes below the open. This is another bullish divergence signal and a red dot is printed on the Emini bars. The same thing happened again on Wednesday, which was also a doji candlestick pattern day indicating market indecision.

TRIN Day 3 Image

Emini: TRIN Long Entry Signal

Also on Tuesday, the Better TRIN Oscillator turns up and the TRIN system signals to go long at the end of the day with a Type D pattern. The trade was entered in after-hours at 1,466 and the Emini closed at 1,498 on Friday - an open profit of 32 points or $1,600 per contract. Let's see how this trade eventually works out. Good luck with your trading.