Wednesday 12 November 2008

High Volume Churn Pattern at Turning Points

I was out of town last week and without an Internet connection. As a result I was unable to warn subscribers about an upcoming cyclical turning point when the Emini reached 1,000. The Emini has subsequently dropped 150 points and is now close to the important support level of 835.

Emini Hilbert Sine Wave Image

Cyclical Turning Point using Hilbert Sine Wave (Emini daily)

The turning point is shown on the Emini daily chart above, labeled PB for Pull Back. As many of you know I use the Hilbert Sine Wave to anticipate cyclical turning points. No back-adjustments are ever made to try and finesse turning point signals.

The Pull Back pattern occurs after a support (or resistance) level is broken and a trend develops. If the next cyclical turning point is below this breakdown level (vice versa if an uptrend) then PB text is plotted on the chart to indicate the possible end to the Pull Back and possible resumption of the trend - in this case the down trend.

Note - we're approaching another cyclical turning point and possible end to this down trend move. But we'll need more confirmation before adopting a Long bias.

Emini High Volume Churn Image

High Volume Churn Pattern (Emini daily)

With price-based cyclical turning points I'm always looking for volume confirmation. In this case, as the Pull Back turning point approached we had High Volume Churn (blue paint bars). This indicates profit taking and sellers entering the market, preventing price from advancing, and increasing the probability of a valid turning point.

As usual I'm using my Better Volume indicator to show Volume Patterns. If you're interested, you can download it for free here.

Emini Swing Trading Oscillators Image

Swing Trading Oscillators (Emini daily)

Last chart is of my swing trading oscillators - all approaching over-sold but yet to turn up. Over the next few days I'll be watching for possible Support between 800 and 835, High Volume Churn and the Better TRIN Oscillator to turn up. Good luck with your Emini trading.