DeMark acknowledges that in order for the trendline to be determined accurately and unambiguously, it must be based strictly on two points. DeMark also notes that contrary to usual, the trend line follows draw from right to left, because “recent price action is more importan than the past movement. "
Moving Averages
The problem is that if in markets with a pronounced trend moving averages work well, in fluctuating markets where there is no pronounced trend, moving averages give a lot of false signals.
Trading Ranges
In general, markets spend most of their time in trading ranges. However, it is unfortunately very difficult to conduct profitable trading in them. In fact, most technical traders will likely find that the best strategy they can apply to trading ranges is to minimize their involvement in such markets, which is easier said than done.
Trading Ranges Breakthrough
Breakout outside the trading range suggests the upcoming price movement in the direction of the breakout. The significance and reliability of a breakdown is often increased by the following factors:
Length of the trading range. The more the length of the trading range, the potentially more the scale of the future breakdown is more significant. This thesis illlustrated by the example of the weekly and daily graphs
Narrowness of the range. Breakouts from narrow ranges, as a rule, provide especially reliable signals to trade. Moreover, such trading can be extremely attractive because reasonable protective stops imply relatively low monetary risk.
Breakout confirmation. It is quite common for prices to break out of the trading range by only a small amount or only for a few days, and then return back into the range. One of the reasons for this is that market participants, wanting to insure against strong price movements after the breakdown of the trading range, place protective stop orders in an area that is not far beyond the trading range. As a consequence, a slight outward price movement can sometimes trigger a significant number of protective orders to be executed. Once this initial influx of orders is satisfied, the breakout dries up unless there are strong fundamentals and supportive buys (or strong sells if the lower boundary is broken) underneath to reinforce the trend.
Support and Resistance
Trading ranges
After prices break out of the trading range, the level that previously served as resistance becomes support, and vice versa.
Previous important MAX and MIN
A breakout of the previous high can be considered as a buy signal, and a breakdown of the previous low is a signal to sale. However, just as in the case of the breakdown of the boundaries of trading ranges, in order to use the breakout of highs and lows as a as signals to trade, they must meet certain minimum requirements (by the breakdown depth in price terms or by the time duration).
Graphic Models
Daily Models
Gaps
Common Gap
Not very important
Breakaway Gap
The price breaks away fom a trading range
A breakaway gap that holds for a few days is one of the most important & significant graphic signals
Runaway Gap
strong market
accelerating trend
Exhaustion gap
After this there's a turnaround of the trend
Not very significant because it is easy to misunderstnad
Spikes
Spike above
Daily Max that is not higher than before or after
CLOSE is close to bottom value
Is significant only after rising prices
a culmination of demand
Amplifying factors
Big difference between spike up and MAX before & after
CLOSE near daily bottom
Serious rising of price before Spike Up
Reversal Days
New MAX, then CLOSE_1 < CLOSE_0
Thrust Days
CLOSE_1 > MAX_0
Run Days
1) MAX > MAX in N days in past
2) MIN < MIN in N days in future
Wide-Ranging Days
1) VOL > AVG VOL in N days
2) Wide-Ranging day w/ LOW CLOSE after bull run is a downward signal
Continuation Patterns
Triangles
Symmetrical -- continuations
Ascending/descending = направление пробоя важнее типа
Flags and Pennants
Short consolidations inside trends
Add Pictures
Pauses in a strong trend
Continues with the same direction as before
Open positions for Flags and Pennants before the close of this model
A bullish signal if it is near the upper bound of the zone
Reversal Models
V-peak and V-dip
Must be connected to another signal -- a spike, for example
Double-V
A sign of reversal if it is after a run
Head & Shoulders
Пробитие по шее, как и в V-peak and V-dip
Triangles
Wedge
Ascending wedge is a sign of a slowing trend
SELL when PRICE is less than the lower bound of the wedge