How to find short-term downside reversals

These are stocks which are in a strong downtrend, as determined by a proprietary
trend filter and whose current bar has its lows above the 4-day
moving average.
Historically, these stock on average have had a larger than normal short-term
downside reversals. In order for us to be a buyer of a “Trading Window”, we must
have a 10-period ADX reading of 30 or higher and a +DI reading above the -DI
reading. Or we must have a 14-period +DI of 30 or higher (with no ADX reading
required). In order for us to have a sell signal, the 10-period ADX must be 30
or higher and the -DI must be greater than the +DI. Or we must have a 14-period
-DI reading of above 30 (with no ADX reading required). Single Windows are the
most common type of Windows. They are simply a single bar which has its low
trading above the 4-period MA or its high of the day below the 4-period MA. You
will enter tomorrow if the market trades above today’s high (for buys) or below
today’s low (for sells).

Whirlpool
(
WHR |
Quote |
Chart |
News |
PowerRating)

1. Current bar has its lows above the 4-day MA.

2. 10-period ADX must be 30 or higher.

3. The -DI must be greater than the +DI.

In the days to come we’ll show you more of these examples on both the long and
short side. I’ve enjoyed showing you this Chart of the Day, please feel free to
email me at editor@tradingmarkets.com
if you have any questions or comments.

Ashton Dorkins