1
Seven Set-ups
That
SYMMETRY, THREES &
SEVENS
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Jan 2000 through October 2002
A) All-Time highB) 3-Drives to a low at 50% of high (October 02 was 769)
The low played out in Three’s as well: A test-of-a-test into March ’03!
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S&P 500 Weekly
August 1999 through December 2000
A) Weekly 1-2-3 Snapback Swing-to-a-Test (1-2-3or 1-2-3-4- Sometimes there are four Swings instead of three).
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January 95 through February 07 A) 1-2-3 Swing to 50% of high
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From the October 02 low (A) the S&P was up 390
points in 15 months prior to a 1st Pullback of 6 months
to 1060 S&P in August 2004 (B).
From there a measured move up of another 390 points equates to 1450 in 30 months or Feb 2007 (C).
(D) 7th Month up 7 years from high (E) Test-of-a-Test
Pattern 3 Swings at September 2000 Pivot 3 Swings at March 2003 Pivot
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06 through 07
Note how momentum identifies Kick-Off Move
A) 1-2-3 Weekly Swing Pullback
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August 06 through February 07
Note- The Range of the low before breakout is 146-147 and the 50% Rule is 220/221.
A) Gap up over 50 DMA identifies Kick-off Move B) Gap down below 50 DMA
C) 1st Sell / Train Tracks
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Jan 07 through February 07
A) 50 DMA is lost after gap coinciding with Rule of 4 Sell Signal
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A) Thrust
B) 1st Weekly Pullback
C) Train Tracks Top
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August 06 through March 07
A) The Key to a 1-2-3 Swing-to-a-Test Sell Pattern is a prior Overbalance
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From November 06 through
March 5, 2007
A) 1-2-3 Runaway Pullback =
Mid-point of move - 1st Pullbacks
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August 06 through March 07
A) 1-2-3 Swing Pullback to 50 DMAB) Spirit of a 1-2-3 Pullback to 50 DMA is Handle of Cup & Handle Pattern
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12-14-06 thru 2-1-06
A) In the Spirit of a 1-2-3 Pullback coincides with a Handle of a Cup & Handle Pattern and a
Necktie of 20/50 DMA’s B) Note 3-Bar Surge
27
Note 7th Bar Pivot on weekly on week ending 2-9-07
A) Accelerated Momentum on Weekly
B) Continuation of momentum subsequent week –The natural expectation is for momentum to beget momentum – always look at multiple time frames!
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August 06 through March 8,
2007
Note momentum gap on September 12th /
Angular Rule of 4 Breakout o January 10th after
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A) Note 3-Week Surge after Outside up week
B) Note the 7th week Pivot week ending 1-12-07
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December 18 through
February 7, 2007
Snapshot of high from Prior chart A) Soup/Test Failure on 12-29 B) N/R7 on January 16, 2007
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A) 1-2-3 Swing-to-a-Test of 50 DMA B) 7-Day Pivot
C) 7-Day Pivot on 2-22 (not shown on this chart)
August 06 through March 5, 2007
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A) Gap on 7th Day
B) 1-2-3 Swing-to-a-Test Gap
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A) Note the 1-2-3 Swing Pullback to 50 Week Moving Average on week ending July 28, 2006
B) Weekly Rule of 4 Breakout
Accelerated Momentum suggests substantial follow-through
October 06 through February 07
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A) 1-2-3 Drives to a High
B) 1-2-3 Snapback –to-a-Test
THE NATURE OF PRICE BEHAVIOR
EXPANSION/CONTRACTION
FALSE MOVES LEAD TO FAST MOVES
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A) Nesting or Necktie of 20/50 DMA
B) Gap up on 11/06 suggests kick-off move and an Expansion of price after 1 month Contraction
C) Note 1st turndown after Thrust
D) 1-2-3 Swing Pullback to 20 DMA – note gap.
Sept 06 through December 06
45
A) Contraction or Volatility
B) Breakout which “Tails Off” leading to a 10%, 10 point decline over ensuing days (C).
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December 12, 2006 Volatility Pendulum
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Train Tracks on 10-minute/ Note how the Reversal on 11/27 occurred after a “Bullish Outside Day up on 11/24”.
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A) Expansion Breakdown but note there was no follow-through for 3 days.
B) Note acceleration as CXW Recaptures 50 DMA which coincides with Rule of 4 Breakout and move
through Top of Triangle.
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Reversal after decline from $93 in December 7th Bar Pivot after Contraction
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A) Rule of 4 Breakdown but no follow-through – Follow-through is key!
B) Volatility Pendulum is triggered C) First Pullback to 20 DMA
D) 7th Bar Pivot
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A) Momentum gap on January 9th B) 1st Pullback after Thrust
C) Symmetry 43 to 38.50 = 4.50 38.50 – 4.50 = 34
Friday’s/ Trend Days are accentuated
January 9 – 12, 2007
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A) Large Range Extension through Trendline (Hang Man’s Noose) stops at 20 DMA
B) GLD explodes when break is offset
Note move back below (A) on 2-27 leads to Breakaway Gap
December 06 through March 5, 2007
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2-21-07
At 66.10 GLD offsets (A) from prior chart
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A) Angular Rule of 4 Breakdown at 50 DMA
B) N/R7 Contraction/ Note subsequent Expansion of Range and Direction
C) Failure at 200 DMA on closing basis
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VOLATILITY PENDULUM
EARNINGS REVERSALS
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A) Triangle Pendulum
B) Reverse Triangle Pendulum sets up with LROD prior day on 2/22 which is a 7th Day Pivot
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Note how earnings Reversal occurred on 3rd Drive up.
Note “Gap & Fill” Pattern (A) gave a line drive to 50 DMA (B)
1-2-07 thru current
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Bubble Oops is triggered as TNH gaps up on 3rd Large Range Extension (A) and
trades back through prior days high (B). Note how the Oops occurred from a
Parabolic Rise and a 100% plus advance. Note Bungee off 50 DMA on 2-27
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Gap up after Runaway Move sets up as stock takes out prior days high and stays red.
Note the Symmetry of 50% Rule as the set-up occurs 50% up from low at (B)
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2-26-07
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A) Reversal
B) Reversal is off-set
C) 1st Pullback after Thrust is an N/R7 – 1-2-3 Pullback Note subsequent Explosion (D)
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A, B & C) All show Reversals that are offset.
Note how momentum accelerates as the prior Tails are negated.
The Reversal at (D) is an Outside Down Gilligan – after the “Charlie’s Angels” or 3 Prior Tails.
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A) August ’97 Outside Down Month gives 1-2-3 Bar Pullback B) July ’98 Monthly Tail
C) May ‘99 D) August ‘99
E) * Large Range Outside Down Month
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FIRST TURNDOWNS
FIRST PULLBACKS
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A) Recapture of 50/200 DMA
B) 1-2-3 Runaway Pullback is 1st Pullback after Thrust
January 07 thru March 07
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Keying off Moving Averages/ * 1-2-3 Pullback on February 9th. A) Breakout
B) 1st Pullback
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January 2, 2007 through March 8, 2007
A) Bungee off the 50 DMA back up to the 20 DMA (B)
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November 06 through February 07
A) 1st Test of 50 DMA in 60 Days B) Rule of 4
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A) 1st Pullback is a 1-2-3 Pullback on 10-minute chart. B) 1st 10-minute bar below a prior 10-minute bar in
accelerated momentum is a place to take profits.
2-21-07
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A) Many times Breakouts Snapback quickly and Stutter Step before following-through
Note how the seemingly bearish Outside Down
day at (A) is offset by a gap suggesting continuation. B) 1st Pullback after follow-through is in the spirit of a
1-2-3 Pullback
97
A) 1-2-3 Pullback after regaining 50 & 200 DMA B) Reversal (Gilligan)
C) Reversal Reversed leads to Accelerated Momentum
Jan 03 through March 5, 2007
99
A) Breakout Recapturing 20 DMA B) Tail/ Looks like failure
C) Note 1st Turndown on very next day January 10th – when stocks do what is NOT EXPECTED
101
How to identify fast moves –
A) ORB suggests Trend Day higher
B) At 97.30 a Reversal New High Method is triggered
January 10, 2007
103
A) Rule of 4 Breakout at 50/200 DMA
B) Snapback appears to be failure as it is an Outside Day Down but is followed by gap up – these
momentum gaps above resistance are often kick-off moves.
105
Many times stocks walk before they run. This is day 2 after a 1-2-3 Pullback set-up. A) “Spirit” of a 1-2-3 Pullback
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A) Bubble Oops without follow-through (B) Note how (A) is a “First Sell”
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A) Momentum Gap (Gaps after price contractions) B) 1st Daily Turndown
C) Holy Grail/ 1st Pullback D) Undercut of 20 DMA
KEYING OFF MOVING AVERAGES
THE HOLY GRAIL
THE MANTRA AT THE 50 DMA
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February 20 through current
113
A) Flush at the 50 DMA – note long “Tail”
B) Undercut at 50 DMA – note N/R7 Following Day
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February 13/14, 2007
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A) Note the 1-2-3 Pullback to 50-Week Moving Average on week ending July 14, 2006
B) N/R7 week on week ending September 8 – Contraction/ Expansion
C) N/R7 week precedes Explosion (D)
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A) Tail at 200 DMA
B) 1-2-3 Runaway at 20 DMA C) Holy Grail
D) Tail at 50 DMA
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A) Tail at the 50 DMA is a successful test of (B) C ) Angular Rule of 4 on a gap
End of September 06 through
February 7, 2007
123
DECK triggers Angular Rule of 4 Breakout on gap open. Note Expansion in 1st hour and Contraction for rest of session
125
A) Flush Out at the 50 DMA
B) Expansion Pivot “Carryover” trade
127
A) Test at 200 DMA B) Test of 50 DMA
C) 1st Pullback to 20 DMA / Holy Grail
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A) Recapture of 50 DMA B) 1st turndown
C) 2nd Mouse Gets the Cheese D) First 1-2-3 Pullback
131
Note the acceleration when the 20 DMA at 108.65
is broken and the prior weeks low at 107.05 is broken (B).
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A) Note on January 3rd the Expansion Breakout/ Angular Rule of 4 Breakout
B) On January 23rd a 180/ Holy Grail/ Outside Day up /7th Bar Pivot
C) 1-2-3 Pullback/ 180 /Mini Cup & Handle at 20 DMA Note how the Reversal at (B) occurs at high of (A).
From December 06 through
February 9, 2007
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January 26 through February 14, 2007
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PEEKABOO CLOSING HIGHS
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A) Peek-a-Boo Closing High January 31st B) 1-2-3 Pullback on February 12th
C) Note failure below prior Pullback Pivot on
February 23rd and failure of 20 DMA on February 23rd Note – The market has a memory of Prior Pivot Points
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CARRY OVER SETUPS
143
A) Signal Bar
B) Signal Bar Reversed – Note this occurs below 50 DMA and is a good carryover candidate as it is also a Rule of 4 Sell Signal.
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A) Island Top Pattern
B) (A) is a Fractal of the December Island Top (B) C) LROD after possible climax run on 2-26 –
Follow-through is key / Gap from 2-27 underscores follow-through.
147
A) “Carryover” from 2-26 / Note how daily chart turned up on morning of 2-26 and died
PUTTING THE PIECES TOGETHER
149
A) 1-2-3 Runaway Pullback
B) In the Spirit of a 1-2-3 Runaway C) Flush out at 50 DMA
D) 50 DMA is recaptured – note –
151
A) Undercut of 50 DMA
B) N/R7 Pause after the Reversal at (A) C) Explosion
D) Holy Grail
E) 1-2-3 Pullback follows through after a stutter-step
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January 30th
Note high for day is 7th bar for a first hour high
155
A) Angular Rule 4 Breakout which looks like a failure B) Undercut of 50 DMA without follow-through
C) 50 DMA is regained on an Expansion Pivot Buy Signal which offsets Signal Day at (A).
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A) Expansion Pivot: Largest Range in 10 days below
50 DMA, leads to momentum (good Carryover Set-up) B) Expansion Pivot back up through 50 DMA
C) Handle of Cup & Handle at 200 DMA indicates Breakout (D) will seee continuation.
159
A) The Breakout on January 31st was a good “carryover” set-up based on the Cup & Handle Pattern at 200 DMA on daily.
161
A) Momentum Gap through Key Moving Averages many times identifies Kick-Off Move
B) 1st Pullback of 6 days note 7th day turns up daily trendline C) Riding the 20 DMA
D) 50 DMA Bungee
163
A) Low of February 7th was 79.92 (A) – ANF gapped down on February 8th but filled the gap and squeezed higher B) Note how 1st Pullback led to a quick spike higher
165
A) 1st tag of 50 DMA in a while (time not shown) and acceleration
B) Undercut without follow-through
C) 50 DMA regained convincingly with Large Range Day D) Lizard Sell Signal without follow-through occurs at
mid-point of run
167
February 9, 2007
Trend Day down on February 9th after Sell Signal on February 8th. NYSE-BXP-10 BOSTON PPTYS
169
A) Expansion Pivot also breaks Neck of Head & Shoulders Pattern
B) This coincides with the Rule of 4 Breakdown
