Capital Ideas & Analysis

Adding more to our discussion on large range days. ive observed the ADX to be a good indicator for this. Using either 5 min 14 period ADX, or 3 min 23 period ADX.

+DI and -DI do not cross in the first 2 hours for sure, and almost always the first 3 hours of trading. many times they do not cross at all, or just once for a noon swoon or a small dip into the final hour.

Large range up days close in the upper 77% of the days range, and above VWAP. for down days, this is just reversed.

A/D is favoring one side by a large margin. certainly 60% of stocks are advancing in an up move, but more clarity is provided if it is 70% or greater. 80% and you definitely have a wide range day set up.

When the noon swoon or late day shake out happens, it should not retrace more than 38.2% of the days move on a 3 or 5 min bar closing basis. if it does, often an event happened mid day to drastically change traders minds. this is a sign to exit the position.

Thus entries are best between the 10:00-11:30 time period. after that the trade is either lost or waiting for the pullback that starts to show signs of recovery above a 38% retracement.

Failure: breakouts that break out of a channel on the open, if the 3 min bar closes more than one ATR within the channel, after breakout out for opening price, thats a failed breakout.

Breakout bars should exceed one ATR. it should stand to reason that a large range day cant be very large range if its within the average range.