Relative Strength at Trade10.com- The science of trading market momentum for stocks, options, futures and bonds.

Critical Day Analysis

Our critical day analysis is all about trend reversals. We tell you when there is a high potential for a reversal of the short trend and we've been doing it since 1994 with an 80%* accuracy.

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Comparative Relative Strength

This is a comparison of the price movement of a stock with another stock, or sector, or index. It allows for a development of strategies based on the relationships between movements of different underlying interests. Using critical day analysis which has had an 80%* success rate at pre determining the short term pivot points for the markets, traders can then look at stocks, sectors or a broad selection of indices to help build evidence of trade opportunities and apply forethought to various market relationships that occur.

We have better than an 80%* success rate over 6 years with an average of 5 signals a month.

A comparative relative strength graph shows the S&P500 Index and one of its components picked at random. In this example, Advanced Micro Devices is plotted as a line graph against a line graph of the S&P500 Index. The value in the plot is as a comparison of performance and correlation of movement. Since we pick trend reversals of the short trend of market indices, highly correlated stocks will tend to move with the index. The graph of Advanced Micro Devices shows some periods of correlation and periods like the beginning of 1999 when the stock moved on company specific news.

Comparative relative strength can be a measure of performance in that a comparison can be drawn between the performance of a stock and a sector, or a stock and the overall index. Stocks of one company can be compared to that of a competitors share price and market action. Graphing two plots over similar time periods allows for a quick reference of performance and offers a method of comparison and if a strong co-relational relationship exists, offers a way to develop an expectation for price action on one stock as a result of price action on another stock or index.

A look at a price plot

Nortel Networks is compared against the S&P500 Index for the period of August and October 2000. Nortel is shown as a line plot of closing prices in red. The S&P500 Index is shown as a bar chart with critical days marked on the graph in blue and red dots. There appears to be a high correlation between the two for this period as a movement in one seems to coincide with a movement in the other price plot.

The critical days are indicated with blue and red dots on the graph. These are days we give to members in advance that identify possible reversal days for the short trend. You can see a closer look at our critical day research throughout the site.

With a high historical success rate on a variety of major indices, our critical day research can have application for stocks, options and futures. For stocks, finding a highly correlated stock to the index is the beginning step to finding trading application for our research in your daily trading activity.

To the right technical studies are examined in more detail to provide a sense of conformational evidence for traders of the critical day. Click on any of the terms to take a closer look at a technical discussion on that topic. All formations, patterns, indicators and technical tools fail at various times and so should only be used to build a body of evidence in forming a trading decision rather than being solely relied upon. There are a number of valuable studies that lead to intuitive understandings about price and volume but a strong compliment to technical analysis is an understanding of the trends and changes in the fundamentals and economic activity that ultimately lead valuation levels in the markets.

Walk through a critical day

The graphs show a price plot of the Dow Jones Industrials from Sept 28/00 to early November. The First graph ends on November 3/00, two days before an upcoming critical day on November 7/00. Our members looking at the market are expecting a trend reversal to occur due to the high rate of success in our research. Ideally a member will be using their own skills to judge the supply and demand changes, using technical and fundamental indications to confirm suspicions of a reversal, and trade accordingly.
On the second graph we see that the price action on November 6 was a bullish day, reversing the short trend so that the short trend leading into the critical day is now up. A critical day is an expectation of a reversal of the short trend that immediately precedes the critical day. In the case of the November 7 signal, given to members 3 days before, is an indication that the upward moving trend, recognized at the close of November 6 is expected to reverse direction.
On the third graph we can see that November 7 was a low volatility after a large gain on November 6 of about 160 points for the Dow Jones Industrials. The subsequent move over the three days following the November 7 signal saw the Dow Jones Industrials fall 376 points. The next day, November 13, the Dow Jones Industrials lost an additional 83 points with intra-day low a full 609 point loss since the open on the critical day.

Most recent signals

A closer view of the most recent signals. You can see the short trend immediately prior to a successful critical day, reverses coming away from the critical day. Often a failed critical day will indicate a stronger bias in the market for continuation of the trend that was in place prior to the critical day. A failed signal can therefore provide as much information and opportunity as a successful one. Take a look at tech studies to develop a sense of trend reversals and use.

Tech Studies

Comparative Relative Strength

Congestion Pattern

Consolidation