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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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WALK THROUGH A CRITICAL DAY

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Support

Support is the point at which sellers exhaust or buying pressure overcomes sellers or both. A support line is a line drawn that connect two prominent troughs on a graph. Generally the correct way to draw a support line is to draw the line so that no price penetration occurs between the two starting points.

Support lines can be used on indicators as well. Below is a chart of Pfizer Inc and a plot of the Relative Strength Index (RSI). Blue lines have been drawn on the RSI and price plot showing a support line that extends from early March 2000 to May 2000. The RSI is the plot in red at the top. A divergence of the peaks is also indicated with a single blue line over the peaks in question (May to July 2000). When the RSI penetrates the support line from above and continues to fall it is a bearish indication for prices. A support line once penetrated becomes a resistance level and vice versa.

The longer a trendline drawn at a support or resistance level the more significant it is when penetrated. The more a trendline is validated, whether it be a support level or resistance level, the more significant penetration of the trendline is in determining the future path of prices. Penetration gives indication of a reversal of the price trend. Validation of a trendline occurs when price approaches and is turned back at the support or resistance level indicated by the line.

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