Understanding graphs 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.

Trade10 Home | Advertisement Opportunities | Recent Signals

Home

QuoteChart Opinion Profile

Enter Symbol:

WALK THROUGH A CRITICAL DAY

OUR SERVICE

MARKETS

UNDERSTAND THE CHARTS

JOIN!!!

Understanding the Graphs

The price action of the S&P500 Index and other graphs are often displayed on site using a candlestick chart. Without endorsing the methods of interpreting candlesticks, we choose this price display because it illustrates supply and demand in the market place clearly and concisely.

In order to understand the graph, you must first understand how a candlestick is created.

The above candle is a representation of the price action that can occur on any particular day. The candle above indicates that the opening price was at the bottom of the candle and that the opening price was also the low of the day. The closing price was the top of the body of the candle and the high trade or high value of the day is indicated by the top of the "wick". When a candle is clear or white, it indicates that the prices closed higher than they opened. The opening price is always the bottom of a clear candle body. The closing price is always the top of a clear candle body. The wick, which can occur on both top and bottom, is meant to indicate both the high and the low price traded during the period the candle is meant to represent. If no wick occurs then the opening or closing price was the high or low of the day.

This next candle is colored and indicates that the day was a down day. For the black candle, the opening price is the top of the candle body. The high of the day is indicated by the top wick on the upper side of the candle. The low value of the day is indicated by the bottom wick on the lower side of the body. The closing price is the bottom of the candle body.

Many types of candles are created through daily price action. Always a clear candle is an up day, a dark candle is a down day. The wick on the top of the candle shows the high of the day. The wick on the bottom shows the low of the day. If there is no wick then the opening or closing price, depending on the color of the candle was the high or low of the day.

A candle graph is visually clearer when looking for a quick digestion of the price action that occurred on any given day.

The graph itself has a horizontal and a vertical axis. The horizontal axis represents time. Different segments of time can be used on different graphs. Here on this site, all units on the horizontal axis are measured in days. Each candle represents the price action for each trading day. The dates of the trading days are indicated at the bottom of the graph.

The vertical axis is price or value in the case of an index. On site we use the S&P500 Index to show past signals. The Index is made up of 500 of the largest companies in the United States and the value of these companies make up about 80% of the total value of the stocks listed on the New York Stock Exchange. Historically there has been about an 85% correlation between major Indices in the US. In other words, if the S&P500 Index changes direction, it is highly likely that the other major Indices will also change direction to match. We have had better than 80%* success rate on the S&P500 Index for our critical day research between 1994 and 2000. For the most recent critical days take a look at our most recent signals.

A candlestick graph illustration of the S&P500 Index

S&P500 Index

Every dot on the graphs below is given to members on average 3 days in advance. Each critical day that we generate through our research is meant to indicate a point in the markets path when a reversal of the short trend has a higher probability of occurring.

When we talk about the short trend, we are referring to the shortest segment of a single direction leading into the critical day. Here are some examples:

A candlestick graph illustration of the S&P500 Index and critical day signals

S&P500 Index

You'll see the number 1 showing a downtrend into a critical day that proved to be a success. The market after the critical day was up and away, even though it was only up for two days beginning on the critical day, it was a change in direction. Market analysis during the course of the movement can help determine the expectation of the size of the move.

Number 2 shows a trend leading up into the end of the millennium and falling after the critical day.

Number 3 shows a short consolidation move leading downward into the critical day. The market moved up after the critical day and so the signal was a success.

In the members area we try to fill in the gaps with reference to what is important on every critical day and give focus to the things that will be market movers.

If you have any further questions about understanding the graph please e-mail us at Support@Trade10.com

Critical day analysis

Momentum trading - critical day signals on a graph of the S&P500 Index.

When the flow of candle bodies rises leading into the critical day, the expectation is a reversal of that trend and for the flow of candle bodies to fall coming away from a critical day. When the flow of candle bodies falls leading into a critical day, the expectation is a reversal of that short trend and for the flow of candle bodies to rise coming away from the critical day. There are some special circumstance signals such as the March 17/00 signal on the graph above which became a short consolidation period before there was a continuation of the price trend higher. This type of signal cautions a trader to allow price trend to confirm the expectation before risking capital on the trade. The April 18 signal is a special circumstance in that the trend leading into the critical day was still down despite a strong rise in prices on April 17.

Momentum trading - critical day signals on a graph of the Philadelphia Semiconductor Index.

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