Buy and sell Setups
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To “perfect” a buy setup, either the low of
Setup bar 8, the low of Setup bar 9 or a
subsequent price bar’s low must be
less than the lows of both Setup bars 6
and 7. Until that occurs, the anticipated
price “hiccup,” or reaction, is less
likely to occur.
A sell Setup is a series of at least nine
consecutive closes greater than the
close four price bars earlier. Prior to the
first bar of this series, a TD Price Flip
must occur to initialize the Setup –– i.e.,
the close of the bar immediately before
bar No. 1 of the prospective sell Setup
must be less than or equal to the close
four price bars earlier. If the Setup
series is interrupted at any time prior to
completion, the bar numbers are erased
and the process must start again.
Typically, when a sell Setup is completed
and perfected, price has a tendency
to at least react to the downside
or move sideways for a while. A sell
Setup is perfected when either the high
of Setup bar 8, the high of Setup bar 9 or
a subsequent price bar’s high is greater
than the highs of both Setup bars 6 and
7. Until that occurs, the anticipated
price reaction is less probable.
Countdown
Buy Countdown begins when a buy
Setup has completed (once the minimum
requirement of nine consecutive
closes less than the close four days earlier
is fulfilled). Beginning on the ninth
Setup bar, a process is applied that
compares the close of that price bar vs.
the low two bars earlier: If the close is
less than or equal to the low two price
bars earlier, then a Countdown is
recorded.
Just as a buy Setup series’ bars are
numbered, so too are bars in a
Countdown, except in a different color.
Once 13 valid Countdown bars have
occurred (note: Countdown bars do not
have to be consecutive), the downside
price momentum is likely to be
exhausted. Additionally, to ensure the
price action is sufficiently low relative
to the prior price action, the following
qualifier is used: The low of buy
Countdown bar 13 must be less than or
equal to the close of Countdown bar 8.
There are two events that cancel a
buy Countdown prior to completion:
The first occurs if, subsequent to the
completion of a buy Setup, a price
bar’s low and the prior price bar’s
close are both above the highest price
of the entire buy Setup series. In these
instances, the buy Setup is cancelled
and you must begin to look for a new
Setup series. The second cancellation
occurs when a contradictory sell Setup
appears before the completion of the
Countdown.
On the daily time frame, completed
Countdown “13s” coincide with a market’s
top or bottom approximately four
or five times a year. On shorter timeframe
charts, the number of Countdown
13s will increase commensurately.
Forecasting trends instead of
following them
The advantage of using TD Sequential
instead of conventional trend-following
methods is that you can buy into weakness
and sell into strength (and do so in
size). When following trends, entry
competition produces slippage and
price gaps that cut into performance.
Operating against the trend is often
difficult because it contradicts human
nature. However, these examples show
there are distinct advantages to doing
so, and TD Sequential is an indicator
designed specifically to accomplish
this goal
[DEW Note: Full Article Attached]
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