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Significance of a Black Bar

From the last tutorial, my reader asked how the black bar works.  As you can see on the chart below on Dec 10, a ST black bar means the model is suggesting the price is topping.  This ST Max signal is useful for swing traders or short term traders per below, but also helpful for long term players that can use the ST Max signal to help them to hedge their positions.  Because it is impossible to predit the price in the future, profit taking is very important (At least you are not losing money but instead the risk is you may sell too early).

 

Short term strategy when you see just an ST black bar:

1) Sell all your positions.

2) Sell a portion of your positions to lock in some profit.

3) Raise your stop loss target (this doesn't help if the stock gaps down the next day).

 

Long term strategy when you see any combination of black bars:

1) Raise your stop loss higher than your entry price but leave a big cushion (so at least you are not losing money).

2) Sell a call contract when the Broad Market begins a downtrend (more advanced) or the uptrend has topped (many black bars) and cover your call when the market begins an uptrend again.

 

To summarize:

1.  We will have a low risk setup after consecutive whole red bars with lower trend levels.

2.  Another sign of bottoming is when you see flat price actions for a couple of days.

3.  Always bear in mind the current trend of the Broad Market.

3.  Keep your position when the whole bar is green until you see one or more of the following signs:

a) price action not confirming the trend

b) black bars (suggested top)

c) red bars (run)

 

 

 

 

 

 

Here I attached another example of many black bars appeared in Sport Gold ETF.  It was too crowded.