In keeping with the recent lessons with the TICK and trading the intraday markets, let’s take a broader perspective of the past few days to see specifically how clean TICK Divergences helped you trade “swings” or mini-reversals intraday in the SPY or S&P 500 index.

Here’s the broader multi-day chart:

Click for full-size image.

This is picking up – or expanding – where my prior post  “Trading and Forecasting with the TICK – Lesson April 11” ended.  Be sure to read that post for a better explanation of the concept of comparing TICK (divergences) with price.

We’re seeing the S&P 500 Index (which just as easily could be the SPY, @ES futures, or any leveraged or related ETF) overlaid with the NYSE TICK (number of stocks “ticking” up at a given moment minus those ‘ticking’ down).

Traders can use the TICK confirm moves in motion (new TICK highs + New Price Highs = Confirmation and thus expectation for price continuation) or disconfirm them via divergences (New Price Highs with lower relative TICK highs = non-confirmation and expectation for potential price reversal).

Of course, on the 5-min chart, reversals occur frequently and it takes quick reflexes or intraday trading experience, but as you can see from the multi-day perspective, these swings last for hours if not full days at a time once a reversal is confirmed via a price breakdown of a trendline (the easy signal to enter or take profits).

Starting on April 11th (where I showed a detailed description), price pushed up in the morning while TICK trailed lower – your classic divergence.  Price then broke the rising trendline at the 1,330 level, triggering a breakdonw/reversal ’scalp’ (or swing – depending on your definition) trade.

This short-sale trade ended with new index price lows at the 1,310 level on a clean positive TICK divergence from the 11th to the 12th (Monday to Tuesday) as shown.

Price then broke the falling trendline at 1,312 triggering a “take profits” exit for your shorts and a potential “get long” trigger to play a pending reversal.

That trade ended this morning (the 13th) on the breakdown under 1,316 near 11:00am CST and triggered a new short-sale that ended just after I captured this chart mid-session with another positive TICK divergence and breakthrough of the falling trendline.

As I type this, the Index is back up to the 1,317 level.

So these give three clean examples of “Carry-over” TICK divergences that were confirmed – triggered – with price breakthroughs of respective price Trendlines (you can also see the trendlines I drew in TICK as well).

It’s not all that complicated, but does take practice and that’s what these examples are intended to show you.

As always, nothing’s perfect but I’ve found this simple strategy goes a long way in helping you conceptualize intraday ’swings’ or little reversals as they occur in real time – giving you clean entries and risk-controlled stop-losses (beyond the most recent swing high or low once the trendline breakout occurs).

As I showed in the prior post, look back over the blog archives – including the following links – for more information on trading/forecasting intraday moves with the NYSE TICK index:

“Lesson in Trading SPY Intraday with Two Timeframes and Divergences.”

“Why You MUST Consider Volatility When Trading with the TICK”

“Research in Behavioral Changes in the TICK Over the Last 10 Years”

“How Market Internals Helped You Avoid March 1st Big Gap Trap”

“Lesson on Using TICK for Intraday Reversals (“History Repeating”)

“Comparing the TICK and S&P 500 Highs for 2010?

“Using Intraday TICK Signals to Forecast Reversals”

“When Divergences Really Matter:  SPX at 1,300?

Corey Rosenbloom, CMT
Afraid to Trade.com

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