TICK Divergence Tuesday

Apr 14, 2009: 10:29 PM CST

I renamed today “TICK Divergence Tuesday” in honor of the numerous TICK Divergences that gave valid trading signals on April 14th’s intraday trading (in the SPY).  Let’s look at these TICK Divergences, two bear-flags, and a 5-wave Elliott Pattern that guided the structure of the day.


(Click for full-size chart)

The main purpose of this chart is to notice the (at least) seven TICK Divergences (on the 1-min chart) that formed key swing highs and lows of the day – all of which set-up aggressive trades and confirmation/non-confirmation as the day’s structure developed.  Take a close look at each divergence – there’s no need for me to discuss them all.

I did want to highlight two other structural points in the day –

First, we had a Dual Bear Flag that completed to form the Intraday Lows.  Normally, you don’t get such fractal Bear Flags –  you usually only get one per day.  The “Measured Move” of the first Bear Flag formed the “Pole” of the second Bear Flag – that’s odd.  Both flags met and exceeded (slightly) their price projections.  Also, an “ABC” 3-wave corrective structure formed inside each flag.

Speaking of corrective structures, we see a 5-wave Elliott-like formation (pattern) that moved from the intraday high to the intraday low.

I was able to have a high degree of confidence (though not certainty) as price completed the following converging patterns at the intraday low of $84.08 just after 1:00 EST:

5-Wave Complete Elliott Wave Structure
Four-Swing Positive TICK Divergence
“Three Push” Pattern (was technically a “Four Push” Pattern)

I’m sure there were other signs of confirmation there, but those all jumped out at me in real-time, signaling an exit to any short positions and an aggressive buy signal.

That’s exactly why I do these intraday reports, both for myself and for readers.  The more times you see these patterns, the better you’ll be in real-time to act on them as they develop.  Also, you’ll have to confidence to act (put on a trade) because you’ll get the sense of “been there, seen that, done that” and it will feel natural to you to enter and manage your trade more appropriately.

I’ll soon be offering formal write-ups on the day’s action highlighting as many objective trade set-ups and patterns that I find – “Daily Idealized Trade Summaries” – so stay tuned for that!  Feel free to pass on any comments or suggestions.

Corey Rosenbloom
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

Travel to the LA Trader’s Expo in June to hear Corey speak on “Idealized Trades for Intraday Traders”

13 Comments

13 Responses to “TICK Divergence Tuesday”

  1. Anonymous Says:

    Corey, thanks for the TICK lessons. I’ve added a 1min TICK chart under my S&P chart because I’ve found it so useful during the day. Hopefully I will be able to zoom out a little as the day progresses and catch these signals like you do. Last year VIX used to signal me like a bright flare in a moonless night, but this year it’s been nearly useless during the day for me. Another reason TICK stands out.

    I’ve also added CCI to my 1-5 min charts and find it VERY useful for confirming entries, even for quick scalps. I’m using shorter settings for CCI than standard and I’m still learning how it works.

  2. Blue Says:

    Oops, didn’t mean to be anon. I’m Blue, Gaming The Markets brother.

  3. Anonymous Says:

    love your posts on spy. it’s all i trade and you provide some great views and ideas. thanks so much and keep up the awesome blogging.

  4. mark Says:

    Hi Corey, thanks for faz breakdown from yesterday, question, why was vix negative yesterday ? fridays option ex ? thanks mark

  5. Corey Rosenbloom Says:

    Blue,

    Good to hear from you! I love the GTM site – very in-depth and informative.

    Yes, certain indicators/trade set-ups cycle in and out of favor. The gap-fade worked wonders in 2008 but it’s not been so hot in 2009. There’s a little bit of disconnect in the VIX and S&P slightly at the moment which is odd.

    It’s all about finding that magic mix of indicators/trades that make sense to us (personally) and then the market continuing to deliver. But, like the old saying goes, once you figure out the key, they change the lock!

  6. Corey Rosenbloom Says:

    Anon,

    Thank you for reading and sharing!

  7. Corey Rosenbloom Says:

    Mark,

    No problem – it was an interesting chart.

    I really have no idea about the VIX – I noticed that in my end-of-day meeting but we just brushed it aside and noted it as strange. The VIX has been acting weird in my opinion lately, namely not confirming the March lows with a high VIX reading.

    If any readers have any insights on this, please feel free to share.

  8. Blue Says:

    I bet what’s going on with the vix is due to GS’s control of 30-40% of the volume (read ZeroHedges blog for info). The volatility swings of last year are gone because the market is being DOMINATED by one major player driving the tape. That’s my theory. Now that GS got their $123 a share dilution and once OPEX ends, I’m willing to bet we go back to the wild wild west like last year, but with less volume. Lots of people simply bailed on this stock market.

  9. Corey Rosenbloom Says:

    Blue, Andrew Horowitz and I were discussing that article recently. The specific article is:

    http://zerohedge.blogspot.com/2009/04/incredibly-shrinking-market-liquidity.html

    Certainly a decent possibility. Lower volume would mean volatility/range would be higher, bid/ask spreads would be wider, and … well it wouldn’t be a good thing, let’s just leave it at that.

  10. Dominick Says:

    Fantastic analysis Corey. I spotted a lot of the patterns you regularly speak about and point out on the site. It gives great confidence. Thanks.

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