TICK Divergences Yield Promising Signals for SPY April 7

Apr 7, 2009: 9:55 PM CST

I wanted to focus again on today’s intraday report on the simple TICK divergences that gave us powerful trading signals all through the choppy trading of April 7, 2009.  Let’s see them up close.

To me, a TICK Divergence is far more powerful than a standard oscillator divergence, due to the fact that we are looking at a portion of the Market Internals and comparing high/low readings with prior price swing highs or lows.

The TICK takes a snapshot of stocks that traded that second on an up-tick vs those trading on a down-tick, and can be plotted any way you want – I prefer bar or candle charts because you can focus on absolute highs and lows.  I also like to plot a 5-period Simple Moving Average of the TICK to smooth out the spikes and then compare MA highs/lows as well as absolute highs/lows.

We started the day with a powerful gap down and then price formed a TICK divergence right out of the opening bell, which was combined with a powerful hammer candle signal as price tested the day’s S2 Pivot.  Notice the green sloping arrow on the TICK when compared to the arc reversal on the price candles.

The second divergence came as price sauntered up to challenge the falling 50 EMA and the S1 Pivot.  Look very, very carefully at where the new Tick High formed: it formed on the second large up-bar as price cracked above the 20 EMA.  As price spiked yet again to test the 50 EMA, we saw a distinct TICK divergence set-up (which was even clearer on the 1-min chart).  Given the TICK divergence and price coming into two levels of overhead resistance, odds distinctly favored a down move that steadily occurred.

Notice that a New TICK Low occurred at 12:30 (CST) which hinted that a lower price low was yet to come, which did form both 30 minutes and one hour later… though those new intraday lows formed on a distinct Positive TICK (and momentum) Divergence – so many times a daily price low/high is formed on a key divergence.

This time price surged off the lows, breaking again above key EMAs with two powerful pushes, the second of which formed two bearish long upper shadows… and more importantly the day’s final Negative TICK Divergence. Price collapsed through the roof into the close, leaving only very aggressive and quick-thinking traders able to profit.

If you’re not following the TICK on your intraday charts, begin looking specifically for how you might incorporate TICK Divergences into your trading.  Continue studying today’s action for additional insights to prepare you better for the future.

Corey Rosenbloom
Afraid to Trade.com

8 Comments

8 Responses to “TICK Divergences Yield Promising Signals for SPY April 7”

  1. mbalani Says:

    Hi,
    Could you please re-post with chart please.
    There was no chart below your 1st paragraph.
    Much appreciated.

  2. mbalani Says:

    Hi,
    Please ignore previous email. Managed to “find” the chart. Didn’t show up in Firefox but saw the chart in IE8.
    Thank you.

  3. insane! Says:

    Great stuff…I really need a better platform to see the indices and indicators at the same time. Saw this today and couldn’t act fast enough to trade the divergence.

  4. Corey Rosenbloom Says:

    Mbalani,

    That’s so weird – thank you for letting me know. I went back and uploaded through Flickr like normal – every time I try a new image program it fails. I guess I’ll stick with Flickr.

    Please let me know if you’re able to see the new image in both IE & FF.

  5. Corey Rosenbloom Says:

    Insane,

    Good point – I’ve only recently started looking very closely at the TICK. I’ve always had it on the screen but never paid all that much attention. It’s quite powerful!

    A 5-minute chart may be too fast for some people but anything’s better than a 1-min chart!

  6. Anonymous Says:

    i have decided to long gold silver short dollar starting tomorrow. cradle being tested and great chance

  7. Corey Rosenbloom Says:

    Anon,

    Those seem to be good opportunities, provided the price holds. The risk would be low compared to the reward.

  8. MrTrader Says:

    I gave this method a try today and had excellent results! Thank you for sharing