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The
criteria for the daily plunger = For a daily FP to form, the
most recent intra-day high must meet or exceed a 10-day high. For
a daily RP, the most recent intra-day low must meet or exceed a 10-day low.
Secondly, the most recent closing price (latest intra-day update or
final end of day closing price) must be in
the top or bottom 30% of that days range. For a RP, it must be
in the bottom 30%, for a FP it must be in the top 30%. The daily
plungers can occur and will be noted on our charts as they form on an
intra-day basis as well as end of day basis. HOWEVER, the only
plungers considered official are the ones that form based on closing
figures.
Additional criteria for the daily
plunger - The entire price range must also be at least 1/3 of an
average days price range (for each specific market) for the plungers to
occur. This eliminates plungers with extremely tiny intra-day ranges.
Weekly Plungers - The criteria for
the weekly plungers are similar, except we are evaluating data on a
weekly basis as opposed to daily. The close on Friday is the most
important price of the week and this is when all weekly plungers are
confirmed. The same is true with daily plungers as well, that is,
they are confirmed ("official") on the final official close of the
normal trading day (based on the traditional trading hours which is
still where most of the volume occurs, even though markets trade
virtually around the close today).
One
of the benefits of identifying plunger formations is that they provide
excellent logical stops. If
it turns out that the plunger pattern did identify a crucial
turning point, the low/high of the plunger should not be
penetrated. In other words, if the market moves higher
following a forward plunger day, the low of the plunger
day should not be penetrated. Thus, this is a logical
area for a protective stop. Likewise on a reverse plunger day, if the
market moves lower, the high of the reverse plunger day should not be
penetrated. This is also a logical place for the protective stop.
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