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.
Plunger Pattern Criteria - A plunger pattern occurs when a 10-day high or low is
reached or breached and the market reverses itself intra-day and closes at the opposite
end of the 10-day high or low. For the plunger to officially occur the closing price
must finish in the top or bottom 30% of the day's entire range.
Plunger Pattern Expectations - Plunger patterns on average are expected to produce
a market reaction (in the direction of the plunger) with a duration of 1 to 3 trading
days.
FP = Forward Plunger: Forward Plungers can occur at or near short-term bottoms,
occasionally occurring at major turning points.
RP = Reverse Plunger: Reverse Plungers can occur at or near short-term tops, occasionally
occurring at major turning points.
FP = Forward Plunger
RP = Reverse Plunger
Reverse Plungers can occur at or near short-term tops, occasionally occurring at
major turning points.
Forward Plungers can occur at or near short-term bottoms, occasionally occurring
at major turning points.
* Keep in mind that this pattern, not unlike other patterns, will not work 100% of
the time. Sometimes plunger patterns will occur and the market will move in
the opposite direction (opposite of what we anticipate when a plunger occurs).
This happens with all identifiable price patterns and is normal.
Description of the pattern(s) and graphic examples from our proprietary charting
software
Forward Plunger
|
Reverse Plunger
|
Figure 1.
How and when/where to enter based on this pattern alone, and where to place the stop.
One of the things I really like about this particular pattern is the identifiable
stops. It is clear with this pattern where the stops must be. They must
be above or below the plunger highs or lows. See examples below in figures
1.2, 1.3 and 1.4. The entry is also very straight forward. The trader
can enter as soon as the pattern is discovered, but must enter before a significant
move has occurred and before the market turns back the other way, taking out the
plunger high or low (shown below). I would avoid buying or selling gap opens,
or sharp moves immediately following the pattern. Market orders, limit
orders and stop orders can be used for entry. The pattern would be negated
(voided) if the opposing plunger high or low is taken out. Again also, I would
avoid buying or selling sharp gap openings that immediately following the formation.
Forward Plunger
Figure 1.2
|
Reverse Plunger
Figure 1.3
|
Figure 1.4
|
Plunger Pattern Criteria - A plunger pattern occurs when a 10-day
high or low is reached or breached and the market reverses itself intra-day and
closes at the opposite end of the 10-day high or low. For the plunger to officially
occur the closing price must finish in the top or bottom 30% of the day's entire
range. The specifics for both Forward Plungers (FP) and Reverse Plungers (RP)
are provided below.
Forward Plunger (FP) - This will occur when a market meets or exceeds
its 10-day low and then reverses intra-day and closes in the upper 30% of the day's
range. A market's full range is 0 to 100% with the low of the day corresponding
to 0% and the high of the day corresponding to 100%. Thus a market that finishes
on its high finishes at 100% and a market that finishes on its low finishes at 0%.
This percentage figure (close as a percent of range or cl%ran) is provided daily
in all markets in the daily excel report. The figures are listed in column
"L" of the daily excel report. The same criteria applies to weekly plungers
as well with the only difference being weekly plungers consist of weekly data and
daily plungers consist of daily data. The cl%ran for weekly data is also provided
in the weekly excel report which is also updated daily. It should be noted
that the weekly plungers are not officially complete until Friday's close.
Nevertheless however the day to day cl%ran figures for the weekly closes are updated
automatically each day in the weekly excel report (column 7). The weekly
excel report is only available on the automated reports page.
Reverse Plunger (RP) - This will occur when a market meets or exceeds
its 10-day high and then reverses intra-day and closes in the lower 30% of the day's
range. A market's full range is 0 to 100% with the low of the day corresponding
to 0% and the high of the day corresponding to 100%. Thus a market that finishes
on its high finishes at 100% and a market that finishes on its low finishes at 0%.
This percentage figure (close as a percent of range or cl%ran) is provided daily
in all markets in the daily excel report. The figures are listed in column
"L" of the daily excel report. The same criteria applies to weekly plungers
as well with the only difference being weekly plungers consist of weekly data and
daily plungers consist of daily data. The cl%ran for weekly data is also provided
in the weekly excel report which is also updated daily. It should be noted
that the weekly plungers are not officially complete until Friday's close.
Nevertheless however the day to day cl%ran figures for the weekly closes are updated
automatically each day in the weekly excel report (column 7). The weekly
excel report is only available on the automated reports page.
Plunger Pattern Expectations - Plunger patterns on average are expected
to produce a market reaction (in the direction of the plunger) with a duration of
1 to 3 trading days.
The 3-day Rule as applied to Plungers:
The market must follow through in the direction of the plunger pattern (forward=up,
reverse=down) within 3 days following its formation. In the case of a forward
plunger, the market must exceed the plunger day high within 3 days following the
plunger, else the plunger expires. In the case of a reverse plunger, the market
must exceed the plunger day low within 3 days following the plunger formation, else
the plunger expires. During the 3-day period, the opposing plunger day high
or low must not be exceeded on a closing basis. We will address that below.
However, it is possible for a secondary plunger to occur within 3 days of the initial
plunger formation. In that case, the new lows and highs of the secondary plunger
pattern take precedence over the prior plunger day high and low.
The High / Low Rule as applied to Plungers:
The high and low that is struck on the day a plunger pattern is formed are very
important. In the case of a forward plunger, the low struck on the day the
plunger pattern forms becomes important support or what I refer to as "the logical
stop area". An example is the 7/24/02 Forward Plunger low of 773 in the September
S&P500 futures. If this low is exceeded on a closing basis, the plunger
is no longer valid. In the case of a reverse plunger, the high struck
on the day the reverse plunger forms becomes very important resistance (logical
stop area). If that high is exceeded on a closing basis, the plunger will
no longer be valid.
Failed Plunger Patterns - Plunger Patterns that immediately fail indicate
a potential trade in the opposite direction (i.e. a forward plunger than immediate
fails is often a good sell signal).
Real example of Plungers identified on our proprietary price graphs
MORE REAL EXAMPLES VIA RECENT REAL MARKET CONDITIONS (our graphs as it happened).
* Past performance is not indicative of future results, no trading system can
guarantee profitable results.
* The reverse plunger (red carrot following A) FAILED via a close higher which turned
that RP into a BUY too!
Click here
to Review Color Changing Feature of the Daily Trend/Swing Price graph
Daily Trend/Swing graph with associated Detrended study while trend from A to B still
unfolding on 9/14/04.
Core UCL/LCL graph for Russell. Note August net-com peak exceeds EUCL
(extreme buy trigger)!
