Close n Parallel © 2007 Whooph

CLOSE n PARALLEL©️

by Charlie Whooph, CFE

George Lane’s Stochastic Oscillator can foreshadow reversals well before price knows it, let alone price following traders.

Dr. Lane was a fairly smart guy to recognize the predictive nature of this measurement complimented by the Law of Large Numbers as it relates to markets:

THE MATH

the Stochastic Oscillator

%K = (C−L14) / (H14−L14) × 100 where:

C = The most recent closing price; L14 = The lowest price traded of the 14 previous trading sessions; H14 = The highest price traded during the same14-day period;

%K = The current value of the stochastic indicator

THE WHOOPH

In the sample chart above, the faster RED stochastic (signal line) juts in to the slower BLACK) line. This is a warning or precursor of change. Then upon the equity or stock’s continuance of its rally, price inks a higher high suggesting no evidence of price weakness whatsoever! However, Dr. Lane’s Stochastic disagrees. The signal line of the Stochastic begins to lag or fails to catch up to the higher price action indicating a change in Average 14-period momentum. The math formula for Stochastic effectively draws an “alligator snout” profile or what the Whooph calls Close n Parallel as shown in the header image above. The circled portion of Stochastic shows the tell-tail: even as price registers a higher high, the Stochastic faster RED signal line hugs the BLACK and is unable to pull away from the slower BLACK line, suggesting weakness. Who would know?

The Whooph Close n Parallel label is an observation or an interpretation of the Stochastic tool which from decades of daily price-technical data correlation has come to suggest disagreement foretelling a swing or reversal in price.

In a follow-on story we’ll describe divergence — a similar phenomenon as Close n Parallel©️2007 and the holy-grail of predictive signals. For example: In an uptrend, price again inks a higher high, but the trend of Stochastic highs suddenly diverges from its upward trend previously tracking with price. This divergence suggests price weakness and forecasts an impending reversal or swing to the low side!

In fact, would you believe equity or stock momentum begins to suffer WELL BEFORE price action even “knows it” ? This is true especially if you’re NOT actively gauging change in momentum against the prior average momentum 14–28 days ago. And who would be?!

What percentage of traders do this or even know what relative highs to look at over a greater than 14-day period, when trying to gauge an impending swing in price let alone a swing reversal or correction or crash?

Is it even possible? Plenty of criticism spews from critics in caustic, sarcastic tones, suggesting market price action is completely random and unpredictable outside of news or earnings. ( Ha!…really? )

So, which is it? Is a market reversal predictable or not? This very same principle was already on display well before Thursday, February 20th, 2020. Not just days, but WEEKS before the 2020 Covid crash.

Can you see it?

The phrase Close n Parallel ©️ Charlie Whooph 2007 is copyrighted. Please respect the rights of the originator.

Charlie is a 23-year full-time equities swing trader. At Whooph LLC he writes and advises on Trading for Income and predictive market "tells". He teaches swing trade methods step-by-step. Don't hesitate to email Charlie directly with any questions: Charlie@whooph.com As a Certified Fraud Examiner, Charlie also writes and advises on Pii Theft, Email and Bank Account Hacks, Detection, and new Fraud Schemes posing a threat the US. Charlie was a US Navy Lieutenant SWO / Division Officer. He consulted 30 years in risk control, private investigation, and has 23 years experience equity swing trading.

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