Will this Market Uptrend Continue?

Herein is a secret, how YOU can read the “tells”.

by Charlie Whooph, CFE

Draw YOUR Chart…

Using this link you can bring up your stock? The chart is powered by a free charting site known as Bigcharts.com.

I’ve used Bigcharts.com since 2001, because its chart engine produces accurate graphics, which are easy on the eyes.

You’ll see the QQQ, an ETF that follows tech stocks (Nasdaq), with indicators tracking below it — pulse and blood pressure for its momentum, speed, and strength. These specific metrics or indicators are used in the most sophisticated trading algorithms available.

Now, in the upper left hand corner next to an orange Draw Chart button, key in your stock symbol, AAPL, USO, and that’s it. Draw Chart.

1 — Use the link to draw a chart of your stock. I’ll wait…Your chart will look something like the one below.

We’re going to find out where you are in the current trend. Notice on my QQQ chart the circles which identify waves of the current trend.

Beginning the uptrend when price crossed the Moving Average, I have numbered price highs, each followed and separated by a low. These represent waves 1, 3, and 5 associated with Elliott Wave Theory. The lows are numbered 2 and 4.

Fig 1 — Writer’s creation showing stock price/indicator waves. Useful for traders who Trade for Income.

Locate where you are…

Stocks or market indexes like the Nasdaq or S&P 500 move in waves. This has been proven mathematically, empirically. Likewise, your stock will likely trend in FIVE waves, including 3 legs up (1, 3, 5) with the uptrend and 2 brief legs down (2 and 4) against the trend.

2 — Compare your stock to the generic Elliott Wave chart and discover where you are in the Elliott Wave sequence. Elliott discovered in 1930s that nature, human psychology, and equity markets move in predictable wave patterns and sequence, due to a Law of Large Numbers.

Fig 2 — Writer’s image. Elliott Wave helps traders with stock chart analysis to lock in profits and create income.

Locate the market index or your stock within the Elliott Waves of the trend. If you’re between 1 and 3 you’re early in the trend. If you’re at point 5, then you are nearing the end of the uptrend wave sequence before selling and a pull-back.

Check the Trend

In the trend-wave sequence a stock (equity or ETF) should remain above and to the left of the Moving Average (MA). It’s normal for the stock to retrace to the Moving Average (MA). Why? For safety or to regroup and consolidate.

3 — Verify your stock’s Moving Average (blue line) is trending up and Price is above and to the left of it.

This common trade method will trigger a BUY decision when Price cuts up through the Moving Average (MA) line to the top side of the MA.

Buy definition, a “trigger” is not predictive of stock action, it’s indicative of what the stock is already doing. It doesn’t predict the uptrend will continue, but its likelihood.

In Step 5, we’ll encounter a market tell which is in fact a predictive indicator — its called disagreement.

Fig 3 — Writer’s Creation. In a healthy uptrend Price stays to the left and above the Moving Average (MA).

Side Note:

In a trend wave sequence an index or equity or ETF may “check back” to the Moving Average (MA) for “safety” to regroup or consolidate. In that process the stock may dip below or to the right of the MA, possibly triggering a Sell, depending on where in the Elliott Wave structure you are.

In Trading for Income, there are better ways to trigger a SELL to lock in gains at the highs, before price rolls over which of course is preferable.

Believe it!

When Price vaults to a new high, but an Indicator paints a lower high, this may suggest weakness and disagreement with the actual price rally. In almost every instance of a swing high, disagreement or weakness is evidenced in some form! Says Whooph, trader and analyst of over 40,000 charts since 2001.

Keep reading. The section Sell on Indicator Disagreement gets into this very key predictive market tell.

Upper Operating Area©️ 2007

In a healthy uptrend, Stochastic and other technical indicators, which track concurrently with Price, will “operate” in the upper three-quarters of the Stochastic. Meaning the Stochastic lows will turn-up above the Stochastic’s 25 level. There’s nothing magical or surprising in this observation, for it’s a mathematical cause.

What is amazing is how powerfully predictive this principle is in a market’s ‘change of the guard’ in a swing. — Whooph

If early in the trend price dips below the 25, which occurs when price pulls back below the Moving Average, a trader watches for the indicator to regain UOA territory above the 75. If at the price high swing, Stochastic fails and paints at or below the 75, I may sell there as the condition ranges sideways or enters a Lower Operating Area develops, indicative of a trend reversal. Be cognizant of your chart’s frequency and timeframe of course.

4 — Use the Upper Operating Area©️ concept to monitor the health of an uptrend. The manner in which Stochastic gives up the 25–100 territory precedes and is predictive of a sell-off, correction, or reversal.

Fig. 4 Writer’s Stochastic Upper Operating Area (UOA) is coincidental with a healthy uptrend.

Sell upon Indicator Disagreement

The implication in Figure 5 below is that the Indicator (purple) disagrees with a recent Price (blue) high, suggesting a sell-off is imminent. Though Price vaults to a higher high, the Indicator follows in sync with a lower price high. We concede Price traded higher but it did so on weakness!

This market tell is also known by traders and technicians as divergence. In an uptrend a curve drawn through Indicator highs “diverges” from the curve drawn through Price highs. In a downtrend the similar comparison is performed using the Price and Indicator lows.

5 — Check Stochastic, MACD, and Williams% for Indicator disagreement with Price.

Fig 5 Writer’s creation. Market tells are predictive indicators of price action, potentially foretelling a reversal.

Fig 6 Writer’s creation. Market tells are predictive indicators of price action, potentially foretelling a reversal.

Whooph’s Take

A look at the 6-month daily chart of QQQ above shows successive disagreement at points 1, 3 and 5, but the market responds with mostly sideways price action, a time pull-back from 1 to 2, a price pull-back from 3 to 4 below the MA, and a pull-back from 5 to below the MA.

Some critics mistakenly assert this to be a failure of divergence because a complete reversal of trend didn’t occur. When in fact, the market does “answer” the disagreement as detailed within an Elliott Wave structure.

It’s an issue of chart frequency and timeframe. The Weekly chart shows no weakness or disagreement at present, but the faster indicating, Williams%, failed to peg at the high (0) which is weakness. I suspect disagreement with price highs will emerge by middle of March 2024, we will have completed the 5-Wave Elliott Wave structure, and we’ll see an ABC pull-back.

Let’s recap:

1. Use this link to bring up your stock?

2. Use Elliott Wave to find out where you are?

3. Are the price bars above or left of the MA line?

4. Use Upper Operating Area©️ to confirm your uptrend.

5. Use Indicator disagreement to foretell your stock’s action.

Note: Upper Operating Area (UOA) was created by Charlie in 2007.

Charlie Whooph has been been trading for 20+ years and can vouch for Elliott Wave and predictive tells of the turn foretelling a sell-off, correction or pull-back. Traders and investors may utilize these or similar methods to generate gains and lock in recurrent income.

Learn more at Whooph.com

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Thank you all for reading this article. I appreciate every one of you and especially your comments, but also your visits and claps. :o)

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Otherwise my advice is free. I trade full time. If you have an interest in Trading for Income please don’t hesitate to ask questions. There are no silly or dumb questions. You’re also welcome to poke around Whooph.com