More constructive setups this week, and once again we’re having a great earnings season.
Thanks to our progress with technology and quantitative analysis, we’ve been able to keep evolving our methodology to higher standards, refining our approach to make it quicker, easier and more precise.
As you’ll have noticed, I’ve also made small but important adjustments to how I explain our method and exactly the kind of activity we’re looking to exploit. Sometimes a seemingly small tweak can make the most profound difference to your understanding and implementation, and that’s exactly the feedback I’ve been receiving about this.
So, I’m going to keep beating the drum for it, because even for me personally it’s making a difference – particularly in terms of speed – which means I know it will be for you too.
One particular challenge I was determined to articulate is in how to choose between similar setups where there are many to choose between.
You’ll see me approach this subject in the review, and soon I’ll also hold a live webinar with exactly this in mind.
Ultimately we’ve always been focused on following big (professional) money. That still holds. But specifically I can articulate it in the following way:
- OVI (hidden, leveraged, insider money)
- Recent volume rush (big money flowing into a stock)
- Recent price reaction (in line with the volume rush – catches the attention of large players)
- Breach and hold of a key level (again, catches the attention of large players)
From here we need a low risk tradeable setup for our entry point … ie a price and volume consolidation. This is where flags come into play because they exhibit a point in time where sellers appear to have dried up, and the slighted uptick in buying action (in context of all the above) will result in a high chance of our P1 being achieved. This is why so many OVI traders report win ratios of 7+ / 10.
What if there are several decent setups lining up?
One excellent way to prioritize your selection is if the stock is exhibiting a series of “diminishing” or shrinking retracements, which often manifest in the shape of (reverse) head and shoulders patterns.
We’ve talked a lot about reverse head and shoulders which culminate in flags over the years, but the importance of these patterns in context of our particular approach is actually quite profound. It means combining our empirical advantage (sourced from the OVI) with a broader pattern that suggests sellers are being progressively overwhelmed by buyers (this is in a bullish context of course, but always works in reverse).
So what we end up with is an entire setup where we can describe the chart from the perspective of buyers vs. sellers.
Once you commit to trading only the setups where you can describe the activity of buyers vs. sellers, you will see a significant uptick in your performance, combined with a significant reduction in time taken to make your selections.
Of course the OVI TradeFinders do most of work for you, but the big change now is that we have a quick way to prioritize our final selections by eye.
There are plenty of examples of this in this weeks’ review, and several of them are real gems too!