The Market
Good morning everyone! I hope you all made some money last week and are ready for another day in the markets. This weekend I saw Dumb Money, or "The Gamestop Movie" which I think was actually well done. I recommend you see it if you can.
I had an idea last week and I think it's a good one to talk about with potential to make us some thick cheese. I am busy this morning so I will get right into it.
The 9 Reversal
Over my time learning the market and reading charts, there was one indicator I was most fascinated by. Originally put on by @iamiam, the Q9 Reversal, or Tom Demark's Sequential 9, indicator really helped me understand reversal patterns in the market. Since I began trading futures, I have not used a lot of the indicators I once used such as the MACD, my ChartPrime indicators and Vortex (I still use it but I don't look at it too much now). This is because futures is a real time trading platform and the tools I mentioned are lagging indicators. Don't get me wrong! Seeing the MACD about to go red or green with the RSI as oversold and bought + another combination of indicators is a great way to gage the market, but personally I don't use them. RSI is a great indicator of course, and I do use it but not as much as VWAP, some of the EMAs, liquidity and FVGs. I recommend looking into those if you just started trading futures. Again, I know a ton of traders use those indicators that I mentioned I do not use as much. Full transparency I used to heavily support the Vorted indicator and still use it, but not as much. I am in no way saying they are bad and you should not use them. Everyone should use whichever indicators they want, but for how I trade I do not personally look at them when taking a trade.
Let's look at this strategie in depth.
I would like to mention I do not use the 9 reversal in pre-market or post-market. This is because a lot of setups I trade require volume, which is almost always lower than when the market is open on the day.
Where is the indicator?
I use the 9 reversal on MooMoo which is found here.
The settings I use are default. There could be better ones but for now this is what I have.
How does it work?
Essentially, the 9 works by finding overextentions in the market. My usage is mostly for the reversal down as the reversal up is much harder to trade using the 9 countdown.
Can anyone use this indicator?
Mostly yes. I would personally not use it when trading stocks or penny stocks, but if you are trading options the 9 reversal is a great indicator. I use it specifically to trade futures since we are trading intraday price action.
Does it always work?
No, the 9 reversal does not always work. We will see that in the examples. You should always trade carefully as the 9 reversal is not absolute and in no way a true indication of a reversal.
Examples
Yesterday we had two higher 9 reversals, but as you can see the reversal did not trigger at other higher highs. This is because there was either a strong buyer, lots of potential upside liquidity or we chopped around. Chopping around at the highs does not always mean we will reversal down. I recommend looking at what a bullish rectangle is when trading at the highs and anticipating movement to the upside.
Something to take notice of is that the 9 does not always signal an immediate reversal. We had 2 more candles to go before reversing down. When trading, it is important to stay within your risk tolerance. I don't recommend going all in when seeing the indicator trigger. Set your stopp loss above the most recent swing high and be patient. If not waiting to see large sell volume to begin before taking the trade.
On friday we saw 4 different 9 reversals. They worked out pretty well each time, but if you look even closer you will notice that the countdown to 9 does not always work out. That's why I use it for reversal downs rather than up.
Here's a great example of the 9 reversal not always working out and why it is not the indicator of indicators. Last thursday we saw a ton of volume, specifically to the upside. We anticipated this, but we were also looking for the reversal down. Things to keep in mind are the current market trends. If there is massive upside liquidity and a 9 reversal comes into play, patience will be needed. It may mean you miss out on the trade, but remember that not taking a trade still means you are in profit. On days with incredible volume and market sentiment to the upside, I would trade the 9 reversal with caution, if not at all.
Wednesday was an easier day to trade the 9 reversal. The market was dropping in a range and tried to break above VWAP which failed. Leading up to the last 9 reversals, we shot up at a very unstable angle. Any time you see a sharp move downward or upward, there is a higher probability of the market reversing at some point. It does not mean the market will reverse, but last week we saw a ton of price action resembling down during the day with a rocket up. How last week traded is not an indicator of how the next week will.
Here's a good day to talk about. Chop. This was a couple weeks ago and I remember this day. Chop is the killer of all indicators and setups. We had three 9 reversals in the morning, but continued to chop around. It might be good practice to trade the futhest out 9 reversal during a choppy day. It is hard to say when the chop will end but I see a confirmation of chop within the first two candle ranges. Normally I see around 3-4 swings up and down before the market makes a move. That could be any amount of time but usually I see it ranging around 30 minutes to an 1.5 hours. In this case, we chopped for about an hour. I think I took a loss this day because of the time it took to move the market.
I personally use the 9 reversal with the 1 minute chart. This is the 5 minute chart at the highs of August into september. There were numerous fake 9 reversals down and plenty of miss triggers at the highs. There was even a day where we didn't have a single indicator. Another reason why the sequential 9 is not the end all indicator.
Taking a look at the charts, the 9 reversal seems to have a higher probability of working on days we are down trending. If the market is uptrending, the 9 may not work out due to the buying volume. However, the 9 reversal does like to work out with a higher probability during down trends when the market is trying to push resistance such as VWAP, EMAs or supply zones. Of course that is not always the case, but more times than not have I seen the indicator work when we are down trending and we reject off another volume indicator.
Game Plan
Right now we are trending to the downside. What I am looking for is a push up when the market opens into VWAP and observe the price action when if we get there. If the 9 reversal triggers then I will be taking a slight position to the downside.
Daily
Right now we are tading into this very significant pivot point on the SPY at the 424.41s and I took a trade here to the upside because of the lack of volume in pre-market but will be cutting it immedietly if buyers cannot step in enough.
4 Hour
We are very far away from our bearish to bullish setup target. Which tells me we might see another balance to the downside.
On another note
If someone knows how to stop the auto-snap feature when manually adjusting the charts on MooMoo please let me know becuse it makes using the charts very difficult.
1 hour
We have a FVG that the SPY might be looking to fill either pre-market or early in the market. I will be watching this when the market opens to see if our original strategie plays out with the 9 reversal.
5 Minute
There is not a lot of indication where the spider might go. Waiting on higher time frames to play out here into the market open.
Today is going to be an incredibly important day. Whether we reject off the pivot points or visit some of the lower EMAs has investors looking carefully at the market. There was news that hedge funds might be selling anywhere from $20 billion to $30 billion of equities in the next two weeks. Throughout the year hedge funds have gotten it wrong so far. They got short when the market began moving to the upside and got long when we were near the highs. Now we are trending lower and they are thinking about selling. What they sell will need buyers, so we might see another move to the upside in the following months but again I am not sure.
Be careful trading today, I personally think there will be some chop in markets today at these levels, but we already realized this low before on the daily so we might sell through if we do go lower.
I hope everyone makes some profits today! I might not be trading as much but if I see the 9 reversal I will take the trade. Drop a like if this information was helpful or informative :) and lets see if our setup works on the day. Good luck trading
Disclaimer: Community is offered by Moomoo Technologies Inc. and is for educational purposes only.
Read more
Comment
Sign in to post a comment
Moo Contributor
Alkaline Analyst
All Deep Dives:
https://medium.com/@alkalinedeepdives
1110Followers
9Following
4307Visitors
Follow
iamiam : nice post, good job