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HEIKIN-ASHI TRENDS

NEWSLETTER

INDEXES | EQUITIES | FOREX |BITCOIN

#317 | 02.14.2021

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Technical and non-technical commentary for the coming week

• (+) Equity markets are not in a bubble (page 11, monthly RS breadth)

• (+) Markets will go higher.

• (-) Gold will go lower.

• Nobody knows the future, but many pretend they do. The difference between sentiment (“I believe that…”) and data (trailing stop): a (trailing) protective stop is the only safe(r) protection against (massive) capital loss.

• White (vaccine rumors), grey, black swans may fly over anytime.

Last week

• (+) Positive signs for the market.

• (+) Biotechnology at full steam.

• (+) Bitcoin will go higher.


Heikin-Ashi Education Corner

• Candle-inside-candle Heikin-Ashi pattern: A Heikin-Ashi candle inside another Heikin-Ashi candle is sign of a trend slowdown. It may be a sign of reversal or a sign of a pause, too, before the trend resumes. A stop-loss is highly recommended.

• When you listen to talking heads or get stock recommendations, trust, but verify. If Heikin-Ashi charts tell the same story, it is a confirmation and not the final decision. Otherwise, ignore the advice.

• A short talk about haOscillator: A falling oscillator in an uptrend is a sign of a consolidation, not of a trend change. A rising oscillator in a downtrend is a sign of consolidation, not of a trend change.

• About perfection: There is none, especially in trading. Too much effort – time and money - is wasted in search of ‘perfect’ entries, exits, and stops. They work once, twice, and then they do not. One solution is to avoid trading noise in lower time frames and use a stop-loss and trends (lesser noise) in higher time frames.

• A short talk about haDelta: There are five (5) possible scenarios when haDelta and its short average are crossing above/below each other. Not all these signals are strong as the following table shows:

haDelta average (1) haDelta (2) Crossing 1x2 Signal strength

Below zero Below zero Positive Weak positive

Below zero Below zero Negative Strong negative

Above zero Above zero Positive Strong positive

Above zero Above zero Negative Weak negative

At/near zero(*) At/near zero(*) Positive Very strong positive

At/near zero(*) At/near zero(*) Negative Very strong negative

(*) It may also signal a consolidation. Tricky.

• In an uptrend, pullbacks are accepted if the close does not go below the previous important low.

• In a downtrend, reactions are valid if the previous important high is not taken.

• (+++) A good trailing-stop takes most emotions out of a trade or investment.


• Establish a level of risk you accept, do not change it, use any chart, with any indicators you may find suitable, and ride through the noise. If noise is just noise, the odds to be stopped out are small and losses minimal. If noise is the start of something serious, you will be stopped out with no regrets.

• If you hear about a stock or financial instrument recommended as a buy or a sell, verify it first with Heikin-Ashi. You will be surprised how often you will be right and save money.

• Like any other indicators, Heikin-Ashi indicators will show (in most cases) different states (bullish/bearish) in different time frames. To solution to improve odds of success is to stick with the time horizon of your trade/investment.

• haDelta is faster and noisier than an average or the S-oscillator. A stop-loss is the only way to protect against false signals issued by the two (and any) indicators


Brief introduction to Tom DeMark TD Indicators

TD Indicators are a whole family of technical indicators developed during a period of over 40 years by Tom DeMark. They were and are used by hedge funds and big names in trading with the purpose of improving the odds in trading.

There is a large amount of information about them on the net, most of it being accurate. It takes a long time to study and understand all indicators, accurate software being a prerequisite (another challenge).

The purpose of this introduction is to introduce the trader to the basic level of understanding of TD Indicators: TD Buy and Sell Sequential. There are many exceptions and subtleties that are not discussed here.


TD Buy Sequential

• defines the trend

• identifies exhaustion points (!)

• has two components, TD Buy Setup and TD Buy Countdown TD Buy Setup

• must be preceded by a Bearish TD Price Flip (a shift from positive to negative momentum) defined as

o current close is less (<) than the close 4 bars earlier and o previous close is greater (>) than the close 4 bars earlier

• once the bearish TD Price Flip is triggered, a sequence of 9 consecutive closes (1 to 9), each one less than the close 4 bars earlier (momentum) can follow. When this happens, a 9 is printed and the TD Buy Setup is completed. A TD Buy Countdown can now start.

• ‘9’ also warns about the start of a pullback or consolidation. In certain cases, it signals an important top and a strong pullback.

TD Buy Countdown

• identifies a trend exhaustion (trend reversal)

• following the completion of a TD Buy Setup (9 is printed), it starts comparing the current close with the low 2 bars earlier for a potential buy until there are 13 closes (not necessary consecutive) lower than the low 2 bars earlier. Then, a 13 is printed.

• the first bar of the countdown may be o either the 9th bar of the TD Buy Setup if its close is lower than the low 2 bars earlier or o the first bar (after the 9) that has a close lower than the low 2 bars earlier. o when a 13 is printed, the TD Buy Countdown ends and a relevant trend reversal from

down- to uptrend is expected (the downtrend is exhausted). o bar 13 is a serious warning for a trend change, especially when it is printed in two

timeframes (e.g., daily, and weekly). Trading the TS Buy Setup

• use the completed TD Buy Setup (‘9’) only with a stop. The signal may be weak (non-event) or rarely, strong (stop will be activated).

• use the completed TD Buy Countdown (‘13’) only with a stop. Usually, the signal is strong but in strong downtrends trends, its anticipated effect is delayed.


TD Sell Sequential

• defines the trend

• identifies exhaustion points (!)

• has two components, TD Sell Setup and TD Sell Countdown TD Sell Setup

• must be preceded by a Bullish TD Price Flip (a shift from negative to positive momentum) defined as

o current close is greater (>) than the close 4 bars earlier and o previous close is less (<) than the close 4 bars earlier

• once the bullish TD Price Flip is triggered, a sequence of 9 consecutive closes (1 to 9), each one higher than the close 4 bars earlier (momentum) can follow. When this happens, a 9 is printed and the TD Sell Setup is completed. A TD Sell Countdown can now start.

• ‘9’ also warns about the start of a reaction or consolidation. In certain cases, it signals an important bottom and a strong uptrend.

TD Sell Countdown

• identifies a trend exhaustion (trend reversal)

• following the completion of a TD Sell Setup (9 is printed), it starts comparing the current close with the high 2 bars earlier for a potential sell until there are 13 closes (not necessary consecutive) higher than the high 2 bars earlier. Then, a 13 is printed.

• the first bar of the countdown may be o either the 9th bar of the TD Sell Setup if its close is higher than the high 2 bars earlier or o the first bar (after the 9) that has a close higher than the high 2 bars earlier. o when a 13 is printed, the TD Sell Countdown ends and a relevant trend reversal from up-

to downtrend is expected (the uptrend is exhausted). o bar 13 is a serious warning for a trend change, especially when it is printed in two

timeframes (e.g., daily, and weekly). Trading the TD Sell Setup

• use the completed TD Sell Setup (‘9’) only with a stop. The Sell signal may be weak (non-event) or rarely, strong (stop will be activated).

• use the completed TD Sell Countdown (‘13’) only with a stop. Usually, the signal is strong but in strong trends as at those the time of writing – early June – its anticipated effect is delayed.


SP-500 – Weekly S-oscillator

Sign of a continuation (haDelta).

Last weeks ago: No sign of a trend change, yet.


S&P-500 – Monthly RS breadth chart

Another daily market (SP-500) breadth approach, this time based on price rankings. Notice how the market breadth synchronizes with market peaks and troughs. Watch out for +/-300 levels (out of 500+ stocks). How can you use market breadth based on price rankings?

o Long/Short when the market breadth indicator has a higher/lower value than the

previous one o Use a trailing stop o (optional filter) Combine it with the S&P-500 above/below its 200-day average


SP-500

Short-term: 9/9 TD Sell Setup with haDelta attempting to print a positive signal. I trust

haDelta. Medium-term: positive signal. Long-term: 9/9 TD Sell Setup.

Last week Short-term: 13/13 TD Sell Countdown printed last Tuesday. Still in an uptrend with an

haOscillator warning. Medium-term: It can be translated as a negative divergence, but it’s not; just a weaker uptrend

almost 10% above the trailing-stop. Long-term: 9/9 TD Sell Setup.


Volatility Index (VIX)

Short-term: failure at zero! Positive for the markets. Medium-term: negative haDelta signal. Long-term: 10/13 TD Buy Countdown. No indication of reversal to higher volatility.

Last week Short-term: at support. Signs of reversal, it may be a short reaction. Medium-term: consolidation. Long-term: 9/13 Buy. No indication of reversal to higher volatility.


DAX30

Short-term: positive. Medium-term: positive sign. Long-term: 18.2% until the generous stop. Last week Short-term: again, above the trailing-stop. Medium-term: positive sign. Long-term: a top here (haDelta).


HEIKIN-ASHI MARKET BREADTH - DAILY

%Net < 0 = weakness. %Net > 0 = strength. +/-90% point to reversals.


HEIKIN-ASHI MARKET BREADTH - WEEKLY

%Net < 0 = weakness. %Net > 0 = strength.


HEIKIN-ASHI MARKET BREADTH – MONTHLY

%Net < 0 = weakness. %Net > 0 = strength.


Table 1: Morningstar® sectors + industry groups (31) – daily, weekly, and monthly heikin-ashi perspectives.


Table 2: Select Sector SPDRs (9) - daily, weekly, and monthly heikin-ashi perspectives.

Note: The tables in Figures 1 and 2 are based on heikin-ashi change of color indicating a possible change of trend or the

start of a consolidation. Other heikin-ashi criteria can be used to generate similar tables. For more information about heikin-ashi check the daily personal blog http://heikinashi.wordpress.com and http://www.educofin.com. All tables and charts are generated at the end of the week. The monthly view (Monthly HA Trend) is not final until the end of the calendar month.

Table 3: FX pairs - daily, weekly, and monthly heikin-ashi perspectives.

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US Dollar ETF (UUP)

Figure UUP (US Dollar ETF) Short-term: positive haDelta, but below the buy-stop. Medium-term: still below the buy-stop. Downtrend. Long-term: 9/9 TD Buy Setup + a positive divergence. Last week Short-term: uptrend. Medium-term: still below the buy-stop. Downtrend. Long-term: 9/9 TD Buy Setup.


Figure FX1: EURUSD daily Short-term: high probability to turn lower from here. Medium-term: in an uptrend. Far from a trend change. Long-term: weak (haOscillator). Last week Short-term: attempt to reverse. Medium-term: in an uptrend. It’s still far from a change of trend. Long-term: weak.


Figure FX2: GBPUSD daily Short-term: in an uptrend (higher highs, higher lows), going higher. Medium-term: positive. Long-term: above the @buy-stop, positive. Last week Short-term: in an uptrend (higher highs, higher lows). Medium-term: positive. Long-term: above the @buy-stop, positive.


Figure FX3: AUDUSD daily Short-term: undecided (resistance + haDelta). Negative bias. Medium-term: positive, in uptrend. Long-term: haDelta weakness. Last week Short-term: positive divergence. Medium-term: positive, in uptrend. Long-term: haDelta weakness.


Figure FX4: USDJPY daily Short-term: uptrend, positive divergence. Medium-term: a short pause here. Long-term: in a downtrend. Last week Short-term: uptrend. Medium-term: signs of reversal of the downtrend. Long-term: in a downtrend.


(Source: GDAX) Figure FX6: BTCUSD daily Short-term: signs of a pause. Medium-term: positive. Long-term: who cares about bubbles? Have and follow a stop you rely on, in multiple time frames. Last week Short-term: uptrend. Medium-term: signs of reversal of the downtrend. Long-term: in a downtrend.


Figure 1: QQQ Short-term: 9/9 TD Sell Setup. Pullback is over. Medium-term: positive haDelta signal, still comfortable @11% above the trailing stop. Long-term: uptrend, but eyes on haDelta. The trailing-stop decides the entry and the exit. Last week Short-term: back in uptrend. Medium-term: still comfortable @11% above the trailing stop. Long-term: uptrend, but eyes on haDelta and the trailing-stop.


Figure 2: IWM (iShares Russell 2000 Index ETF) Short-term: above the trailing-stop. Medium-term: almost a perfect uptrend. Long-term: 8/9 TD Sell Setup. Last week Short-term: above the trailing-stop. Medium-term: almost a perfect uptrend. Long-term: 8/9 TD Sell Setup.


Figure 3: SMH (Market Vectors Semiconductor ETF) Short-term: 9/13 TD Sell Countdown. Above the trailing-stop. Medium-term: uptrend, signs it will go higher. Long-term: 9/9 TD Sell Setup at the end of January. Warning! Last week Short-term: ready to go higher, above the trailing-stop. Medium-term: uptrend, signs it will go higher. Long-term: 9/9 TD Sell Setup at the end of January. Warning!


Figure 5: XLF (Financial sector ETF) Short-term: 9/9 TD Sell Setup. haDelta shows potential positive signs. Medium-term: positive. Long-term: at resistance. 11/13 TD Sell Countdown. Last week Short-term: at resistance. Medium-term: consolidation with a positive bias. Long-term: at resistance. 8/9 TD Sell Setup.


Figure 6: DIA (SPDR Dow Jones Ind. Average ETF) Short-term: 9/9 TD Sell Setup. Weak uptrend. Medium-term: positive signs. Long-term: 9/9 TD Sell Setup. Almost 21% from the stop. Last week Short-term: consolidation with positive bias. Medium-term: weak uptrend, but still above the trailing-stop. Long-term: 9/9 TD Sell Setup. 21% from the stop.


Figure 7: EEM (Emerging Markets ETF) Short-term: 9/9 TD Sell Setup. Medium-term: the stop is the red line to cross. Positive. Long-term: 8/9 TD Sell Setup. 18% from the trailing-stop. I trust the trailing-stop before any

other indicator. Last week N/A


Figure 8: GLD (Gold ETF) Short-term: going lower. Medium-term: downtrend, below the buy-stop. Long-term: near support, negative bias. Last week N/A


Figure 9: SLV (Silver ETF) Short-term: negative, below stop-loss. Medium-term: negative, below the stop-loss. Long-term: a top here. Last week Short-term: a short bounce is expected. Medium-term: fake breakout, it closed below the stop. Long-term: a top here.


Figure 10: IBB (iShares Nasdaq Biotechnology Index Fund ETF) Short-term: uptrend, positive reversal (haDelta). Medium-term: positive, negative divergence. Long-term: it may be translated as ‘close to a top’ but the trailing stop is the objective

judge. Last week N/A


DISCLAIMER - This newsletter is published only as an educational tool for those who are interested by and want to know more about heikin-ashi noise filtering / trend technique. It is neither a forecast nor a prediction of the markets/instruments. The information in this newsletter represents author’s own opinions and does not recommend any trades or investments and at no time should the reader infer that any such recommendations are given. The content of this free newsletter is an illustration of how various heikin-ashi techniques apply in the field of technical analysis. This information is not to be construed as an offer to sell or the solicitation of an offer to buy any securities. All information presented herein is believed to be reliable, but we cannot guarantee its accuracy. The author(s) may hold positions or other interests in instruments mentioned in this newsletter. Past performance is not a reliable indicator of future returns. All charts are for illustrative purposes only. Reproduction, disclosure, or dissemination of this newsletter is allowed with no alteration of its content and only with a mention of its author(s) and source. -

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