The PRICE MAP incorporates an array of technical studies into a series of support

The PRICE MAP incorporates an array of technical studies into a series of support/resistance levels. Price levels in the series followed by stars *** are weighted support and resistance levels. Prices followed by symbols(<>, UP, DP, R, +c and -c) are directional pivots or trend indicators.

The star *** value weights are determined by the coincidence of occurrence of different studies on a price point. The more stars ***, the more value a level has and the greater the number of technical studies that coincide, or occur on that point.

Symbols such as < >, UP, DP, R, +c and -c represent specific directional bias. The < > signs indicates the Directional pivot for the trading session. This is the initial point that the market will rotate around to find its immediate bias for the trading session, not a trend. To establish a trend the market must sustain a violation of the CRITICAL RANGE, whose parameters are set by the UP (Upside Pivot) and DP (Downside Pivot).

A breakout of the CRITICAL RANGE signals a trend move to specified support or resistance targets designated by the numbers #1, #2, and #3. A trend move will remain intact when the successive price targets are violated and held. An unsustained breakout signals a price movement back to the previously violated level.

NOTE: A PRICE MAP support or resistance level becomes its converse after it has been violated. What once was support becomes resistance.

Trading within the CRITICAL RANGE represents a neutral posture for the market.

The R symbol represents the intra-day trend bias. Trading above the R signals a positive buy break bias, while trading below signifies a negative sell rally bias. A price violation or failure at the R number would reverse this bias. A CRITICAL RANGE breakout should note if the signal is with or against the underlying trend, as counter trend signals should not be expected to be sustained.

+c and -c are symbols denote a high probability of price follow through in the next trading session. Long positions are vulnerable to a pull-back with a closing price below the +c. Only a closing price above the +c signals a high probability of upside follow through in the coming session. The converse is true for the -c.

A longer-term trend bias is provided in the Price Map Trend section. This section highlights the market's underlying market trend for three different time frames. Minor (MIN) 1 day - 2 weeks, Intermediate (INT) 2-8 weeks, and Major (MAJ) 2-8 months. UP and DN signify if the trend is up or down, respectively. The price following the trend indicates the point at which the trend will reverse. For example; a Minor UP 128150 means the Minor trend will change to DN or NEU when the market closes below the 128150 level. NEU signals that the trend is in a neutral position.

Summary

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Practical Application Tips

Where is the Index in relation to its Price Map R number? This tells the trader the general market tone or session's bias. Is the system buying breaks or selling rallies?

What is the Minor (MIN) trend? Is the current action with or against the MIN trend? Action with the trend has more follow through potential. Action against the trend is more corrective with lower probability of follow through.

If the market violates a Directional Pivot (UP or DP), how does the market react? Is it a sharp pop breakout or does the market languish trading around the pivot area? A clean sharp breakout is a statement. Sentiment is shifted quickly and any pull-back to the violated pivot is expected to hold, as a play for the #1 target is the forecast. After the #1 target is attained, it then becomes the directional level for the continuation of the move.

A messy chop back and forth through a pivot (UP or DP) signals that the market may need some time to produce a signal. Under these circumstances, it is best to note the market position in relation to the R number. If the pivot violation is also in the R trend bias direction, it will have a higher probability of follow through. The Directional < > should be used as a momentum number and stop for any trades initiated at either pivot (UP or DP).

A messy chop back and forth through a pivot that is counter to the R bias is more likely to be a false breakout with no follow through potential.

Three star *** numbers should be used to gauge a market's momentum. A sustained trade beyond this level will keep the momentum intact, targeting the next three star *** weighted level.

In addition, a market that has made a substantial move in the session and is fast approaching a three star *** should expect a short-term reaction. These are high probability scalps. It is important, however, not to get "turned around" against the underlying session trend. View this opportunity as a place to "work" or "lighten" any intra-day position.

The Price Map highlights critical pivot points in the market. Waiting for the market to get to these stress areas allows you to have a higher probability risk reward ratio. Aggressive intra-day traders will implement a roll long or short technique at significant Price Map levels.

For example: The market is approaching a three star *** R level. The trader sells the market against this resistance. After a brief pause at the R level, the market violates it and continues higher. The trader quickly buys double the amount sold reversing his/her position. This technique is called rolling long or short.

Caution: This technique should only be used at significant levels in good trending markets (an ADX in a PURPLE position with a value > 33). If not, the technique is a proven cash siphon in choppy sideways markets.

Trading Tips using the Price Map to trade equities

Focus on a group of stocks that have a high Beta or are negatively correlated to the SP500, NASDAQ100 and the Dow Futures.
Watch Index for momentum signals. If the Index is breaking out above the UP, is my stock firming up? If the Index is holding its rally is my stock? If not, you may not want to own it or look to sell and reverse on a negative signal. Conversely if the Index is faltering and breaking down to support and your stock is holding its own in a weak sideways pattern, as the Index comes off support it would be a good time to load up anticipating a breakout.
Note overnight action of Indices for market feel. If the futures market was higher overnight and is now opening lower, this is not healthy. Look to sell against overnight highs. Conversely, if the futures market was lower overnight and is now higher note low points for additional market support.
Where is the Index in relation to its Price Map R number. This tells the trader the general market tone or sessions bias. Is the system buying breaks or selling rallies?
What is the Minor (MIN) trend? Is the current action with or against the MIN trend? Action with the trend has more follow through potential. Action against the trend is more corrective, lower probability of follow through.
Focus on a couple of sectors. Use the Equity Index Ranking table to identify sectors on the move. A +/- 4 shows a sector with a definite bias. Note the broad-based index that correlates best with that sector for momentum signals. A bid sector that correlates best with the ND should note all buy signals in the ND.
Use the Ranking Table on the selected sectors to zero in on best/ worst component issues. A bid sectors bid components that correlate best with the sector index or broad-based index.
When selecting the component issues focus on the following MarketColor profiles; action colors in the direction of the sector index bias, both trend indicators coincide showing a strong trend bias, no turning point or oscillator deviation signals, ADX has good follow through potential.

Using the Price Map with the MarketColor Ranking Tables

Risk Management - The Price Map was designed as an aid in providing trade initiation and risk management. Liquid futures contracts such as the S&P500 and NASDAQ100, representing over $50 billion in notional value transacted each day, provide a good overview of the general market tone. By noting the key Price Map levels for the broad-based indices, a trader can greatly enhance the execution proficiency in equity trading.

Example
Beta is better - Stocks that have a high correlation with the broad-based indices, such as the SP, ND, DJI, will be influenced more by intra-day swings in these indices. Traders should note any divergences.

For example; the NASDAQ (ND) goes negative on the day and is breaking down to its Downside Pivot (DP). CIEN, which is showing a high correlation to the NASDAQ (ND), is higher on the day and is not breaking but is languishing in a sideways trade. The ND trades down to its DP and bounces. This would be a buying opportunity in CEIN. As the stock was not able to break when the underlying index broke and any positive or non-negative action should allow the stock to rally.

Conversely, JNPR takes a tumble when the ND starts to break down to its DP. As the ND starts to find support, the stock pauses. When the ND bounces off its support level JNPR continues its sideways trade unable to rally. When and if the ND approaches the directional < >, a test and rejection from this resistance would provide a selling opportunity in JNPR. Since the stock is already showing negative tendencies, any negative action in the index would expect and exaggerated effect in the stock. Further, If the ND fails from the DP, it would be an aggressive sell signal in JNPR, as the general market is now in a strong negative posture, trading below the DP.