Toby Crabel - Definition of Patterns

Toby Crabel wrote a book called Day Trading With Short Term Price Patterns and Opening Range Breakout which is no longer in print and sometimes sold on eBay for more than $1,000. In this book he defines a number of trading patterns which have become popular numbers to calculate and watch among day traders and swing traders. He is a United States self-made millionaire commodities trader. The Financial Times called him "the most well-known trader on the counter-trend side" He is the fund manager of "Crabel Capital Management". ranking number 101 out of 196 funds on Absolute Return magazine list Absolute Return survey of U.S. groups with more than $1 billion AUM, July 2005. This is the latest current ranking of the top 196 money managers in the country. Mr Crabel manages 3.2 billion dollars and had a growth of 16.7% in 2005. A producer of consistent returns whatever the weather, Crabel has avoided having a losing year from 1991 to 2002 (Wikipedia).

Stretch

The Stretch is calculated by taking the 10 day Simple Moving Average (SMA) of the absolute difference between the Open and either the High or Low, whichever difference is smaller.
 

For example, if the Open is 1250, the High is 1258, and the Low is 1240, then we would take the value of 8 for that day because 1258-1250 is 8 which is smaller than 1250-1240 which is 10. We then add together all of these values for the last 10 trading days and divide this by 10 to get the 10 day SMA. This value will then become the Stretch. Stretch Calculation:

1.  Take the Open, High and Low of each day.
2.  Find delta of High - Open.
3.  Find delta of Open - Low.
4.  Which ever is lower between step 1 and step 2 take that value for each day.
5.  Stretch = average of the values of past 10 days.

The Stretch is used in calculating where to enter the trade and where to place a stop using the ORB and ORBP trading strategies. Before buying and selling the Stretch, also consider support and resistance-levels derived from the Daily Classic Pivot Point.

Daily Classic Pivot Points

The formula used in the calculation of Classic Pivot Points are:
 

R4 = R3 + RANGE (same as: PP + RANGE * 3)
R3 = R2 + RANGE (same as: PP + RANGE * 2)
R2 = PP + RANGE
R1 = (2 * PP) - LOW
PP = (HIGH + LOW + CLOSE) / 3
S1 = (2 * PP) - HIGH
S2 = PP - RANGE
S3 = S2 - RANGE (same as: PP - RANGE * 2)
S4 = S3 - RANGE (same as: PP - RANGE * 3)

Where R1 through R4 are Resistance levels 1 to 4, PP is the Pivot Point, S1 through S4 are support levels 1 to 4, RANGE is the High minus the Low of yesterday's daily EOD.

Opening Range Breakout = ORB

Using this strategy, the trader places a buy stop just above the Open price plus the Stretch and a sell stop just below the Open price minus the Stretch. The first stop triggered enters the trader into the trade and the other stop becomes the protective stop.
 

Crabel's research shows that the earlier in the trading session the entry stop is hit the more likely the trade will be profitable at the close. A market movement that kicks off a trend quickly in the current trading session could add significant profit to a trader's position by the close and should be considered for a multi-day trade.
 

The ORB can be utilized as a general indicator of bias every day. Whichever side of the stretch is traded first will indicate bias in that direction for the next two to three hours of the session. This information alone will keep you out of trouble, if nothing else.
 

Multiple contracts can be used when entering on an ORB or ORBP. This allows for some profit taking as the move continues to guarantee at least some profit in the case of a pullback to the break-even stop. A trailing stop is also very effective.
 

If you miss the ORB and early entry occurred, any 3/8 to 1/2 retracement of the established range can be used as an entry point with stops beyond the 5/8 level. This technique can be utilized twice, but becomes treacherous on the third retracement.

Extending Crabel's research results it is obvious that as time passes and we are not filled early on then the risk increases and it becomes prudent to reduce the size of the position during the day. Trades filled towards the end of the day carry the most risk and the later in the day the trade is filled the less likely the trader will want to carry that trade overnight. Variations of this strategy include the Opening Range Breakout Preference (ORBP - HERE).

Opening Range Breakout Preference = ORBP

An ORBP trade is a one sided Opening Range Breakout (ORB) trade. If other technical indicators show a strong trend in one direction then the trader will exercise a "Preference" for the direction in which to trade the ORB trade. A stop to open a position would be placed on the side of the trend only and if filled a protective stop would then be placed. The calculation of where to place the "stop to open" would be the same as that for the ORB trade: For longs, the Open price plus the Stretch and for shorts the Open price minus the Stretch. The ORBP trade is a specialized form of the ORB trade (HERE).  

Narrow Range = NR

If a price bar's Range is less than the previous bar's range it is said to have an NR. The opposite of NR is Wide Spread (WS). NR is technically NR2 when compared to NR4, NR5, and NR7.
Type: Trend-Continuation or Short-Term Breakout Set-up
Conditions: The current bar has the narrowest range (high - low) of the last X bars. The bar may or may not be an inside bar. Buy and Sell reference are the high and low of the NR bar.
 

Narrow Range 4 = NR4

If a price bar's Range is less than the previous 3 bars' ranges (measured independently) it is said to have the narrowest range in 4 days or NR4. The opposite of NR4 is WS4. NR, NR5, and NR7 are also closely watched price patterns.Type: Trend-Continuation or Short-Term Breakout Set-up

Narrow Range 5 = NR5

If a price bar's Range is less than the previous 4 bars' ranges (measured independently) it is said to have the narrowest range in 5 days or NR5. The opposite of NR5 is WS5. NR, NR4, and NR7 are also closely watched price patterns.Type: Trend-Continuation or Short-Term Breakout Set-up

Narrow Range 7 = NR7

If a price bar's Range is less than the previous 6 bars' ranges (measured independently) it is said to have the narrowest range in 7 days or NR7. The opposite of NR7 is WS7. NR, NR4, and NR5 are also closely watched price patterns.

Type: Trend-Continuation or Short-Term Breakout Set-up

Wide Spread = WS
If a price bar's Range is wider than the previous bar's range it is said to have a WS. The opposite of WS is NR. WS is technically WS2 when compared to WS4, WS5, and WS7.
WS4 = Wide Spread 4: If a price bar's Range is wider than the previous 3 bars' ranges (measured independently) it is said to have the widest range in 4 days or WS4. The opposite of WS4 is NR4. WS, WS5, and WS7 are also closely watched price patterns.

Inside Day = ID
If the high of the current day is lower than the high of the previous day AND the low of the current day is higher than the low of the previous day then we have an ID or Inside Day. The opposite to an ID is an Outside Day (OD).  
Type: Trend-Continuation or Short-Term Breakout Set-up.

Outside Day = OD
If the high of the current day is higher than the high of the previous day AND the low of the current day is lower than the low of the previous day then we have an OD or Outside Day. The opposite to an OD is an Inside Day (ID).

Bear Hook
A Bear Hook occurs when you have an NR with the Open less than the previous bar's Low AND the Close greater than the previous bar's Close.

Bull Hook
A Bull Hook occurs when you have an NR with the Open greater than the previous bar's High AND the Close less than the previous bar's Close.

Inside Day Narrow Range 4 = IDnr4
IDnr4 is an Inside Day (ID) with a Narrow Range 4 (NR4).
An IDnr4 is a combination of an ID and an NR4. This happens when the current day's high is lower than the previous day's high AND the current day's low is higher than the previous day's low AND the range is the narrowest when compared to the previous 3 trading days.
See also HERE 

2 Bar Narrow Range = 2BNR
If the 2-day-range (the higher of the 2 highs less the lower of the 2 lows) is the narrowest 2-day-range in the last 20 trading sessions then we are currently sitting on a 2BNR.

3 Bar Narrow Range = 3BNR
If the 3-day-range (the higher of the 3 highs less the lower of the 3 lows) is the narrowest 3-day-range in the last 20 trading sessions then this is true.

4 Bar Narrow Range = 4BNR
If the 4-day-range (the higher of the 4 highs less the lower of the 4 lows) is the narrowest 4-day-range in the last 30 trading sessions then this is true.

8 Bar Narrow Range = 8BNR
If the 8-day-range (the higher of the 8 highs less the lower of the 8 lows) is the narrowest 8-day-range in the last 40 trading sessions then this is true.

Credits: www.mypivots.com

Possible Pattern of current STD Green Week

Tony Plummer: The K-Wave - Heretical Thoughts & Practical Understandings

Credits: MARKET TECHNICIAN - Issue 59 – July 2007

STD Green Week (April 23-27)

 

Tony Caldaro (link): The decline from last weeks Intermediate wave B at SPX 1393 clearly looks like Intermediate wave C. Thus far, we have had a three wave decline to SPX 1370, which we labeled Minor A. Then a rally to SPX 1387, which we labeled Minor B. Minor C is underway now. As soon as the OEW 1363 pivot range, (1356-1370), fails, the steep part of this declining wave should be underway. We continue to look for a correction low between SPX 1300 and 1340, and ideally between 1313 and 1327. Short term support is at the 1363 pivot and SPX 1340, with resistance at the 1372 and 1386 pivots. Short term momentum is nearly back to neutral after getting extremely oversold.

Francis Bussiere (link): Moon in Capricorn Low near Monday the 23rd?
Moon 20 degree High near Wednesday the 25th?  
Moon in Taurus Low near Monday the 30th?
Moon in Leo High near Monday the 6th?

The dual Moon cycles work best from May to October when they are in phase, and historically this is the weakest period in the market.

Nikolai D. Kondratieff: The Static and the Dynamic Views of Economics

The Sixth Kondratieff

Nikolai D. Kondratieff - The Long Waves in Economic Life

Martin A. Armstrong (1989 + 2011): Long Wave Theory - Kondratieff Wave Already Bottomed?

Market & Solar Activity

Yesterday a rapid increase in Sunspots went along with the market's decline.

Geomagnetic forecast suggests weakness also for next Monday, April 23. 

Recent STD Red Weeks

April 16-17 major High - sharp decline into April 20-23 Low - rally into mid May 
(follow upper STD scheme)

The Sun, the Moon, and the Number 56 | David McMinn

The Kondratieff Cycle And Subdivisions

The economic long wave is a boom and bust cycle driving the global economy, first discovered by Russian economist Nikolai Kondratieff in the 1920s. Kondratieff was researching debt, interest rate, production and prices when he discovered the economic long wave. The Long Wave Dynamics approach calculates the ideal Kondratieff long wave cycle as 56 years in length, but it can run long and short in Fibonacci ratios to the ideal length in time.

The current long wave is of the long variety and began in 1949. Current analysis suggests that the current K-wave will end in 2013, running eight years and a Fibonacci ratio of 14.5% longer than the ideal 56 years. 

The late renowned Harvard economist Joseph A. Schumpeter, author of the book Business Cycles; A Theoretical, Historical, and Statistical Analysis of the Capitalist Process, believed that the economic long wave is the single most important tool for economic prognostication.

The current long wave is now in the Kondratieff Winter season. Most investors wish they had access to this long wave season chart in 2007. Every long wave has four seasons, just like a year. The approximate length of a long wave season is 14 years, but they can run short and long. Each season typically contains four Kitchin cycles with an ideal length of 42 months. However, long wave seasons can have fewer or more Kitchin cycles than the normal four.

www.escholarship.org

 

















































The Kitchin Cycles: Harvard’s Joseph Schumpeter concluded that every long wave was made up of 18 smaller business cycles or Kitchin cycles. In more recent years, with more sophisticated charting technology and market analysis, the research conclusions of market analyst P.Q. Wall, that the long wave is make up of only 16 market cycles, has been validated. This is an essential distinction in cycle research.

Schumpeter’s model of how all the cycles worked together to produce long waves included Kitchin cycles (the regular business cycle of 3-5 years) and Juglar cycles (7-11 years), with three Kitchins in each Juglar. Schumpeter also wrote of the Kuznets cycles (15-25 years), but didn’t put them in the charts below. The chart depicts the flow of the Kitchin and Juglar cycles integrated in 56-year long wave cycles. Note that Schumpeter’s model presented 18 business cycles in a regular long wave. See: schumpeter_business_cycles.pdf

Market cycles differ from business cycles in that they are identified on an index chart, and not necessarily in the economic data as a business cycle. However, they often correlate to the regular business or trade cycle. Every long wave appears to be made up of 16 market “Kitchin” cycles.

The chart above demonstrates our count of the 15 Kitchin cycles that have come and gone in the current long wave since 1949 using stochastics. We are currently in cycle number 16, with its expected conclusion in the year 2013.

The 16 Kitchin cycles that make up a long wave are ideally 42 months in length, but they are rarely ideal and fluctuate in length both short and long, often in Fibonacci ratios of their ideal length in time. In each Kitchin Cycle there are ideally 36 dips or 36 Hurst "5 week" lows.

The Kitchin Third: The ideal Kitchin cycle is 42 months or 1277.5 days in length, the ideal Kitchin Third is 14 months or 425.83 days. A Kitchin cycle is made up of 9 Wall Cycles, therefore each Kitchin Third is made up of three Wall Cycles. PQ Wall had a general rule of third last and weakest. This goes for the final Kitchin Third in a Kitchin Cycle, but also goes for Wall Cycle #3, #6, and #9, or the final Wall Cycle in each Kitchin Third. The Kitchin Cycle often unfolds in the three Kitchin Third sections, but the Kitchin Third is not typically as distinct as the other cycles.

The chart displays the full Kitchin cycle #14 in this long wave, which began on September 1, 1998 and ended on October 10, 2002. This Kitchin cycle, like most in the current long wave, ran long. Therefore, the Wall cycles and Kitchin 3rds also ran longer than ideal. The nine Wall cycles and three Kitchin 3rds are all clear in this Kitchin cycle

Schumpeter’s model of how all the cycles worked together to produce long waves included Kitchin cycles (the regular business cycle of 3-5 years) and Juglar cycles (7-11 years), with three Kitchins in each Juglar. Schumpeter also wrote of the Kuznets cycles (15-25 years), but didn’t put them in the charts below. The chart depicts the flow of the Kitchin and Juglar cycles integrated in 56-year long wave cycles. Note that Schumpeter’s model presented 18 business cycles in a regular long wave.

The Wall Cycle (aka 20-Week Cycle):  The Wall cycle is the ideal trader’s cycle. Accurate technical analysis of the Wall cycle is essential for stock market traders. If you divide the ideal 56 year long wave by 144 you have the ideal Wall cycle. The mathematical relationship of these cycles indicates the Wall cycle is a miniature long wave. The approximate 20 week cycle (141.9 days) fluctuates short and long by Fibonacci ratios to the ideal length.

The chart presents the Wall cycle that ran from July 8, 2009 to February 5th 2010. The Wall cycles are currently expected to be running long due to government stimulus and aggressive monetary policy. If the ideal Wall cycle is 141.9 days, then an exact 50% extension of that is 212.85 days. July 8, 2009 plus 212.85 days is February 5th, 2010.

The Quarter Wall Cycle (aka Trader’s Cycle)

This chart is an example of the four Quarter Wall cycles in a Wall cycle in the DJIA and 8,5,5 stochastics. This is the Wall cycle that ran from October 10, 2002 until March 12, 2003. Tracking the Quarter Wall cycle is of critical importance for traders.

As the name implies, the Quarter Wall cycle reflects that the Wall cycle tends to unfold in four sections, or Quarter Wall cycles. The Quarter Wall cycle is a mini version of the long wave season. The ideal Quarter Wall cycle fluctuates in Fibonacci ratios in time relative to its ideal length of 35.475 days.The Quarter Wall is the critical cycle for traders.  Just like the other cycles, the Quarter Wall will run short and long relative to the ”ideal” in Fibonacci ratios in time. The forecasting power of the Quarter Wall forecasting tool is often startling.

"There is a tide in the affairs of men.

Which, taken at the flood, leads on to fortune;

Omitted, all the voyage of their life

Is bound in shallows and in miseries.

On such a full sea are we now afloat,

And we must take the current when it serves,

Or lose our ventures."

 William Shakespeare

"By the Law of Periodical Repetition, everything which has happened once must happen again, and again, and again - and not capriciously, but at regular periods, and each thing in its own period, not another’s, and each obeying its own law … The same Nature which delights in periodical repetition in the sky is the Nature which orders the affairs of the earth. Let us not underrate the value of that hint."

Mark Twain