Using A Satellite View To Spot Developing Market Storms On Your Chart
It would start out as a ‘tropical depression’…
… just south of Jamaica on October 22nd 2012. It would finish as a $71 billion disaster nine days later when it left the eastern seaboard of the US. Such was the wrath of hurricane Sandy.
Those in its path were able to chart the storm’s movements thanks to satellite imagery. Oh, and there were the reporters dumb enough to stand outside in the storm with a mic in their hand.
When looking for a candidate options trade, you can put your finger in the air and try to judge a market’s wind like most traders. Those trades expire either worthless, or even more likely with a loss. Or you can take a satellite view using fractals and surface opportunities on a daily basis.
Why most options contracts are late, or miss altogether
The Europeans called it eight days in advance. Located in Reading, England, the European Centre for Medium-Range Weather Forecasts generated a computer model that predicted Sandy would hit New York and New Jersey. This was in contrast to conventional wisdom that the storm would turn east and head back out into the ocean.
Every minute of the trading day, millions of options traders follow the supposed conventional wisdom they’ve picked up along the way. This leads to completely missing market storms that have been brewing for months – not days, like Sandy. This is often because they simply don’t take enough time to analyze the stock or index they’re trading.
Long-term patterns and trends are overlooked in favor of short-term price moves that really won’t be sustained long enough to make money for their contract. They simply fail to see the larger patterns unfolding in a market that are being repeated on a smaller scale.
Using fractal energy trading you can spot these moments and trade with far greater accuracy.
A way to spot market storms in seconds
The team in the US at the National Weather Service was criticized for not using the ‘high-resolution’ imagery that the Europeans used. In this instance, they ended up confirming Sandy’s path after the folks in England already called it. It took four days for this to happen.
You don’t have to wait four days to spot a storm approaching in your market. You can do it in seconds, simply by applying fractal analysis to your chart. Fractals are simply chart patterns that unfold on a long-term basis.
It starts with the factor of 5. Specifically the relationship between a monthly, weekly, daily and then a 78-minute chart. That’s right – 78 minutes, because six and a half hours of live trading is approximately 78 minutes. This is considered a family view of your charts – with the parents being the long-term monthly and weekly charts – and the children being the daily and 78-minute charts.
Focus on the swings that take place on the monthly charts. Then compare them to the weekly, daily and 78-minute charts. You’ll see two critical relationships:
- Swings take the same shapes and patterns from monthly to weekly, all the way down to the 78-minute chart. Almost like a Russian Matryoshka doll, where a smaller yet pretty much identical version of the same swing appears every time you open up a smaller timeframe.
- Long-term swings have a habit of reappearing and then playing out on a shorter timeframe.
It’s these repeats that you’re looking for to accurately estimate the direction of the market.
Spot market storms in the making before they make landfall
It took a serious hardware and software upgrade at the National Weather Service so that they could make more accurate predictions. In addition to the accuracy, the time for advance warning would also increase – far better than the performance in 2012.
You don’t have to wait a year to make an upgrade to your market analysis. Look for emerging fractal patterns simply by looking at the swings that occur in your selected market.
Check out the XLI, the industrials index derivative. Starting with a monthly view, you can see a swing continuation that unfolded all the way back in 2012. A similar pause, and then continuation in the trend occurred a full three years later – playing out into 2016. Translate this into a weekly, then daily, and then 78-minute view – you can see how the same swing played out.
Yes, history repeats itself with alarming frequency. As long as you know what to look for you can quickly spot these moments – and then position a strategy accordingly!
Don’t be late. Get a jump on these trends by spotting the macro fractal moves – like the Europeans did with Sandy.
Position yourself to benefit from market storms with fractals
They ended up calling Sandy a ‘Frankenstorm’ as the hurricane was expected to merge with another storm front developing in the US, just days before Halloween. News outlets couldn’t get enough – they picked it up and ran with it, in an election year no less. As though everyone hadn’t had enough already.
Skip the nicknames but track the storms that are developing in your chosen sectors. Take the factor of 5 and run with it. Start with a monthly view that stretches back over years. Compare it to the weekly, daily and then fractal intra-day 78-minute views.
As the patterns for trends, consolidation and breakouts emerge, stalk the price levels that you want to enter on – using your chosen strategy. Don’t let the opportunities unfolding with every month and minute pass you by. Benefit consistently with the proven analysis that comes with fractals.