Bar chart with swing lines

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Bar chart with swing lines

• Toronto TASUG March 2003

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OHLC Bar

• Bar is represented by 4 elements

High
Open
range high - low
Close
Low
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Bar classification12

• 1. Up bar

The bar on the right is called an UP bar. It
has a higher high and a higher low than the
previous bar. Open and close positions do
not matter.
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Bar classification

• 2. Down bar

The bar on the right is called an DOWN bar. It
has a lower high and a lower low than the
previous bar. Open and close positions do not
matter.
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Bar classification

• 3. Inside bar

The bar on the right is called an INSIDE bar.
It has a lower high and a higher low than the
previous bar or simply its trading range is
inside that of the bar on the left. Open and
close positions do not matter.
Inside days are essentially slowdowns or pauses
in the market action Temporary interruptions
as buyers and sellers are unable or unwilling
to push beyond the previous days range. This
behavior suggests the market is undecided about
direction.3 Narrow-range bars and inside
bars represent short-term volatility lows out of
which price can move sharply.4
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Bar classification

• 4. Outside bar

The bar on the right is called an OUTSIDE bar.
It has a higher high and a lower low than the
previous bar or simply the trading range
is outside that of the bar on the left. Open and
close positions do not matter.
Outside days are fairly common and any value
they have is tied to such factorsas the
relationship of the bars closing price to the
opening price and currenttrend. Some traders
interpret outside days as signals of either
continuationmoves (i.e. those in the same
direction of the trend) or reversals,
dependingon these factors.5 Outside bars can
provide potential entry signals, if youknow what
to look for and what to look out for. 6
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Bar classification

• 5. Neutral/borderline bar

The bar on the right is an example of a NEUTRAL
bar. It is a bar that does not fall into the
other previously defined classifications.
Basically either the high or low is the same as
the previous bar. Open and close positions do
not matter.
Some people may relaxed definitions such that
these bars may be includedin the previous four
classification. For the example above, some may
consider it to be a down bar or maybe anoutside
bar.
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Bar summary

• outsidebar H gt Ref( H, -1 ) AND L lt Ref( L, -1
  )
• insidebar H lt Ref( H, -1 ) AND L gt Ref( L, -1
  )
• upbar H gt Ref( H, -1 ) AND L gt Ref( L, -1 )
• downbar L lt Ref( L, -1 ) AND H lt Ref( H, -1 )
• neutralbar is one that does not match any of the
  aboveorneutralbar L Ref( L, -1 ) OR H
  Ref( H, -1 )

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Bar summary

• An alternative (without neutral bar)
• outsidebar H gt Ref( H, -1 ) AND L lt Ref( L, -1
  )
• insidebar H lt Ref( H, -1 ) AND L gt Ref( L, -1
  )
• upbar H gt Ref( H, -1 ) AND L gt Ref( L, -1 )
• downbar L lt Ref( L, -1 ) AND H lt Ref( H, -1 )

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Who is in control?

• In general, one can tell how bullish or bearish a
  bar is by looking at factors such as
• The closing price versus the open price.
• The closing price versus the previous close.
• The position of the closing price within the
  range of the bar.
• The size of the range versus the previous bars.
• The volume traded.
• Gaps7 within the chart.

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Control example

• Bearish example

• One would expect that price would be
• lower in the short term because
• Down bar
• Negative (close lt open) bar
• Open near the high and close nearthe low
• Low is lower than low 2 bars ago
• Not only did it closed below theclose of
  previous bar, it closed belowthe close of 3
  bars ago

Series of three up bars. First two are positive
orbullish (open gt close) and the next is
negativeor bearish (close lt open).
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Further control information

• In terms of the battle between buyers and
  sellers, one should look at candlesticks pattern
  doji, harami, hammer, hanging man, engulfing
  etc.
• Stevens8 has a chapter Recognition and
  Analysis of Chart Patterns which covers bar
  patterns with numerous examples.
• Pring1 has a chapter one and two bar patterns
  with Key Reversal Bars, Exhaustion Bars and
  Pinocchio Bars. Pring9 recently published an
  article on two bar reversal pattern.
• Examples charts of chart patterns provided at the
  end.

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Some ways to plot bar charts

• One colour for all bars.
• Colour bars with green representing close greater
  than previous close and red representing close
  less than previous close.
• Colour bars (like candlesticks) with green
  representing open greater than close (like up
  candles) and red representing close less than
  open (like down candle).
• One colour bars with symbols showing various
  patterns like reversal pattern.
• Various colours for each type of bars.

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Colour bar chart

• One can assign colours to the bars
• Up bars green
• Down bars red
• Inside bars yellow
• Outside bars blue
• Neutral bars white

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Daily bar chart of DJ-30
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Daily bar chart of DJ-30
Colour bars using AmiBroker10
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Daily candlestick chart of DJ-30
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Daily candlestick chart of DJ-30
Colour candlesticks using AmiBroker10
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Trends

• In general, most consider
• Uptrend is a series of bars with higher highs and
  higher lows.
• Downtrend is a series of bars with lower highs
  and lower lows.

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Trends

• With up and down bars, swing lines can be drawn
  easily.

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Trends

• According to Dunnigan2
• An Upswing starts when a bars high and low
  prices rise above the respective high and low
  prices of the latest Downswing. Prices then
  remain in an Upswing until such a bar that the
  high and low prices decline below the respective
  high and low prices of the highest bar of the
  Upswing. The highest price in the Upswing is
  called a TOP.

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Trends

• According to Dunnigan2
• A Downswing starts when a bars high and low
  prices decline below the respective high and low
  prices of the highest bar of the latest Upswing.
  Prices then remain in a Downswing until a bar
  high and low prices rise above the respective
  high and low prices of the lowest bar of the
  Downswing. The lowest price in the Downswing is
  called a BOTTOM.

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Trends

• Dunnigan swing2

Highest bar of Upswing
Start of downswing
Start of Downswing
Start of Upswing
Start of Upswing
Lowest bar of downswing
Lowest bar of downswing
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Trends

• According to Gann swing11
• Upswing From down to up. The swing direction can
  change from down to up only if the market makes
  two consecutive highs. When the swing direction
  changes from down to up, the low of the downswing
  is called a valley and represents supports.

Using Gann swing definition11 (on page 54)
used by charting program Fibonnaci Trader.
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Trends

• According to Gann swing11
• Downswing From up to down. The swing direction
  can change from down only if the market makes two
  consecutive lows. When the swing direction
  changes from up to down, the high of the
  downswing is called a peak and represents
  resistance.

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Trends

• Gann swing11

Highest bar of Upswing
Start of downswing
Start of Downswing
Start of Upswing
Start of Upswing
Lowest bar of downswing
Lowest bar of downswing
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Swing charts

• Have implemented swing function that can produce
  various swing types.
• There is a minimum of one bar required to figure
  out the start of a new swing line.
• Examples
• Why modified swing line?

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Daily bar chart of DJ-30
Daily bar chart of DJ-30
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Daily bar chart with swing of DJ-30
Modified swing lines using AmiBroker10
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Daily bar chart with swing of DJ-30
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Weekly bar chart of XAU
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Daily bar chart of XAU
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Daily bar chart of XAU
Down bar with close below previous bar low
Negative up bar
Negative up bar bearish harami
Two bar reversal bearish engulfing
Upswing ends with negative up bar to trend line
then down bars
Positive down bar with close above previous bar
low
Series of up bars followed by pullback to support
and then a positive bar
Series of down bars to trend line followed by two
positive bars
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Info/code for charting programs

• Here are a few related(?) references (with some
  code) that may be interest to others
• Metastock http//eis.pl/kr/AFM/e-se-Dunnigan_Tre
  nd.htmlhttp//toronto.tasug.com/CodeSnip.zip
• TradestationOn Silicion Investor site, there is
  a discussion subject called Dunnigan's Swing
  Formulas under the forum Market Trends and
  Strategies http//www.siliconinvestor.com/stockt
  alk/subject.gsp?subjectid51961
• AmibrokerIn the Yahoo Amibroker message
  group,- message 2098 has Gann Swing Chart code
  written by Tomasz Janeczko (see AFL library).-
  message 23815 has an attempt for swing code.-
  message 27893 has kagi/swing code (see AFL
  library).- message 29073 has zigzag code based
  on percentage swing.- message 34064 has swing
  code with a swing size defined.
• Cringan, William, Zigzag Targets Technical
  Analysis of Stocks and Commodities, February 2003
  code for programs like Metastock, Tradestation
  and Amibroker in http//www.traders.com/Documentat
  ion/FEEDbk_docs/Archive/022003/TradersTips/Traders
  Tips.html

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Chart Patterns

• Following are some examples of chart patterns
  with modified swing lines added. The examples are
  taken from various articles that discusses those
  patterns. Please refer to the articles and
  references such as Pring1 and Stevens8 for
  more detail.

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Pattern bull flag12
Morning star
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Pattern bull flag12
Two hammers
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Pattern bear flag12
Bearish harami
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Pattern bear flag12
Bearish harami cross
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Pattern (long) broadening triangle13
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Pattern (short) broadening triangle13
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Pattern symmetrical triangle14
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Pattern symmetrical triangle15
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Pattern symmetrical triangle15
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Pattern symmetrical triangle15
This is just a weekly view of the previous chart
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Pattern symmetrical triangle15
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Pattern symmetrical triangle15
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Pattern ascending triangle16
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Pattern compact ascending triangle16
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Pattern descending triangle16
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Pattern descending triangle16
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Pattern falling wedge in an uptrend17
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Pattern falling wedge in a downtrend17
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Pattern a rising wedge in a downtrend17
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Pattern a rising wedge in an uptrend17
56
Pattern head and shoulder18
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Pattern inverse head and shoulder18
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Pattern symmetrical broadening top19
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Pattern ascending broadening top19
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Pattern ascending broadening top19
This is just a weekly view of the previous chart
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Pattern descending broadening top19
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References

• Pring, Martin, Technical Analysis Explained,
  McGraw-Hill Trade, 4th ed 2002.
• Dunnigan, William and Mack, Donald, New
  blueprints for gains in stocks and grains
  One-Way Formula for Trading in Stocks and
  Commodities, Financial Times Prentice Hall 1997.
• Staff, Technical Tool Insight Inside days,
  Active Traders, January 2003, Volume 4, No. 1,
  pages 88-89
• Hartle, Thom, Opening shots, Active Traders,
  April 2003, Volume 4, No. 4, pages 36-38.
• Kira Mccaffrey Brecht, Technical Tool Insight
  Outside days, Active Traders Magazine, December
  2002, Volume 3, No. 12, pages 86-87.
• Andrews, Timothy, Outside bars From concept to
  strategy, Active Traders Magazine, April 2003,
  Volume 4, No. 4, pages 40-43.
• Kira Mccaffrey Brecht, Technical Tool Insight
  Gaps, Active Traders Magazine, April 2003,
  Volume 4, No. 4, pages 82-84.
• Stevens, Leigh, Essential Technical Analysis
  Tools and Techniques to Spot Market Trends ,
  John Wiley Sons 2002.
• Pring, Martin, Twice as nice The two-bar
  reversal pattern, Active Traders Magazine, March
  2003, Volume 4, No. 3, pages 48-51
• AmiBroker, http//www.amibroker.com
• Davis, Paul, Swing trading price and volume,
  Active Traders, January 2002, Volume 3, No. 1,
  page 50-57.
• Bierovic, Tom, Flags by candlelight, Active
  Traders, January 2002, Volume 3, No. 1, pages
  34-38.
• Hartle, Thom, Broadening Horizons, Active
  Traders, December 2001, Volume 2, No. 11, pages
  38-39.
• Staff., Technical Tool Insight Triangle,
  Active Traders, June 2002, Volume 3, No. 6, pages
  86-87.
• Bierovic, Thomas A., Triangle Trader, Active
  Traders, August 2002, Volume 3, No. 8, pages
  32-37.
• Bierovic, Thomas A., The ups and downs of
  triangles, Active Traders, September 2002,
  Volume 3, No. 9, pages 50-55.
• Bierovic, Thomas A., Winning with wedges,
  Active Traders, October 2002, Volume 3, No. 10,
  pages 30-35.
• Bierovic, Thomas A., Standing the test of time
  The head and shoulders pattern, Active Traders,
  March 2003, Volume 4, No. 3, pages 42-46.
• Bierovic, Thomas A., How to trade Broadening
  Tops, Active Traders, April 2003, Volume 4, No.
  4, pages 32-35.