de Leon #442

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Category:

Phase Lead

No. of Plots:

4 (hereafter BlS, BrS, DL and Sw)

Screen Location:

Below bars / candlesticks

Plot Style(s):

BlS: Blue histogram bars
BrS: Red histogram bars
DL: grey solid line
Sw: yellow dot

Plot Significance:

BlS: Blue histogram bars (Bullish Sentiment - BlS)
BrS: Red histogram bars (Bearish Sentiment - BrS)
DL: grey solid line (Detrend Line - DL)
Sw: yellow dot (Swings in the indicator - Sw)

Y-Axis Legend:

Neutral Sentiment Level (NSL)

Details:

As always you must do your own research as to what patterns work best. The following might be a starting point to assess indicator upturns (vice versa for downturns). We are looking for loss of down momentum.

Pattern 1: DL n shape below NSL
Step 1: DL crosses NSL direction down then turns up. DL should be lower than the BrS bar. (Call the DL low point Up1).
Step 2: DL crosses NSL direction up then turns down. (Call the DL high point Dn1).
Step 3: DL crosses NSL direction down then turns up. (Call the DL low point Up2). If no Sw at Up2 then wait for Sw. DL and BrS should be higher than at Up1.
Formulae: DL(Up2) < NSL, DL(Dn1) > NSL, DL(Up2) > DL(Up1), Price(Up2) < Price(Up1)*, BrS(Up1) < BrS(Up2)
* preferable but not essential - see divergence. WARNING: Markets always have the potential to break prior support and resistance levels.

Pattern 1 n shape
(failed retest):

Pattern 2: DL extreme v shape below NSL
Step 1: DL crosses NSL direction down then turns up. (Call the DL low point Up1). At Up1 DL should have about twice the amplitude of BrS and be more extreme than is typical for Pattern 1. Also, DL should not cross through any BrS bars on the way down to Up1. Any subsequent change in direction is most likely to be temporary.

Pattern 2 v shape:

Pattern 2 v shape
followed by
Pattern 1 n shape
(failed retest):

Patience was needed to trade the left hand example as the market dropped a further 5% after the early warning was given by de Leon #442. However, it then rose 14% from the low in about 6 weeks. This confirms the need to wait for multiple green lights (from technical indicators, fundamentals, fibonacci analysis, risk compliance etc.) before entering a trade. WARNING: Markets always have the potential to break prior support and resistance levels.

Pattern 3: DL m shape below NSL
Step 1: DL crosses NSL direction down then turns up. DL should be lower than the BrS bar. (Call the DL low point Up1).
Step 2: DL crosses NSL direction up then turns down. (Call the DL high point Dn1).
Step 3: DL crosses NSL direction down then turns up. (Call the DL low point Up2). DL and BrS should be higher than at Up1.
Step 4: DL crosses NSL direction up then turns down. (Call the DL high point Dn2).
Step 5: DL crosses NSL direction down then turns up. (Call the DL low point Up3). If no Sw at Up3 then wait for Sw. DL and BrS should be higher than at Up1 and lower than at Up2.
Formulae: DL(Up2) < NSL, DL(Dn1) > NSL, DL(Dn2) > NSL, DL(Up2) > DL(Up3), DL(Up3) > DL(Up1), Price(Up3) < Price(Up1)*, BrS(Up1) < BrS(Up3)
* preferable but not essential - see divergence. WARNING: Markets always have the potential to break prior support and resistance levels.

Pattern 2 v shape
then
Pattern 1 n shape
(failed retest) then
Pattern 3 m shape
(successful retest):

NOTE: As already mentioned v patterns can be short-lived. The de Leon #442 gave 3 early-warnings of potential to change direction. Notice how each time the market turned up the de Leon Trend became more bullish at the peaks.

For further research will be inverse patterns such as ^, u and w patterns.

Indicator Characteristics:

Clean patterns (where DL doesn't jiggle around between the major turning points) appear to be better than those that don't.

Patterns don't occur very often and should only occur around primary cycle lows (vice versa for downturns). If not, it may be prudent to ignore them. The majority of patterns tend to be contra long-term trend.