Stock Market Proprietary Indicators Part 4

Trading with SVAPO

Just looking at price and SVAPO it is possible to find early entries for buying or selling a stock.

Figure 8.13: AMD lower tops in price made a hidden divergence with higher tops in SVAPO.

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In figure 8.13, a chart of AMD, there was a big down move for the last 6 months.

Notice how lower tops in price during July and August made a hidden divergence with higher tops in SVAPO. A nice indication that the downtrend would continue.

Until the end of December price went further down in a convergent move. But beginning 2001 price is now making a divergent move with lower bottoms in price and higher bottoms in SVAPO.

This is a buying signal that is further confirmed by price breaking the last downtrend line and price breaking out of a falling wedge reversal pattern.

Figure 8.14: AMD further up trend evolution.

In figure 8.14 we can see the evolution of the up trend.

Price moved up until the beginning of February when a correction started. This correction brought price back to a support level and beginning of March a hidden divergence is visible with higher bottoms in price and lower bottoms in SVAPO pointing to a continuation of the up trend.

Price moved up in a convergent way, with another correction to the support level until the beginning of May. Here we have a small divergence between price and SVAPO with higher tops in price and lower tops in SVAPO.

This could be a selling moment. However if missed there is a second more explicit divergence by the end of May. Time to close the position.

Only just looking at price and SVAPO is however not a good idea. As you know you must always also use an initial and a trailing stop to get you out of a trade with a minimum loss in case SVAPO is not giving a sell signal.

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