Trade Stocks Based Solely on Candle Size?
- Posted by Greg Harmon
- on July 2nd, 2013
Sounds crazy doesn’t it? But not really. You already look at spikes in volatility as a bearish event in a rising trend. And how is a spike in volatility measured? The Volatility Index ($VIX) is used by most to measure volatility. The default measure. It is a direct measure of the near strike options activity on the SPX options. But this is not the only way to measure volatility. Volatility itself could be defined as a wider range day. In the chart below I have highlighted the wide range days over the last 4 months. They coincide with spikes in the VIX. So it fits on that basis. But take this picture a bit further. Cover the bottom panel now. If you were to look only at the candlesticks and sell when the the candles got bigger and then bought
back when they got smaller again how would you have done over this timeframe? Pretty well it turns out. You would have pockets 22 points in the SPDR DJ Industrials ETF, $DIA, from February 28 through July 1st. The DIA itself is up only 11 points. Pay attention to changes in the range. Is the range shrinking again?
Want to learn more about Dragonfly Capital Views?
Dragonfly Capital Views Performance Through June 2013 Expiry and sign up here.
If you like what you see above sign up for deeper analysis and trading strategy by using the Get Premium button above. As always you can see details of individual charts and more on my StockTwits page.
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.blog comments powered by Disqus
Gregory W. Harmon CMT, CFA, has traded since 1986 and held senior positions including Head of Global Trading, Head of Product Development, Head of Strategy and Director of Equity. (More)
- Premium Earnings 2-22-17: Cheesecake Factory and HP
- Momentum Points to Sector Rotation toward the Russell 2000
- Premium Earnings 2-21-17: TJX
- 4 Trade Ideas in Goldman Sachs: Bonus Idea
- 5 Trade Ideas for Tuesday: Commerce Bancshares, Cirrus Logic, McCormick, Ulta Beauty and Union Pacific
- Top Trade Ideas for the Week of February 21, 2017: The Rest Premium
- Top Trade Ideas for the Week of February 21, 2017: The Best
- SPY Trends and Influencers February 18, 2017
- Macro Week in Review/Preview February 17, 2017
- How This Week’s Top 10 Performed, February 17, 2017
Dragonfly Capital Updates