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Prashant Shah Profile picture
@Prashantshah267
May 30, 2021 • 15 tweets • 4 min read • Read on X
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Thread: Strike-back Pattern

P&F pattern explained via images.
See below image.

Price went below its previous swing low. It is a bearish breakout.
Price going below its previous low is a double bottom sell pattern in P&F charts.
Pattern is bearish. People who were looking at previous low as support are in trouble. Bears are dominating.

Imagine, bulls strike back and take price above previous low. See the image.
Price above bearish breakout level. Bears are in a difficult situation now, they seem trapped. The breakout was temporary, if that demand level at the swing low is strong, there is a possibility of strong bullish move from here.

In P&F, ‘X’ is back!
This is bullish, but we need more confirmation. There is a tussle between bulls and bears at this point. If demand is not strong around current levels, price will fall and break previous low.

Previous low is a test of bulls.
Imagine price corrects from there. If bulls hold previous bottom, they are here to stay.
In P&F terminology, there should not be a double bottom sell.
If price maintains the bottom and goes above the previous high, it is a bullish strike-back pattern.

See below image.
We can make it completely objective using P&F, see below image of Bullish strike-back pattern.
Opposite is bearish strike-back pattern. Below image explains it.
Using P&F, pattern became objective. We can scan for it, back-test and create systems for it by using it along with other patterns and indicators.

If I run a scanner in EOD segment today on 0.25% box-value, SBILIFE is one of the candidates.
A = bearish breakout. B = bulls managed to bounce. C = bottom of A was protected. D = bullish strike-back.

Pattern fails if price falls below bottom of C.
Sorry for the bad drawing 😊. It is like bears laughed, bulls smiled and attacked. They can prove dangerous!

Story was to explain the concept.
Attempt is to explain the concept and how it was designed on P&F. Idea is to take advantage of important properties of different methods. I seek objectivity so that focus can be shifted to execution while trading. <End>

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More from @Prashantshah267

Prashant Shah Profile picture
Feb 17, 2023
A new way to look at RSI.

RSI is a very popular strength and momentum indicator.

#RSI
14 is a widely followed period for RSI. If you plot 14-period RSI, it calculates a ratio of bullish prices in the last 14 candles.

As a result, a higher RSI indicates a higher ratio of average bullish prices.

Thread on RSI indicator to learn more
There are many ways to use the RSI indicator.

RSI above 50, overbought-oversold zone, positive – negative divergences, RSI and signal line crossover etc.

How about reducing the noise of the RSI indicator?
Read 11 tweets
Prashant Shah Profile picture
Feb 15, 2023
In our initiative called Trading Buddy, we planned to meet traders in person.


I had the opportunity to meet 50+ traders in this prog. It was a wonderful discussion, and even I gained a great deal of insight.

Some key points that I observed: (1/10)
It was expected that people would begin to discuss the issues. However, the process of opening up took some time.

Jumping to conclusions too quickly is a big problem. More problems result from a lack of problem analysis.
As an example, a strategy for a trader was performing well but was subject to whipsaws during a particular period. He was worried.

The nature of the strategy and why it behaved differently during that period were not fully understood. An unidentified problem cannot be solved.
Read 10 tweets
Prashant Shah Profile picture
Jan 21, 2023
Thread: True Strength Index (TSI) Indicator

A combination of momentum (leading) and smoothing (lagging) qualities.

(1/20)

#Indicator #trading #investing #definedge Image
A momentum indicator developed by William Blau, the True Strength Index (TSI) measures a stock's strength.

In general, momentum indicators are aggressive, while smooth indicators are lagging. Both have their advantages & disadvantages.
However, aggressive indicators are leading but they often result in frequent shifts. Smoothed indicators are lagging, but they are relatively stable.

TSI is a helpful indicator for strength analysis that combines momentum & the smoothing factor.

Let me explain.
Read 20 tweets
Prashant Shah Profile picture
Aug 11, 2022
Thread: Decoding 2-period RSI

#trading
2-period RSI is a popular concept introduced by Larry Connors.

Many traders are using this method in their strategy.

There are two simple rules in the strategy that Larry Connors explained.
For buying:
• Price should be above 200-DMA (Long-term trend is up)
• 2-period RSI should be below 10 (better below 5)

For selling:
• Price should be below 200-DMA (Long-term trend is up)
• 2-period RSI should be above 90 (better above 95)
Read 23 tweets
Prashant Shah Profile picture
Jun 25, 2022
Thread: Ulcer Index (UI) – Bears’ indicator, Exit indicator.

Study of and indicator from learning perspective.

Not so known but a useful indicator.
The Ulcer Index indicator was developed by Peter Marin and Byron McCann. The indicator was first introduced in their 1989 book, The Investor's Guide to Fidelity Funds.

It was designed to analyse MFs. Ulcer index is known as a volatility indicator but I would not call it that.
It is more of a drawdown indicator. It measures the amt of drawdown occurred over a period. It is an entry indicator for bears, & an exit indicator for bulls.

Basic premise for developing this indicator was to take investment decisions based on the downside risk of investment.
Read 19 tweets
Prashant Shah Profile picture
Jun 10, 2022
Back-testing of some candlestick patterns 🧵

I hv back-tested patterns shown below on 500 stocks (Nifty 500 stock group as on today) since inception on daily timeframe charts.

Below is some interesting information.
I was doing to design multi-chart setups. But the information in the thread can be useful for people practicing candlestick chart patterns. There are many patterns & we keep coming across more. The data can give you a rough idea about the past performance of patterns.
Patterns are defined based on the popular rules of identifying them. I have also tested bearish patterns for bullish trades and vice versa (Contra approach).

Criteria: Hit ratio & returns of pattern giving 1:1 risk-reward if the entry is at the closing price of the pattern.
Read 10 tweets

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