How to Increase Your Odds for

A Successful Trend Trade

Greg Capra
Sponsored by Mastertrader

Live Presentation Starts at 3:30 PM Chicago Time

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 An Introduction To Trading the mini
DOW with the Pristine Method®

PRESENTED BY GREG CAPRA

PRESIDENT AND CEO OF PRISTINE CAPITAL HOLDINGS
WWW.PRISTINE.COM

www.pristine.com
 Disclaimer
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3
Combining Support and Resistance,
Market Internals, Trends and Price
Patterns for high probability trades.

Sponsored by The Chicago Board of Trade and

MasterTrader.com

4
 TREND TRADE PLAN
The Plan for trading the mini-sized Dow (YM)

Define the “reference points” of support and resistance or, more

importantly the lack thereof.

Define the market environment each day with market internals.

Define the current trend or lack thereof.

Trade when a predefined price pattern forms in alignment with

the above.

Money Management 5
 SUPPORT and RESISTANCE
Actual Support and Resistance
Prior price highs and lows, e.g., pivots

A series of price bars, e.g., a base

An unfilled gap between price bars

Subjective Support and Resistance

Fib Retracements-Extensions These analysis tools are used by many to
Trading Bands or Envelopes locate or predict support or resistance.

Moving Averages The only real support or resistance is

Trendlines price. This
Pristine Capital Holdings, Inc. the key to objective analysis.
6
 SUPPORT and RESISTANCE
Price support and resistance reference points tell us where
others are likely to act (buy-sell) or react (take stops).
When those points are far apart, the odds are that prices
will trend toward those points when internals are supporting.

7
 SUPPORT and RESISTANCE
Breakout failures
When price support have “shock value”
(demand) and resistance that overcome demand
(supply) are in a range,
trend trading does not work.

Void

Distance

Void

Prior support, as well as market internals, guide us to the

odds of potential trend reversals. Most trends end once they
become climactic based on emotional extremes.

8
 SUPPORT and RESISTANCE
Retracement levels, moving averages,
and/or trendlines did not stop this move lower.

Trends like this one occur when there

are few price reference points of support
with market internals in alignment.

The distance to those points and there

size will indicate their potency as support.
9
 Why Use Market Internals
Market Internals provide an objective comparison between the
current market environment and past based on historical references.

Market Internals act as “gauges” to determine the broader

market’s current level of strength, weakness and sentiment.

Market Internal readings should be read in combination with

each other. One internal gauge alone may be misleading.

Market Internals guide our bias – Bullish – Bearish – Neutral.

This stops us from projecting our own bias that may be influenced
by our wishes, fear or greed at the moment.
10
 Market Internals
Intra-day Internals End-of-day Internals
NYSE TICK McClellan Oscillator Equity Put/Call Ratio

NYSE TRIN Advancing Stocks Ratio Total Put/Call Ratio

NYSE Advance-Decline Line Advancing Volume Ratio OEX Put/Call Ratio

NYSE Advance-Decline VIX and VIX Oscillator Sentiment Surveys

Volume
5-MA of the NYSE TRIN
NYSE VIX
10-MA of the NYSE TRIN
DOW TIKI
Closing NYSE TRIN
Buy and Sell programs
Closing DOW TICKI
Total Put/Call Ratio
11
 THE TICK
TICK Guidelines:
The TICK is used to determine very short-term changes in market momentum.

Trading ranges above 0 indicate a Bullish Bias.

Trading ranges below 0 indicate a Bearish Bias.

Extreme TICK readings (+ 1000, - 1000) suggest a short-term turn, but

consistent readings between + 600 and + 1000 are very bullish, and vice versa.

Divergences, or a non-conformation of price highs or lows, and TICK highs and

lows, indicate relative strength or weakness, signaling a potential trend change.

Confirmation of price highs or lows by TICK highs or lows suggests continuation.

12
 NYSE TICK
TICK spending time between +, - 600 is neutral.

This is a scalper’s market!

13
 NYSE TICK
TICK staying well above zero and
New high and extreme!
moving to extremes, very bullish.
Breakouts in YM should go
higher after a pullback!

TICK Support

TICK often stays at a high level when

prices trend higher.
Trend traders should use this as a guide
to hold onto longs.

14
 NYSE TICK
Resistance at extremes. Don’t sell or sell short based on this information alone!

TICK spending most of the time above zero

and between + 600 and + 1000, very bullish.
Support When the TICK pulls back, ideally near the
zero line, consider longs.
15
 NYSE TICK
TICK spends most time below zero, bearish.

Lower Highs HHs

HLs

LLs
Below -600 to -1000, very bearish.
While bounces do occur from
-1000, avoid longs, unless climactic.
HH-HL TICK, environment changing
16
 YM & NYSE TICK
TICK extremes can indicate a bottom, as well as
confirm an upward move.

While Tick extremes suggest a stall in an uptrend,

trends typically do not end until prices reach a point
of price resistance.

Stars show bullish price-tick action.

TICK divergences can lead a turn in

YM, but the most reliable signals will
come when prices are also in an area
of price support or resistance.

Bullish Divergence TICK Support

17
 THE TRIN
TRIN Guidelines:
Readings above 1.00 indicates more volume is associated with declining stocks.

Readings below 1.00 indicate more volume is associated with advancing stocks.

The TRIN’s trend is as important as the current value.

A TRIN rising from 1.2 towards 2.0 indicates a more bearish market than one

rising from .55 to 1.0. Declining from 1.2 to .50 is a more bullish environment than

one declining from 2.3 towards 1.5. A sideways TRIN is associated with its level.

While a Rising trend is Bearish and a Declining trend is Bullish. This guide
alone can be incomplete; therefore, a deeper understanding of the TRIN is needed.
18
 NYSE TRIN
YM’s range contracts once ing
l
YM and TRIN are in sync. fal
I N
T R
g,
si n
Ri
Sideways, TRIN rising. YM
Range expands after YM
Note wide range bars
is rising for two hours!

TRIN does not always trend opposite YM

Below 1,
but rising

19
 NYSE TRIN
This chart tells us that the
market can rise while the
TRIN is rising, so there must
be more to this indicator.

TRIN is below 1, so
bullish, but rising
bearish. Volume is
increasing into TRIN below 1 and flat to declining.
decliners. Bullish, but this does not truly give a
complete picture of the environment.
20
 THE TRIN

TRIN is an excellent market internal indicator,

but can be misleading at times, if you don’t know

how to interpret it.

By viewing the TRIN’s components, it provides

a deeper understanding of the TRIN and its use.

21
 THE TRIN
How is it calculated?
(Advancing Stocks / Declining Stocks) / (Advancing Volume / Declining Volume)

Advancing Stocks - 1715 / Advancing Volume - 1222310 /

+ 1187 + 48416
Declining Stocks - 528 Declining Volume - 738894

3.25 Divided by 1.654

Equals a 1.97 TRIN

Although this TRIN indicates a bearish environment, this TRIN

value alone is misleading. The numbers calculated are not bearish.
22
 THE TRIN
How is it calculated?
(Advancing Stocks / Declining Stocks) / (Advancing Volume / Declining Volume)

Advancing Stocks - 576 / Advancing Volume - 1222310 /

-1081 - 632810
Decliners Stocks - 1657 Declining Volume - 1855120

.349 Divided by .659

Equals a .53 TRIN

Although this TRIN indicates a bullish environment, this TRIN

value alone is misleading. The calculated numbers are not bullish.23
 ADVANCE – DECLINE LINE
The Advance – Decline line measures the number of
stocks that are advancing verses declining. When more are
advancing, the lines rises; more declining, the line falls.

The A-D line does not consider how much each stock has
moved or how much volume is associated with advancers or
decliners, so its information is not complete.

That said, the advance - decline line, when added to other

market internals, does provide a complete picture of what is
occurring in the market. 24
 ADVANCE – DECLINE LINE
General A-D Line Guidelines:
A rising A-D line indicates the number stocks advancing vs. declining is increasing

A declining A-D line indicates the number stocks declining vs. advancing is increasing

An A-D line between + / - 500 is neutral, but follow its trend

The higher an A-D line rises, the more bullish. Values above + 500 are decisive

The lower an A-D line falls, the more bearish. Values below - 500 are decisive

Readings of + or - 1000 and greater are ideal for a trend to continue 25

 ADVANCE – DECLINE LINE
Set horizontal lines at every 500 increments

Flat at neutral level means

the market is choppy. Good for
scalpers, but not trend traders.

Now the market is getting

ugly. Don’t fight the trend!

26
ADVANCE – DECLINE LINE

Although the A-D is still at a

negative level, it is improving.

Although this was at a very bearish level,

the trend turned up. Now look at the TICK
to see if it moved to a more bullish level.
Market environments change!
27
ADVANCE – DECLINE LINE

The trend is up and the level is

bullish, don’t short. Hold those longs.

It’s very likely that the TICK was

hitting high extremes (+1000).

That’s bullish with this A-D Line,

and not a reason to exit long positions.

28
 ADVANCING – DECLINING VOLUME

Advancing volume is the volume in stocks trading above

yesterday’s close. Declining Volume is the volume in stocks
trading below yesterday’s close.

The Advance – Decline Volume Line measures the

advancing volume minus declining. When more is
advancing, the lines rises; more declining, the line falls.

When the A-D Volume Line is added to other market

internals, it provides a complete picture of what is occurring
in the market.
29
 ADVANCING – DECLINING VOLUME

General A-D Volume Guidelines:

A rising A-D Volume line indicates advancing vol. vs. declining vol. is increasing

A declining A-D Vol. line indicates advancing vol. vs. declining vol. is decreasing

An A-D Vol. line near the 0 area or + / - 150000k is neutral

An A-D vol. value above + 200000k and rising is decisively bullish

An A-D vol. value below – 200000k and declining is decisively bearish

Readings greater than + or – 200000k, and trending are ideal for a trend to continue
30
ADVANCING – DECLINING VOLUME

els
ev
hl
lis
ul
yb
erv
at
ly
pid
ra
ng
si
Sideways at a bullish level.

Ri
Maintain a bullish bias, but be open to change
if internals and YM’s trend suggest change.

31
 ADVANCING – DECLINING VOLUME
Bearish, but at a neutral level.
Check other internal gauges for guidance.

A-D Volume is declining and

declining rapidly to lower levels.

32
 ADVANCING – DECLINING VOLUME

Check other internals for guidance

A-D Volume is rising, but rising slowly at

neutral levels. This indicates a slightly bullish
market, but not a decisive one.

33
 COMBINING MARKET INTERNALS

Conflict

Agreement

A-D Volume NYSE TRIN

NYSE TICK

A-D Line
34
COMBINING MARKET INTERNALS
Conflict

Agreement

A-D Volume NYSE TRIN

NYSE TICK

A-D Line
35
 COMBINING MARKET INTERNALS

Bullish Market Environment Bearish Market Environment Neutral Market Environment

TICKS 0 to +1000 with many TICKS 0 to -1000 with many TICKS between - 600 to + 600,
ticks + 600 to + 1000 are key ticks - 600 to - 1000 are key or oscillating in that area.

TRIN declining, ideally below TRIN rising, ideally above TRIN sideways, ideally
1.0, or sideways below .50 1.0, or sideways above 1.2 between .90 to 1.05

A-D line rising, ideally above A-D line falling, ideally below A-D line sideways, ideally
+ 500 - 500 between – 500 to + 500

A-D Volume rising, ideally A-D Volume falling, ideally A-D Volume sideways, ideally
above + 200000 below - 200000 between - 200000 to + 200000

These are ideal scenarios, and they can and do occur. But realize
that there are many combinations of levels and trends.
Experience will teach how to combine and interpret them.
36
 DEFINING a TREND and TREND CHANGES

If there is a “Void” of price reference points (support – resistance), the odds are
high that a trend will develop when market internals are supporting.

To take advantage of this, an objective method of trend analysis is needed.

Moving average crossovers, Trendline breaks and/or Fibonacci retracements

are all subjective and potentially misleading as methods of trend analysis.

By simply monitoring pivotal price points, as the market forms them, we can
objectively follow the market’s trend.

This method will also signal trend changes in the time frame being viewed.
37
 DEFINING a TREND and TREND CHANGES
?
All price pivot lows begin with
higher low (HL) bars adjacent to
HL
HL HL both sides of the “pivot bar.”

Demand has increased ?

All price pivot highs begin with
The next bar will determine if a pivotal
lower high (LH) bars adjacent to
point of significance has formed.
both sides of the “pivot bar.”
Supply has increased ?
LH For a change in trend to occur, a
LH
LH
prior price pivot must be overcome
on a closing basis.

?
It cannot happen any other way!
38
 DEFINING a TREND and TREND CHANGES

YM never traded above a prior

pivot high within this trend.

While pivot lows formed (support), a down

trend within a void, with supporting internals,
suggests that they can be overcome.
39
 DEFINE A PRICE PATTERN

Trading is psychological to a great extent.

Let’s use that to our advantage through technical analysis.

Price patterns are pictures of psychology in motion.

Have you ever bought a breakout or shorted a breakdown?

Have any of those breakouts or breakdowns ever failed?

How did it make you feel, think and what did you do? 40
 DEFINE A PRICE PATTERN

Breakout Failure

Breakout Failure

A breakout failure catches buyers on

the wrong side of the prevailing trend.
This typically results in a continuation
of the trend soon afterward.
Short under the failure bar’s low, stop 2
ticks above its high.
4141
 TREND and all INTERNALS in AGREEMENT
Vol. Line is bullish TRIN is bullish
Breakout Failures are
not taken.
The trend and internals
are bullish.

A-D Line is bullish TICK is bullish

Breakdown Failure
signals a buy with bullish
trend and internals.

With all internals in agreement at bullish levels and a bullish

trend, the odds are high that the breakdown failure pattern will
result in a continuation of the prevailing bullish trend. 42
 FINAL THOUGHTS
Price patterns are pictures of the thoughts, expectations and emotions of the
traders that formed them.

When those pictures tell you that others have been caught on the wrong side of
the trend and market internals, you have an opportunity to take advantage of it.

Odds of similar patterns repeating an outcome in exactly the same way are low.

That said, pattern recognition does suggest a similar outcome.

Accept the fact that you do not know what will happen next.

The odds will be on your side, if you have a method of trading that you have
internalized, have confidence in – and, of course, have the discipline to follow. 43
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