GDX Model - using Bollinger Percent B for forecasting trend changes

[canucck]

Hi everyone,

I traded messages with Pascal and hopefully I have posted this to the correct spot (if not, please move it).

Anyway, I believe that you may be able to forecast changes in GDX price (or other instruments) by using Percent B. I have put together a doc that explains Pct B, and the trendline approach.

I am not an expert, but these trendlines seem to be good references, so I would welcome your feedback. As noted in the doc, if there is interest, I could update these weekly, or at some recurring timeframe.

Regards,

Mike M

[davidallison@gmail.com]

Hi Mike, Thank you for sharing this. I plan on reviewing it over the weekend and will have some questions. I'm long GDX at this point. Are you long GDX or a similar product like HGU.TO right now? Anyway thank you again for sharing. Great Work. Dave

[canucck]

Hi, no, I am not long GDX. I mentioned in the notes that I had thought about getting some on the day it popped, but was distracted with other things.

Right now, all those moving averages that I mentioned have flat-lined, so it is likely a new trend might start this coming week. If you get a %B move of over 0.24 ("little Kahuna"), or better yet 0.40 ("big Kahuna"), then the new direction should be clear quickly. For info on Kahunas, see this URL, http://www.highgrowthstock.com/learningcenter/Glossary.htm

[Pascal]

This is excellent work and a very good idea to post regular updates.
I really enjoy reading analyzes that are based on different methods.


Pascal


Hi, no, I am not long GDX. I mentioned in the notes that I had thought about getting some on the day it popped, but was distracted with other things.

Right now, all those moving averages that I mentioned have flat-lined, so it is likely a new trend might start this coming week. If you get a %B move of over 0.24 ("little Kahuna"), or better yet 0.40 ("big Kahuna"), then the new direction should be clear quickly. For info on Kahunas, see this URL, http://www.highgrowthstock.com/learningcenter/Glossary.htm

[canucck]

Hi,

A few things to update. First, I noticed (afterwards) that some a few of the trendlines that I had drawn within Word had moved when some resizing occurred, so the trendlines might not have corresponded 100% to the text (i.e. on page 4 where I reference the yellow trendline, etc) so attached is a revision, which hopefully renders accurately.

Second, I am attaching an updated screenshot of the GDX based on the last couple days of trading. (I am new at attaching drawings so my apologies for the size ...)

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You can see that PctB remains below the long term trendline (Pct B value now @ 42). Note also that the heavy green/red line is the 100MA, so crossing this level will provide a lot of support for a new uptrend. The 20 period MA is @28 Pct B, so we are not far away.

There are two other trendlines of note - the Yellow one, which is referenced on page 4, and which should provide support should Pct B decide to go lower, and, the Green line, which appears to be a positive divergence worth watching. It is possible that we've seen a low in PctB (we'll know today or tomorrow, most likely) and if that green line holds, then we may see PctB creep up towards that 100MA/Long-term Trendline.

I mentioned as well that I would be looking for a "Kahuna" signal, to indicate the direction, and even though we are down in price, we did not have a Kahuna signal. You will note in the following image on the volume bar in the bottom, that we did have a light blue bar (small Kahuna of Pct B change of 0.24 or more) a few days ago, countered the day after by a small down Kahuna. Yesterday, we did not get a Kahuna signal though, so maybe there is not a lot of conviction is this downmove?

This chart is also interesting in that in the top ribbon, you can review periods where %B is greater than Bandwidth (and less than Bandwidth) and see how they correspond to change in trends. Note that we are currently "RED". Note also that the method I described for trendlines works for PctB* Bandwidth, and as you can see, we have had only minor peaks since September. After the next spike up of any size, one could draw a new trendline that will probably forecast the point at which a strong rebound might occur.

[canucck]

Hi everyone,

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Here is an update on GDX based on EOD yesterday. As you can see, the %B*Bandwidth line is still headed down. However, note that the value is approaching zero, so a rebound is likely within the next couple days.

[dwn]

Canucck,

Would you provide a screen shot of the "Studies and Strategies" along with "Language" inputs used in ToS charting for Bollinger Percent-B.

Your contributions are meaningful.

Thanks,
Dan

[canucck]

Canucck,

Would you provide a screen shot of the "Studies and Strategies" along with "Language" inputs used in ToS charting for Bollinger Percent-B.

Your contributions are meaningful.

Thanks,
Dan


Hi,

I am not sure that screenshot will be very insightful, so I am attaching a Zip file with my studies. As noted previously, I am an amateur, and use the studies at your own risk. The Bongo and Pascal studies are based on the work of the High Growth Stock group, as previously noted.

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Below is an updated dailly chart. Note that I have tweaked the studies a bit to improve shading and I have also decided to show the moving avgs that I have been referencing, and added a bunch of text notes to explain what you are looking at. Note that the 20 period avg pinched briefly with the 55 period, but then turned bearish again. Percent B could still work its way down to zero for a few more days, or it may use the Red trendline as a springboard. 16739

Finally, here is an hourly view. The trendlines that you'll see are the trendlines from the daily. I believe that Pct B relative to these trendlines give you a good clue as to where the intraday trend may be developing.

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Note that the hourly Pct B showed an EXTREME low on Tuesday, which often signals a reversal is coming soon. Pct B has started to turn up since Thursday, moving quickly through the 20,55 and 89 period trendlines. After it gets above the Long term trendline, it starts to consolidate. If anything other than consolidation on the hourly occurs on Monday, I will post a new screenshot of the hourly.

If there are any questions on the studies, or if you catch anything that should be fixed, please let me know.

[canucck]

Hello,

GDX is trending up, so it was worth taking a look at what Pct B was doing with respect to the trendlines.

Note that since the last update, PctB bounced off the short term trendline and has now crossed the 20 period daily trendline. The next trendline is the long-term trendline from Feb-Mar.

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In the hourly, note that PctB is very strong, and well above the long term trendline, and the 61 PctB Fib, so this would appear to be a strong short-term trend,

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We still have to break out of a down-trending price channel, though,, and if you look at the daily chart above, you'll see that the PctB moving averages are bearish, although starting to flatten. A couple of the longer term avgs are starting to pinch, but we don't yet have the convergence that we saw back in July. My estimate would be in 5+ days or so, those averages will be pinching, and at that point, the direction that the ST averages take will define the LT trend. My guess would be a new uptrend, but we'll see ...

[canucck]

Hi,

Attaching an update of the daily Pct B view. With the two last days of trading, the Percent B line is well above the long-term trendline, and this has caused the long-term averages to start to move up. I suspect it will still be a few days before the moving averages start to pinch, at which point, we'll get a better view on the long-term direction.

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I don't show it, but switching this chart to a 30 min view shows that PercentB started trending down about an hour and half after the open. My guess would be sideways or slightly down consolidation over the next couple days or so.

[Pascal]

Thank you!

These updates are really interesting!



Pascal

[canucck]

Hi,

Although GDX price moving averages are still in a bearish configuration, a few things are shaping up, which suggest that we may see a trend change in the next 5-10 days.

1) Percent B is finding a base on the daily chart, with 3 touches at the same level since early December. This type of activity helps to level out and enable pinching of the moving avgs, so support a "spring" type move.


I looked back a few years and found a few similar basing patterns with 3 touches occurred in July 2010, October 2008 (which struggled with a later 4th touch before decisively turning above the long term avgs).
There is also a 3 touch pattern that occurred in July-August 08; this led to a slight price increase, but when Percent B stalled at the long term moving avgs, we saw a very steep decline setup.

2) Slow Stochastic - a slight divergence is setting up on the daily view, and can clearly be seen on the 30 minute view.

NOTE: Trendlines drawn on the daily show on the 30 min chart - this is how ToS does it. The thin cyan line is the long term trendline - I believe that for a new trend to start, percent B must decisively move above this line and stay above it. As you can see, a cross could occur in the next 1-3 weeks. The heavy yellow bar/line illustrates the 3 touches of percent B shown on the daily view.

DAILY VIEW
We want to see pinching of the percent B moving avgs and a cross of the 8ema over the 20MA on the price chart. Both events are likely to occur in the next few weeks. Price is still in a bearish configuration, but it would not take much to change the direction of the 8ema to setup a cross of the 20sma.

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30 MIN VIEW

(Remember that the cyan and yellow lines are from the daily view, so trending above these lines are good developments).

A couple things are apparent. First, in the percent B graph, there is a clear upward divergence with price, which is positive. Second, note that the slow stochastic is clearly starting to trend up as well.

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I hope this is helpful. If it could be enhanced let me know. If there are major flaws in the approach, please advise, as I'd like to learn from others who care to share their knowledge in this area.

[canucck]

I saw Pascal's message, and since it has been a while since I looked at PercentB for GDX, I thought that I would update this thread. In the chart below:

The Negative:
- Elder 13d Force is still negative
- slow stoch is about as low as you can possibly get, although still not pointed up, so perhaps we'll see it start to turn up soon. It looks like the 20line is good resistance at this point.
- all Pct B moving averages are still pointing down, so it will take some major moves in price to confirm a new trend.
- the LT percentB line is now pretty much almost intersecting the support line that I drew a few months ago.

The positive:
- Although things can stay oversold for an awfully long time, as we've seen, we are due soon for a reversion to the mean type bounce.
- PercentB is perched on the support line (yellow) that I drew a few months ago, and it is about to crossover the long-term trend line (from last Feb). Although things could get more negative, a bounce is due soon.

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I guess, as Dave Steckler would say, "we'll know in the fullness of time".