Technical Trends

C9 Trading Strategy

A method designed to identify market exhaustion using price patterns. It can help to anticipate trend reversals.

Overview

Based on an indicator called 'Sequential' developed and trade marked by Tom DeMark, this indicator helps identify market exhaustion (based on the premise that price reversals are the result of market exhaustion. The C9 strategy differs in many ways from Mr Demark's indicator. Often, a completed C9 is the best way to identify capitulation or seller exhaustion zone.

Interpretation

C9 Analysis involves a two step process of counting the bars on a bar chart:

Set Up:

Buy set up - count nine consecutive daily price closes which are lower than the close four days earlier.
Sell set up - count nine consecutive daily price closes which are higher than the close four days earlier.

SUMMARY of Correction or Trend Continuation rules

A buy setup is made when prices are declining
High of current buy setup is higher than low of previous sell setup: This setup is a correction, the up move is likely to resume after the buy setup is complete.
High of current buy setup is lower than low of previous sell setup: This setup is a continuation, we will see a counter trend rally, and the down move should resume soon after.
A Sell setup is made when prices are rising.
Low of current sell setup is less than high of previous buy setup. This setup is a correction, the down move is likely to resume after the sell setup is complete.
Low of current sell setup is higher than high of previous buy setup. This setup is a continuation, we will see a counter trend decline, and the up move should resume soon after.

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