Technical Trends

Signal Given by Trend Energy

When you have a bullish view on a stock

The first bar after a 'blue' bar is a buy signal. It is an indication that a short-term weakness is over. Buying may be done above the high of the last bar. A stop should be placed slightly below the low of the preceding down move. The appearance of a 'blue' bar is a signal to close all long positions.


( By default the color 'Brown' refers to strength & 'Blue' refers to 'Weakness'.)

The first 'brown' bar is also a buy signal. This suggests that the security is gaining momentum. Stop placement is a bit difficult here. If you can find a chart based stop, fine. If not, use the Parabolic SAR, the Alligator Red line or the 34 period Linear Regression line as a stop. When the 'brown' bars stop coming, it may be time to tighten stops or even close the position.

When you have a bearish view on a stock

The first bar after a 'brown' bar is a sell signal. It is an indication that a short-term strength is over. Selling may be done below the low of the last bar. A stop should be placed slightly above the high of the preceding up move. The appearance of a 'brown' bar is a signal to close all short positions.

The first 'blue' bar is also a sell signal. This suggests that the security is losing momentum. Stop placement is a bit difficult here. If you can find a chart based stop, fine. If not, use the Parabolic SAR, the Alligator Red line or the 34 period Linear Regression line as a stop. When the 'blue' bars stop coming, it may be time to tighten stops or even close the position.

When you do not have a view on a stock

Trend Energy is very effective when you have a sense of direction for the stock. Yet, sometimes the stock may not be on your radar screen, thus you do not have a view on it. Even in such cases, the buy and sell rules discussed here remain useful. If the stock has seen a big up move with many 'brown' bars, then the first bar which is a 'normal' bar is a signal to initiate short positions. All such positions should be protected with proper stops. If the stock has seen a big down move with many 'blue' bars, then the first bar which is a 'normal' bar is a signal to initiate long positions. All such positions should be protected with proper stops.

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