The Running on Fumes Chart Pattern

• stevenplace
• March 4th, 2010

This is a pattern that pops up every once in a while during the opening session. It’s actionable and fairly reliable– and most importantly, it’s undersubscribed.

Here’s the pattern:

This pattern requires a little more context. First, we’re near the top of a potential trading range and have made lower intraday highs over the past two days.

This pattern only happens at the open, and it shows when the market is “running on fumes.” Essentially if we are getting a runup in futures but it’s not confirmed by the underlying markets, it is fadeable. This confirmation can be seen by looking at a basket of heavily traded names, or by looking at the TICK readings (yellow circle). If we don’t see extreme positive TICK readings, it’s time to be very skeptical of the upmove.

So when does the market fade? Well, the market structure generally changes around 10AM EST as different participants come into the market. The “10AM Turn” is quite reliable as a pivot point.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

blog comments powered by Disqus