Significant price change patterns

In our recent weekly live call, I mentioned that I started rehearsing short trading to be prepped for an eventual more significant turning point and possible Six Sigma event.

In the more typical reversal patterns of the market, each turning point out of a directional market typically leads to a sideways phase first, and as such, an equilibrium of long and short entries and, as such, rehearsal isn't necessary due to a natural transition.

"V" reversal and Six Sigma events are the exceptions, but we find it prudent to consider such exceptions for 2024 on the larger time frames.

To be prepared to be on the right side of the market, I also use other tools to be ready.

One of them is price pattern recognition in momentum indicators.

The underlying principle:

Price pattern recognition is naturally filtered in momentum oscillators since momentum itself is more shortlived versus looking at the markets through a price representation.

This means that looking at momentum representation for price patterns has an automatic filter effect.

These signals are more significant, and with momentum representation providing a leading indicator, searching for these patterns can help to have a heads-up on more prominent turning points.

Example:

Top down: