Stock Market Trends Chart

I thought I would post a quick chart setup that I read about recently in an article by respected trader John Carter of www.Tradethemarkets.com The chart is used to help indentify change in market trend by filtering out daily noise and focuses strictly in price (not volume). Here is the Chart:

Stock Market Trend Chart

The chart I pasted above is from my ThinkorSwim platform(If you dont have ability to get Heikin bar charts on your trading charts you can just setup a free papermoney account for full access to Thinkorswim platform).

The article was about using this chart on the S&P 500 but you might be able to try it on other broad indexes. Each Heikin bar represents average daily closing price among prior 6 days….and if that closing price is in lower 50% of range then its a red bar (and green bar is top 50%).

John mentions he used this chart to watch for trend changes when chart goes from a red to a green bar or vice-versa and then looks at the 8(yellow) daily EMA as a confirming indicator….if bars colors change to red and  8ema starts to turn down then tighten stops….if bars change but ema doesnt turn down then ok…..once the 8 and 21 ema lines actually cross then trend is over…….

What is interesting about this stock chart  is that is is purely focused on prices and not volume. With all the doubters of this September/October rally who tried shorting it or stayed on sidelines because it was low volume/september usually bad/fed intervention/technical indicators not confirming this rally,etc……you would have done well following this chart and buying the S&500 after Sept 1 close down near 1060 and S&P500 still isn’t showing any signal change.

Anyways, I just thought this chart settings was useful as secondary indicator to filter out opinions and daily noise.

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1. Stock Chart Programs Review