Mikula Forecasting Company

MarketWarrior: Swing Projector Type #1 Buy Signal

In this discussion I will describe the Type #1 Buy Signal when using the swing Projector. The Type #1 Buy Signal consists of two components. First is a Swing Projector Warning symbol, and second a bullish divergence in a momentum indicator.

Below is a 5 minute chart for the DJIA, the eSignal symbol is $INDU. On this chart I have applied the Swing Projector and the indicator named "Stochastic of RSI" which is a momentum indicator. On this chart I have labeled two bottom pivots as "B1" and "B2". When we compare the price and the momentum indicator, we can see that B2 is lower than B1 on the price, but B2 is higher than B1 on the Stochastic of RSI. This shows that the price was losing strength at B2 while the momentum indicator diverged and was gaining strength at B2. This is Bullish Divergence and indicates the B2 bottom in the price should turn upward and form an upward swing good for swing trading.

Now notice at the B2 bottom, there is a Swing Projector Warning symbol for a large pivot bottom. This is the red upward triangle with the letter "B" inside. When we see these two items together they form the Type #1 Buy Signal. Somewhere after B2 we would be looking for an opportunity to buy long and trade the next upward swing.



The next chart shows what happened after the Type #1 Buy Signal was given. You can see that after the B2 bottom, the next upward swing was a very good up move for a swing trader to try and trade.