THE HAndbook of TECHnICAl AnAlysIstiCk–trin short-term and Longer‐term interplay
Many traders use a combination of TICK and TRIN to time short‐term entries and
exits, where a rising (but not overbought) TICK and a falling (but not oversold)
TRIN represents a bullish signal where the trader looks for an appropriate long
entry. Conversely, a falling (but not oversold) TICK and a rising (but not over-
bought) TRIN represents a bearish signal where the trader looks for an appropri-
ate short entry.
For longer‐term trading, when the TICK is oversold, that is, above the 2‐sigma
level on a weekly chart, with the TRIN also overbought, that is, near or above the
3.0 level on the daily charts, this signals a bullish scenario and the trader looks
for an appropriate long entry. Conversely, if both the TICK is overbought and the
TRIN is oversold, this signals a bearish scenario and the trader looks for an ap-
propriate short entry.
percentage of stocks above a Moving average
The normal lookback periods employed to determine the percentage of stocks
above a moving average are 50, 100, 150, and 200. See Figure 22.13. There is
a tendency for the S&P 500 index to decline every time it tests the 80 percent
overbought level. Traders still need price confirmation to ensure that there is an
actual change in the trend. In this example, trendline violations are used as price
confirmation.
figure 22.13 Percentage of Stocks above the 50‐Day Moving Average Signaling Po-
tential Tops in the S&P 500 Index.
Courtesy of Stockcharts.com