Victor Sperandeo: The 3-Step Method That Predicts a Change in Trend 80% of the Time
Trader Vic - Methods of a Wall Street Master,
Victor Sperandeo: he provided three steps for identifying a change in trend.
This three-step method will help you avoid losing trades and find great
trading opportunities. It correctly predicts a trend change 60 to 80% of the time.
The three steps are:
- A trendline is broken.
- There is a retest and failure.
- Price falls below the prior low
These three steps define a stock that has moved from an uptrend to a
downtrend.
The trend has not changed yet. Stocks will often break a trendline and
then continue to move in the direction of the prevailing trend. At this
point we are concerned about the trend - but we do not know if the
trend will change.
Step 2. There is a retest and failure
When a stock fails to do this, we should be begin to question the trend. This stock has now tested that prior high - and failed. So, this stock is no longer making higher highs.
Step 3. Price falls below the prior low
This stock has now fallen below the previous swing low. We now have confirmation that the trend has changed. Why? Because this stock is now making lower highs and lower lows. And that is the definition of a downtrend!
This trend change example shows a stock moving from an uptrend to a downtrend. What about a stock that moves from a downtrend to an uptrend?
It's reversed:
It's official. This stock is now in an uptrend because it is making higher highs and higher lows.
