The simplest way to know if "they" bought today?
Net 4% movers
"You do not rise to the level of your goals, you fall to the level of your systems." ~ James Clear, Atomic HabitsMarkets have been sideways and trying to bounce from the supports this week.
Some of the common thoughts you might have to deal with at this point would be:
Will the markets bounce?
What if I get in now and it breaks down?
What if I do not enter now and the market shoots up?
What if I then enter late and markets Top and reverse?
You are not alone my brother. Everyone goes through these questions, at least at the beginning of their trading career. But once you have a system in place to see if “THEY” are buying or selling, then you will start to have answers.
In this article, I will tell you about a simple primary breadth indicator that will help you answer the question, “Did they buy (or sell) today?”
4% movers.
How to use it to confirm the change in the market regime?
“Did they buy the markets today”?
4% movers:
4% Up movers: Total number of stocks that moved up 4% or more.
4% Down movers: Total number of stocks that moved down -4% or more.
These numbers can also be plotted as a percentage.
Net Up Down movers (N): 4% Up - 4% Down
Up Down Ratio (UDR): 4% Up/ 4% Down
Why 4%?
This number directly comes from the work of Pradeep Bonde (from Stock Bee. That’s where I learned it from and later also saw Chhirag Kedia aka Swing ka Sultan’s work on this)
A 4% move is a significant move. Much more than the average volatility of a stock. 4% moves up or down can only come with high strength and shows the true strength or weakness in a stock. A 4% up move tells you conclusively that they bought and a 4% down move tells you that they sold (in most cases. However using volume data tells you this even more accurately).
In essence, you can use a different number too, 3.5% or 5% should also work.
4% movers data to detect the change in the market regime?
Net 4% Up Down plot (N):
Plotting N as a function of time gives you a very good reading of buying and selling in the market.
A positive N value for a prolonged time means a bullish regime. Similarly,
A negative N value for a prolonged time means a bearish regime.
A transition from an extremely negative N (after a longer period of time) to an extremely positive N value could signal a bearish to bullish regime change (see on 1st April 2023) and vice versa.
In terms of %, spikes of N >20% are extremely bullish whereas spikes of N < -20% are extremely bearish.
These spikes should not be viewed per se but in concert with market conditions. For example, a -20% spike after a prolonged +ve N period would mean a possible bearish regime incoming, whereas during an already existing downtrend would mean nothing more than that the bearishness will persist.
You may have also noticed that these plots are noisy. To smoothen the curve, a simple moving average (5ma or 10ma) is used. (Too much work to plot this in Chartink. But Nitin (yes, Finally Nitin) has done it for all of us. In case you are curious, I will leave the link to his dashboard created in line with the works of Pradeep Bonde at the end of the article)
“Did they buy the markets today”?
Just look at UDR = Up down Ratio to get your answer.
UDR will be:
On a bullish day, >5
Ultra bullish day, >10
sideways day: 1-5
Bearish day, <1
ultra bearish day, <0.25
(I just made up these bin numbers. No seriously)
After 2.5 years in the market, I finally have a system in place that signals with high accuracy the regime changes in the market. This helps me to only invest when the markets are suitable for making money.
I share this system with my private group, the Homma Private Access (HPA), and also with my Technical Analysis Masterclass cohort.
If you wanna cut short the first 2 years of pain, losses, and frustration in the market. I have the most in-depth live course for you starting on the 1st of September 2023.
The Sakatas Homma Technical Analysis Masterclass for Beginners:
Register here: https://t.co/WX0zjWhM0p
Full course content details: https://t.co/jxt5qXyBEm
Watch the 1st session of the last masterclass: https://t.co/tVZMPx719e
Read below what previous Masterclass members had to say about the course (this one will be even better):
https://t.co/ScmJTKJSec
https://twitter.com/SakatasHomma/status/1652722398750457856?s=20
(Early Bird/ Freedom offer: 2000/- INR off on 9999/- INR)
Once you make the payment, you get a referral code. Refer your friends and get another 2000/- INR off on each referral.
Payment: UPI @ lamaprakash41190@okaxis or 9481506784. Please send a screenshot of the payment via WhatsApp to the same number.
That’s all I have for this weekend brother.
Thanks for reading.
(Hoping to see you in the masterclass)
Sakatas “less Go” Homma,
Pradeep Bonde’s Breadth Dashboard by Nitin: https://chartink.com/dashboard/176017
Nitin’s tweet explaining the dashboard:
https://twitter.com/finallynitin/status/1674425212694327298?s=20
Great of you to acknowledge the traders👏👏 great post bro!!