I have to be honest and say I have been on the bubble about doing this post for a couple of reasons. First, while it looks simple it is actually quite a complex procedure to find the right sequence and then find the correct anchor placement (it is seldom a high or low but certainly can be). My second concern is that it also broaches work that I feel is proprietary and don’t want to reveal. In the end I decided to do the post because it employs a very simple technique that anyone can use on any CIT that they use and perhaps show you enough about the subject to get you started if you are so inclined.
As I’m sure you all know, a CIT stands for change in trend. However how we define a trend and how we determine where it has changed can make all the difference between a profit and a loss. The great thing about them is you can know well in advance of when they are going to occur and then plan accordingly. In the example here I am using GHS to plot CIT’s on a weekly AAPL chart. So what is harmonic sequencing? It is an attempt to isolate the dominant harmonic resonance within an energy signature and map it’s potential CIT points. It is accomplished by plotting 3 numbers on a numbers vortex and extrapolating into the future. You should know that you will never get all the CIT’s correct because while you might be able to isolate the dominant harmonic you will never be able to eliminate the influence of the other harmonics within the energy signature. Finally if you get everything right you will be able to map the CIT’S within the time domain under observation and the time domain one degree below it. For example, in my work I call time domains “Phases”. So if you were working on Phase V for example you would get CIT’s of Phase V and Phase IV. I have no explanation for this phenomena. Unfortunately that’s all I can offer on this without breaching proprietary material.
So let’s take it to the next logical step. You have developed the greatest CIT technique known to man, so how do you trade it? I like simple and this is about as simple as it gets. First, we want to determine direction. We do that by drawing a regression channel starting 5 bars prior to the CIT signal and ending on the CIT signal. [It should be noted here that while I say 5 bars it is only relevant to a weekly chart. The measuring period is in time, not bars, and is based on proprietary cyclic work that I do. So the bar component will be dependent upon the time frame you are charting in.] Once you have the r-channel in place you note it’s slope through casual observation. You will obviously have 3 possibilities … positive, negative, and flat. At this point all that is needed is to draw a trendline beginning at the same point you started the r-channel and draw it 5 bars past the CIT. You want to capture as many touch points as possible on those first 5 bars. Naturally if the slope on the r-channel is positive the trendline will be on the lows and visa-versa on a negative slope. Finally you will look for a close (important) above/below the trendline within the 5 bars after the CIT signal for it to be considered valid. If not it should be considered a failure.
There are 8 signals that have been generated on the GHS chart below and we will look at 3 of them. As you can see the CIT signals generated at sequence # 37 and # 122 were quite successful. However the signal at sequence #101 didn’t generate a valid signal at all. Which is just what we want on failures because it doesn’t result in any losses. Additionally it may also be a clue as to the strength of the prevailing trend.
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