Chartistry – Embedding

(second blog entry of the series)

How could you possibly trade effectively when you don’t even know what this stage of the market is about?

Lucky for you, I might be able to help.

The starting kit was passed down to us by our Godfather, Ira Epstein.

During embedding, the market locks in a trend.

So far so good.

A stochastic reading below 30 is oversold, above 70 is overbought. Digestible.

Here comes a deviation. I do not have to wager client base and 40+ years of reputation if I did not get some values right off the bat.

This is why I found my 18 sample, not smoothed stochastics better along with changing the embedding limits to 25 and 75. I do not believe in using the same settings on indicators on any time frame. What is the point of plotting a 200MA on a weekly chart?

On to additional personal takes.

During embedding the directional progression (new lower low/new higher high) comes with a guarantee. Yet, the volatility falls short of spectacular. It is a secure, but not necessarily fast market for making gains.

The next image is to show you my theory of the slipping clutch. Observe:

You may not need to cover on the first green box encounter as you can see above, there was a box that got completely sliced through. What you could do instead is wait for a price penetrate a box, knowing that there would be a second box encounter further down the road, you could add to your short during embedding.

Double clutching is necessary to shift the gear stick from forward to backward. And visible reference comes from 2 different candles = 2 different weeks in our case. Back to back trading days could only qualify in a Friday & Monday combination.

Ira’s stochastics show embedding by his definition for a couple of weeks during this whole time. Mine shows the double clutching issue persisting all along.

Combine this knowledge with the buy and sell zone locations cited in the previous entry, and you would start to develop a very good sense of direction.

After the price fails in the double sell zone on the way to the E-21, you sell until they buy it back in the green fields two times: you only die twice.

Then it is a long trade into the red field, and if the E-21 gets surpassed by 40 pips or the embedding gets lost, you can ride some more.

There are profound hedging implications of course due to the persisting predictability.

As for other Ira definitions like re-embedding and both the K and the D lines must be over / below – may just be obsolete with the better settings. D line (signal) would be enough to monitor.

What about this market? I’d say the market will have changed to a full bear configuration once the Weekly E-34 crossed below the E-59, but that won’t happen this week. Until then this is a mixed market with the bears luck lasting till the 21EMA and the embedding holds.

You’ll find the displacement percentages in the prior post.

This midnight magnet (acceleration vector) just got its filled

You are still in buy zone 1 – pay attention to the NO LONGING BEYOND 1.1647 on the first image.