QQQ P S Pattern
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P 3 Entry Alert Signals that a trade is forming
- 1. Bullish divergence signals an undercurrent of change brewing (seen on RSI or CCI)
- 2. RSI indicator to point and start heading up
- 3. Positive candle on the chart, and the 8 EMA moving up and toward the 13 EMA
- 4. Black PPO and ADX lines have come close to each other
- 5. PPO histogram blocks are narrowing and heading upward
- 6. ADX line begins pushing away from black PPO line and +DI line is pointing and moving up, while the -DI line points and heads down.
P 3 Confirmation Buy Signal
- 1. The PPO lines crosses up over its signal line
- 2. The histogram crosses the zero line
- 3. +DI crosses up and over the -DI line (wait for a +DI cross up before entering). If you are more of a risk taker and want a slightly earlier entry, prior to the DI lines crossing, make sure the DI lines have crossed on the earlier tine frame.
Alert - P 3 Exit rules
Remember there is often a wobble on the PPO that will produce some of these alerts, so look at the PPO to see if that is what it appears to be. A second or third area of weakness (wobble) is likely to be the true exit.
- 1. RSI drops from overbought area
- 2. 8 EMA drops closer to 13 EMA, appears as if it might cross
- 3. Negative candles (in conjunction with other alert indicators)
- 4. CCI drops down below 100
- 5. PPO histogram blocks begin to narrow downward
- 6. Black ADX line flattens or curls downward, and +DI starts to head down and -DI starts to head upward
P3 - Confirm Sell Signals
These signals can happen in conjunction with other indicators. Many times it is better to take gains once your trade reaches its profit target rather than wait for a confirmed signal that gives back a portion of your profit. The signals below are the line-in-the-sand exit signals, other than the price hitting your stop.
- 1. Crossover of the PPO over its signal line
- 2. Cross of the 8 EMA over the 13 EMA
P 3 Squeeze Cycles
- 1. The PPO and ADX black lines come close together. How close is subjective.
- 2. The PPO line crosses up over its signal line and the ADX black line pushes away from the PPO line as it it is repulsed by it.
- 3. As the Squeeze continues to unfold, the PPO and ADX lines will move further and further away from each other.
- 4. It is only when the +DI line turns up and eventually crosses over the -DI line that the price will really move upwards. The PPO line cross itself can only take the price so far. If the +DI falters and doesn't continue by taking control, the squeeze is likely to fail and resqueeze because the price will go flat or head back down.
- 5. Quite often as the PPO line is moving upward it will weaken for a period of time, drop back and test the support of the PPO line. The PPO line will then act as a trampoline and the PPO line will bounce up from there. There are times that it will do this twice during the climb up.
- 6. While the PPO line advances upward and the +DI line has crossed up and over the -DI line, the ADX Strength line will turn up to support the new uptrend. I call this the sweet spot or in the Life Cycle of a Squeeze DVD, it is called the adult stage of the squeeze pattern. In this stage of the pattern the PPO and ADX thick lines run parallel to each other. As long as the lines remain in this formation, the price will continue up.
- 7. The last stage and exit is when the PPO and ADX line turn and start heading down. This is a clue to exit.
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