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Breakout After Crash Rate this Topic:
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Posted : Wednesday, November 27, 2013 12:39:38 PM
Registered User
Joined: 10/23/2011
Posts: 7

I'm looking for help writing a condition that will identify breakouts after a market crash.The crash can be anywhere globally, and all I need is a broker to facilitate trades. The conditions are :

  1. After prices climb for several years to a market top then prices drop very quickly, within 3 months to a year reaching a 2-3 year market low.
  2. Then after the decline prices trade sideways
    1. the consolidation can last from 3 months to a year. (within the PCF i could change time periods for different easy scans):
      1. the 60 day to 200 day Bollinger Bands are shrinking
      2. And the 150 and 200 day simple moving averages are converging
  3. Then bam, price breaks above the 200 day Bollinger Band and its 200 day moving average, entering the start of a new Bull Market

Your help writing this equation is greatly appreciated. Thanks!



Posted : Wednesday, November 27, 2013 3:37:01 PM

Worden Trainer

Joined: 10/7/2004
Posts: 65,138

Let's start with parts 2 and 3. We can check for Bollinger Bands shrinking by adding a Bollinger Bandwidth indicator with the same settings to the chart.

Adding and Moving Indicators

Then you can click on the Bollinger Bandwidth indicator and select Create Scan Condition to create a condition for Moving Down. The Period of the Moving Down condition would be the number of bars for which you are checking for consolidation.

If you choose Moving Down Net or Moving Down %, you will want to limit yourself to values which are at or below 0. Having a positive value would allow the condition to be true even if there was a move up as long as that move up was less than the specified value.

Create Conditions from Your Chart

To check for the 150 and 200 period simple moving averages converging, we could select Add Indicator and choose Custom PCF Indicator. Then click on the indicator and select Edit to set the formula to:

ABS(AVGC100 - AVGC200)

Once we have created this Custom PCF Indicator for the absolute difference between the two moving averages, we can click on it and select Create Scan Condition for it moving down in the same way we created a condition for the Bollinger Bandwidth moving down.

The centerline of 200-Period Bollinger Bands are just a 200-period moving average. This means we can add the Bollinger Bands to price. Then click on Price History and select Create Scan Condition to create a condition for Crossing Up Chan Top in the Price History vs Bollinger Bands section of the Condition drop-down menu.

You should be able to add all three of the above conditions to the same EasyScan without any problems.

Build a Scan with Multiple Conditions

But then we have to contend with section 1, and this is a bit more problematic. We are probably going to want to create a Condition Formula for this. I suspect the best time frame to use for the Condition Formula would be Monthly. If we use a Monthly time frame, we could test for price reaching a being at its highest price for the 3 years ending 3 months ago between 3 and 12 months ago using:

L = MINL24 AND MAXH9.3 = MAXH36.3

But the above Condition Formula would be checking for this to be true for the current month. We need to offset this by the amount of time of the consolidation. So if the consolidation is being checked over 3 months, we would need to use the following formula:

L3 = MINL24.3 AND MAXH9.6 = MAXH36.6

But if the consolidation is being checked over 4 months, we would need to use the following formula instead:

L4 = MINL24.4 AND MAXH9.7 = MAXH36.7

We would need to increment all of the bars ago parameters in the formula by the number of months over which we are checking for consolidation. This means you would need to create a different formula for different consolidation periods.

Writing Custom Conditions: The Basics
PCF Formula Descriptions
Handy PCF example formulas to help you learn the syntax of PCFs!

Whatever the consolidation, period used, you would add it to an EasyScan containing the three conditions created by clicking on the chart for the same consolidation period. You will need to create a different EasyScan for each consolidation period you want to check. You will not be able to create a single EasyScan and then adjust a parameter to check for different consolidation periods using the same EasyScan.

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