Quill, I’ve been reading your SS posts and appreciate your teachings. I’ve been trying out SSIII and trying to learn.
It’s been pointed out that the buy and sell “flags” get repainted. I’m curious how you handle this when it happens
For instance here’s a chart for Sentinel One on 19 Jan.
On 9 Jan we get a buy flag and on 10 Jan the OHLC is above so we get a “out of the gate”. But then on 12 Jan we get a sell flag and the next day is below so we sell “at the finish line”.
However, here’s the same chart one day later on 22 Jan
The sell flag from 12 Jan has disappeared so in theory we should still be in the race.
Is the idea that we should jump back in the race and buy because this was a headfake? Or do you let it go and not chase?
We could use more context of course (like TSI, RSI, OHLC reading) to avoid the headfake but I’m sticking with the 2 simple rulez of SS.
Going to assume as you noted that on the 12th of January there was a Flag posted as soon as the next bar dropped below.
What happens is at the same time the next day’s bar dropped below the 12th’s bar, the flag popped at the same time. I have seen this occurrence happen many many times by accident while I happened to be watching a stock and bammm it popped up.
In theory if you own the stock, the rules are to sell the stock. Then the stock decides after you sold the stock the darn stock takes off on you. Take the money off of the table hopefully with a nice profit. The Flag on the 12th would have disappeared because the price on the 22nd went above the 12th.
The 6 p’s apply. " Proper Preparation Prevents Pi*s Poor Performance. "
The only thing to do is wait for the next buy signal. In theory if you did nothing let it ride but have your finger on the sell button at how much lose your willing to absorb.
One last thought when buying Out of the Gate, Once in a rare moment if a RED bar appears don’t buy until the next GREEN bar appears.
For me, I look at the charts at 10 am EST and again at 3: 30 pm EST.
Hope this can help.
Attached is your chart from Barchart showing with several options as an idea of following the green line crossing over the red line as being positive.
Or watch the Parabolic Time Price (SAR’s) (green and red dots). The bottom panel is the TSI or True Strength Index.
I wish you the best
Quill - taking a break to watch Hogan’s Heroes with Sergeant Schultz
Thanks @Quillnpenn for the answer and charts. Appreciate your time. There’s a ton of context we could go into around the move but I think for me the important thing is to keep it simple and learn not to chase. As you said “The only thing to do is wait for the next buy signal.”
FWIW here’s the same chart one day further now on 23 Jan
We can see there’s a new sell signal flag now placed on that big jump up, and if I had chased the move I would have lost money.
And then to cement the idea here’s the chart on 25 Jan, now starting to really turn and reverse.
One last thing … you said “One last thought when buying Out of the Gate, Once in a rare moment if a RED bar appears don’t buy until the next GREEN bar appears.”
I’ve noticed you mentioned this new updated rule for SS3 in other posts and I’m using it.
Hi - Sorry to jump in here, but I thought this was a good time to clear up some mystery about Quill’s SS3 system. The flags that you see are actually the turning points of an indicator called “Zig-Zag”. You can call up this indicator in StockCharts as an overlay.
Here’s an example of Sentinal with the Zig-Zag indicator applied. Note that this is an ACP StockChart.
As you can see, the flags line up with the turning points of the ZZ indicator.
Do some investigation (Googling) of the ZZ indicator. The ChartSchool section of StockCharts actually has a pretty good description.
The difficulty of using the ZZ indicator is that it is NOT predictive. It reacts to the price swings. This is why the flags can change during the day, or day-to-day.
Per the ChartSchool article:
“When using the ZigZag feature, don’t forget to measure the last line to determine if it is temporary or permanent. This line is temporary if the current price change is less than the ZigZag parameter, but becomes permanent if the price change is greater than or equal to the ZigZag parameter.”
Quills SS3 rules are used to see if the flag is confirmed or if the line will continue extending in the current direction of the zig-zag line.
This isn’t a criticism of the SS3 system, but it helps to know where the flags come from.
Deja vu, all over again…
(Stockchart's Price Label)
I’m familiar with ZigZag, and used it to compare with the price labels finding that I could manipulate the inputs so it would basically give the same “tops” and “bottoms”.
The difference, from what I can tell, between ZigZag and the price labels is that the ZigZag indicator will place a “top” / “sell” and “bottom” / “buy” much later than the price labels. In other words, sometimes the ZigZag doesn’t place a “top” or “bottom” until 4, 5, 6+ days after. The price labels appear much quicker. Please correct me if I’m wrong.
Thanks Lakedog, I had read your previous posts. Here’s a chart using 6.93% on ZigZag. I used TradingView so it’s a different platform
And here’s the StockCharts price label chart again
I get basically the same “buy” and “sell” numbers in retrospect but on this current leg we can see the ZigZag still hasn’t placed a “sell” or “top” relative to the price label.
Hey gmcnatt, you’ve clearly done a lot of evaluation on this. I respect the effort. Curious if you have ever tried to incorporate ZigZag in a scan? I have in the past, never found it of value. Probably because I had to code it in thinkscript, which is a weak link for me. Think I trashed all that data, will need to go looking in old files.
ZigZag and Price Labels, as you well know, are lagging indicators requiring data to develop before establishing the newest “point” at a prior bar and thus they can and will repaint. So, at least for me, it is more of a incidental confirmatory/supportive marker after the fact. Although, TA is all about optimizing risk/reward and many trading strategies use a confirmatory signal before taking a position (at least in trend trading) so can envision a role. Just not in isolation. Personally, I don’t use them, although because of all the discussion about it, have spent way too much time looking at it.
I agree with you that price labels appear to be identical to ZigZag, although Chip Anderson (who I think may be the original author of Price Labels) always states that their are proprietary calculations. What are Price Labels and How Can I Use Them? | MailBag | StockCharts.com
Will be interesting to see if they change this next week as Stockcharts releases their newest version. There is a difference in calculations between ACP and Sharpcharts, you can still match a ZigZag to them, but at different settings.
Best of luck,
LOL - thanks for the link Lakedog. I had missed that discussion from last year.
I have an allergy to black-box systems, so I asked StockCharts about the “auto percentage” and “multiplier” parameters for the ACP Zig-Zag indicator. I too got a “no comment” from Jack Smith.
Maybe someone with some math skills can figure out what they are doing.
I’ve never used ZZ because I think it’s primarily used in Elliott Wave which is a religion I don’t practice. I don’t want to belabor the ZZ vs PriceLabel thing because it’s been discussed. From what I can tell, ZigZag and the Price Labels basically print intraday highs and lows of legs up and down. So they will print the same numbers in retrospect. It’s just that it seems that PriceLabels print quicker … usually the following day from a new relative high or low. I’m guessing the proprietary info they use is based on price/volume/volatility or something like that, which is how they print faster. It’s not just a lookback relative high or low, which is what ZigZag is.
My, I guess main point of the original post, was that yes Price Labels reprint from time to time so I was just seeing how Quill deals with that. He answered by saying he doesn’t chase, just wait. Which I think is an important lesson.
Thanks for the link on the PriceLabels definition. I had seen that posted previously (probably from you ha). Appreciate everyone’s feedback.