Bar Swing Chart

preliminary 030326 - 1 [email protected]

Bar chart with swing lines

Toronto TASUG March 2003


OHLC Bar

• Bar is represented by 4 elements

High

Close

Low

Open

range = high - low


Bar classification[1][2]

• 1. Up bar

The bar on the right is called an“UP” bar. It has a higher high anda higher low than the previous bar.

Open and close positions do notmatter.


Bar classification

• 2. Down bar

The bar on the right is called an“DOWN” bar. It has a lower highand a lower low than the previousbar.

Open and close positions donot matter.


Bar classification

• 3. Inside bar

The bar on the right is called an“INSIDE” bar. It has a lower highand a higher low than the previousbar or simply its trading range is insidethat of the bar on the left.

Open and close positions do not matter.

“Inside days are essentially slowdowns or pauses in the market action – Temporary interruptions as buyers and sellers are unable or unwilling topush beyond the previous day’s range. This behavior suggests the marketis ‘undecided’ about direction.”[3] “Narrow-range bars and inside barsrepresent short-term volatility lows out of which price can move sharply.”[4]


Bar classification

• 4. Outside bar

The bar on the right is called an“OUTSIDE” bar. It has a higher highand a lower low than the previousbar or simply the trading range isoutside that of the bar on the left.

Open and close positions do not matter.

“Outside days are fairly common and any value they have is tied to such factorsas the relationship of the bar’s closing price to the opening price and currenttrend. Some traders interpret outside days as signals of either continuationmoves (i.e. those in the same direction of the trend) or reversals, dependingon these factors.”[5] “Outside bars can provide potential entry signals, if youknow what to look for – and what to look out for.” [6]


Bar classification

• 5. Neutral/borderline bar*

The bar on the right is an example ofa “NEUTRAL” bar. It is a bar that doesnot fall into the other previously definedclassifications. Basically either thehigh or low is the same as theprevious bar.

Open and close positions do notmatter.

* Some people may relaxed definitions such that these bars may be includedin the previous four classification.For the example above, some may consider it to be a down bar or maybe anoutside bar.


Bar summary

1. outsidebar = H > Ref( H, -1 ) AND L < Ref( L, -1 );

2. insidebar = H < Ref( H, -1 ) AND L > Ref( L, -1 );

3. upbar = H > Ref( H, -1 ) AND L > Ref( L, -1 );

4. downbar = L < Ref( L, -1 ) AND H < Ref( H, -1 );

5. neutralbar is one that does not match any of the aboveor

neutralbar = L = Ref( L, -1 ) OR H = Ref( H, -1 );


Bar summary

• An alternative (without neutral bar):1. outsidebar = H > Ref( H, -1 ) AND L < Ref( L, -1 );

2. insidebar = H <= Ref( H, -1 ) AND L >= Ref( L, -1 );

3. upbar = H > Ref( H, -1 ) AND L >= Ref( L, -1 );

4. downbar = L < Ref( L, -1 ) AND H <= Ref( H, -1 );


Who is in control?

• In general, one can tell how bullish or bearish a bar is by looking at factors such as:

1. The closing price versus the open price.

2. The closing price versus the previous close.

3. The position of the closing price within the range of the bar.

4. The size of the range versus the previous bars.

5. The volume traded.

6. Gaps[7] within the chart.


Control example

• Bearish example

Series of three up bars. First two are positive orbullish (open > close) and the next is negativeor bearish (close < open).

One would expect that price would belower in the short term because:• Down bar• Negative (close < open) bar• Open near the high and close near

the low• Low is lower than low 2 bars ago• Not only did it closed below the

close of previous bar, it closed belowthe close of 3 bars ago


Further control information

• In terms of the battle between buyers and sellers, one should look at candlesticks pattern – doji, harami, hammer, hanging man, engulfing etc.

• Stevens[8] has a chapter “Recognition and Analysis of Chart Patterns” which covers bar patterns with numerous examples.

• Pring[1] has a chapter “one and two bar patterns” with Key Reversal Bars, Exhaustion Bars and Pinocchio Bars. Pring[9] recently published an article on two bar reversal pattern.

• Examples charts of chart patterns provided at the end.


Some ways to plot bar charts

1. One colour for all bars.2. Colour bars with green representing close

greater than previous close and red representing close less than previous close.

3. Colour bars (like candlesticks) with green representing open greater than close (like up candles) and red representing close less than open (like down candle).

4. One colour bars with symbols showing various patterns like reversal pattern.

5. Various colours for each type of bars.


Colour bar chart

• One can assign colours to the bars 1. Up bars green

2. Down bars red

3. Inside bars yellow

4. Outside bars blue

5. Neutral bars white


Daily bar chart of DJ-30


Daily bar chart of DJ-30

Colour bars using AmiBroker[10]


Daily candlestick chart of DJ-30


Daily candlestick chart of DJ-30

Colour candlesticks using AmiBroker[10]


Trends

In general, most consider

• Uptrend is a series of bars with higher highs and higher lows.

• Downtrend is a series of bars with lower highs and lower lows.


Trends

• With up and down bars, swing lines can be drawn easily.


Trends

According to Dunnigan[2]:• An Upswing starts when a bar’s high and low

prices rise above the respective high and low prices of the latest Downswing. Prices then remain in an Upswing until such a bar that the high and low prices decline below the respective high and low prices of the highest bar of the Upswing. The highest price in the Upswing is called a TOP.


Trends

According to Dunnigan[2]:• A Downswing starts when a bar’s high and low

prices decline below the respective high and low prices of the highest bar of the latest Upswing. Prices then remain in a Downswing until a bar high and low prices rise above the respective high and low prices of the lowest bar of the Downswing. The lowest price in the Downswing is called a BOTTOM.


Trends

• Dunnigan swing[2]

Lowest bar of downswing

Start of Upswing

Start of Downswing

Highest bar of Upswing Start of downswing


Start of Upswing


Trends

According to Gann swing[11]*:

• Upswing: From down to up. The swing direction can change from down to up only if the market makes two consecutive highs. When the swing direction changes from down to up, the low of the downswing is called a valley and represents supports.

*Using Gann swing definition[11] (on page 54) used by charting program Fibonnaci Trader.


Trends

According to Gann swing[11]:

• Downswing: From up to down. The swing direction can change from down only if the market makes two consecutive lows. When the swing direction changes from up to down, the high of the downswing is called a peak and represents resistance.


Trends

• Gann swing[11]


Start of Upswing

Start of Downswing

Highest bar of UpswingStart of downswing


Start of Upswing


Swing charts

• Have implemented swing function that can produce various swing types.

• There is a minimum of one bar required to figure out the start of a new swing line.

• Examples

• Why modified swing line?


Daily bar chart of DJ-30Daily bar chart of DJ-30


Daily bar chart with swing of DJ-30

Modified swing lines using AmiBroker[10]


Daily bar chart with swing of DJ-30


Weekly bar chart of XAU


Daily bar chart of XAU


Daily bar chart of XAU

Two bar reversal & bearish engulfing

Negative up bar & bearish harami

Negative up bar

Down bar with close below previous bar low

Positive down bar withclose above previousbar low

Series of down bars to trend line followed bytwo positive bars

Series of up bars followed bypullback to support and thena positive bar

Upswing ends with negativeup bar to trend line thendown bars


Info/code for charting programs• Here are a few related(?) references (with some code) that may

be interest to others:1. Metastock:

http://eis.pl/kr/AFM/e-se-Dunnigan_Trend.htmlhttp://toronto.tasug.com/CodeSnip.zip

2. Tradestation:On Silicion Investor site, there is a discussion subject called “Dunnigan's Swing Formulas” under the forum “Market Trends and Strategies”: http://www.siliconinvestor.com/stocktalk/subject.gsp?subjectid=51961

3. Amibroker:In the Yahoo Amibroker message group,- message 2098 has Gann Swing Chart code written by Tomasz Janeczko (see AFL library).- message 23815 has an attempt for swing code.- message 27893 has kagi/swing code (see AFL library).- message 29073 has zigzag code based on percentage swing.- message 34064 has swing code with a swing size defined.

Cringan, William, “Zigzag Targets” Technical Analysis of Stocks and Commodities, February 2003 code for programs like Metastock, Tradestation and Amibroker in http://www.traders.com/Documentation/FEEDbk_docs/Archive/022003/TradersTips/TradersTips.html


Chart Patterns

• Following are some examples of chart patterns with modified swing lines added. The examples are taken from various articles that discusses those patterns. Please refer to the articles and references such as Pring[1] and Stevens[8] for more detail.


Pattern – bull flag[12]

Morning star


Pattern – bull flag[12]

Two hammers


Pattern – bear flag[12]

Bearish harami


Pattern – bear flag[12]

Bearish harami cross


Pattern – (long) broadening triangle[13]


Pattern – (short) broadening triangle[13]


Pattern – symmetrical triangle[14]







This is just a weekly view of the previous chart






Pattern – ascending triangle[16]


Pattern – compact ascending triangle[16]


Pattern – descending triangle[16]


Pattern – descending triangle[16]


Pattern – falling wedge in an uptrend[17]


Pattern – falling wedge in a downtrend[17]


Pattern – a rising wedge in a downtrend[17]


Pattern – a rising wedge in an uptrend[17]


Pattern – head and shoulder[18]


Pattern – inverse head and shoulder[18]


Pattern – symmetrical broadening top[19]


Pattern – ascending broadening top[19]


Pattern – ascending broadening top[19]

This is just a weekly view of the previous chart


Pattern – descending broadening top[19]


References1. Pring, Martin, “Technical Analysis Explained”, McGraw-Hill Trade, 4 th ed 2002.2. Dunnigan, William and Mack, Donald, “New blueprints for gains in stocks and grains & One-Way Formula for

Trading in Stocks and Commodities”, Financial Times Prentice Hall 1997.3. Staff, “Technical Tool Insight: Inside days”, Active Traders, January 2003, Volume 4, No. 1, pages 88-894. Hartle, Thom, “Opening shots”, Active Traders, April 2003, Volume 4, No. 4, pages 36-38.5. Kira Mccaffrey Brecht, “Technical Tool Insight: Outside days”, Active Traders Magazine, December 2002,

Volume 3, No. 12, pages 86-87.6. Andrews, Timothy, “Outside bars: From concept to strategy”, Active Traders Magazine, April 2003, Volume 4,

No. 4, pages 40-43.7. Kira Mccaffrey Brecht, “Technical Tool Insight: Gaps”, Active Traders Magazine, April 2003, Volume 4, No. 4,

pages 82-84.8. Stevens, Leigh, “Essential Technical Analysis: Tools and Techniques to Spot Market Trends ”, John Wiley &

Sons 2002.9. Pring, Martin, “Twice as nice: The two-bar reversal pattern”, Active Traders Magazine, March 2003, Volume 4,

No. 3, pages 48-5110. AmiBroker, http://www.amibroker.com11. Davis, Paul, “Swing trading price and volume”, Active Traders, January 2002, Volume 3, No. 1, page 50-57.12. Bierovic, Tom, “Flags by candlelight”, Active Traders, January 2002, Volume 3, No. 1, pages 34-38.13. Hartle, Thom, “Broadening Horizons”, Active Traders, December 2001, Volume 2, No. 11, pages 38-39.14. Staff., “Technical Tool Insight: Triangle”, Active Traders, June 2002, Volume 3, No. 6, pages 86-87.15. Bierovic, Thomas A., “Triangle Trader”, Active Traders, August 2002, Volume 3, No. 8, pages 32-37.16. Bierovic, Thomas A., “The ups and downs of triangles”, Active Traders, September 2002, Volume 3, No. 9,

pages 50-55.17. Bierovic, Thomas A., “Winning with wedges”, Active Traders, October 2002, Volume 3, No. 10, pages 30-35.18. Bierovic, Thomas A., “Standing the test of time: The head and shoulders pattern”, Active Traders, March

2003, Volume 4, No. 3, pages 42-46.19. Bierovic, Thomas A., “How to trade Broadening Tops”, Active Traders, April 2003, Volume 4, No. 4, pages 32-

35.

Documents

Bar Swing Chart