![]() TD Countdown compares the current close with the low two bars earlier for a potential buy and compares the current close with the high two bars earlier for a prospective sell. The countdown phase begins once a TD Setup is in place. Once a Setup is in place it is common to see a one to four bar pullback. Since it compares the current close with the corresponding close four bars earlier, TD Setup has a momentum component, but, unlike more conventional momentum indicators such as RSI, TD Setup is dynamic. ![]() When a market a closes below (above) four bars earlier and then makes nine consecutive closes above (below) four bars earlier a Sequential Sell Setup is in place. The indicator has two components: TD Setup, which relies on momentum to define price ranges, and TD Countdown, which is trend based, and looks for low-risk opportunities to fade established directional moves. Let’s look at the components of TD Sequential in order to understand how and why it manages to be so versatile. While it may seem counter intuitive, given that most people do follow trends, TD Sequential attempts to isolate prospective exhaustion points in ranges, to anticipate market tops and bottoms when it believes prices are overbought or oversold and during trends when sentiment is invariably at an extreme. Since the majority of people are trend followers, it’s hardly surprising that “the trend is your friend” is one of the most widely quoted trading mantras. The following excerpts are taken from Jason Perl’s book, DeMark Indicators (Bloomberg MARKET ESSENTIALS: Technical Analysis). The Sequentials are designed to identify points of exhaustion in a trend. We make use of a few of Tom DeMark’s indicators.
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