Applying TD Sequential to intraday charts.

Originally designed for daily analysis, Tom DeMark's TD Sequential indicator also works for intraday analysis. It is effective for especially targeting high- and low-risk entry points.

When I entered the investment business more than 25 years ago, volume on the New York Stock Exchange was

I did my market timing research by poring over weekly printed charts with a magnifying glass. Analysis was limited to conclusions regarding daily price activity because intraday price data were not available until the 1980s. As such, once it became available, I was pleasantly surprised to see that the TD Sequential worked on intraday price movements as well.

My research showed price movement of most markets displayed a natural rhythmic motion that could be measured by a combination of factors that either compared closing price levels or closing prices with extreme price highs and lows. Simply put, TD Sequential consists of three distinct stages: setup, intersection and countdown.

Setup

The initial setup phase consists of a series of at least nine consecutive closes less than the close four trading bars earlier for a buy setup and at least nine consecutive closes greater than the close four trading bars earlier for a sell setup. Setup establishes the environment or the context for the market and determines whether a trader should be looking to buy or sell the market.

I have added a caveat to the phrase "The trend is your friend." It is "...unless the trend is about to end." At that point it is not prudent to trade with the trend. Most of my market timing indicators, as is the TD Sequential, are designed to anticipate trend reversals.

Intersection

Once the setup series has been defined, I review price activity beginning on day 8 of setup to determine whether the setup process has been perfected and countdown can begin. To accomplish this, I require a phase I refer to as intersection.

Intersection requires the high of bar 8 of a buy setup be greater than or equal to the low of bars 5, 4, 3, 2 or 1 of the buy setup. If this requirement is not met, then the high of bar 9 of the buy setup must be greater than or equal to the low of buy setup bar 6 or any other price bar back to bar 1 of the buy setup. If this is not fulfilled, then each successive price bar is compared until its high is greater than or equal to the low of the price bar three or more price bars earlier back to bar 1 of the buy setup.