Fast Moves

What is ‘Fast’ in terms of stock price movement? This is often referred to as ROC (Rate of Change). The stock market is moved by the emotions of ‘Fear’ and ‘Greed’.  These emotions often walk hand-in-hand.  The Intra-Day Momentum Levels were created to determine the intra-day market direction. Could they also be used so that we could define ‘WHAT’ a ‘Fast Move’ might look like?  Because the distances in price are historically significant for a longer time period than just a few minutes, we might be able to mathematically define a ‘FAST MOVE’. This would allow us to determine if a ‘Fast Move’ comes from a ‘False Move’. We will also be able to determine scenarios and base trading decisions on whether we should ‘trade’, ‘fade’, or avoid a Fast Move altogether.

Defining a ‘FAST MOVE’ off the OPEN is considerably easier than doing so from some point during the trading day.  This is because most charting applications deliver the data in a time-frame-based format. This way of delivering the data breaks up the price movements into bars that have been normalized by ‘periods of time.’ At the end of the x-minute time period, the bar closes and a new price bar is created. Therefore, a ‘Fast Move’ could easily occur over two or more time-period bars. This would make identifying the ‘Fast Move’ more challenging.

Historical Significance

The Intra-Day Momentum Method Levels have been historically significant for the past five years. In the past five years, less than 10% of the data exceeded the extension of the levels beyond three times. Only 10% of the data recorded would have needed a 4th Level to encompass the day’s trading range. This allows us to estimate where the High/Low of the day may take place, in terms of price. This also allows us to determine what a ‘Fast Move’ might look like in terms of ‘Price Movement.’

Being able to identify a ‘Fast Move’ is a step in the process of finding answers.  The ability to identify a ‘Fast Move’ gives us a reason to Exit a position, tighten stop-losses, Fade the Move, or just to avoid the directional move altogether. Often times, ‘Fast Moves’ make excellent candidates for ‘fading’ a directional move. However, a ‘Fast Move’ can be indicative of something real. When are ‘Fast Moves’ to be taken as a ‘Real Move’? Our research is constantly evolving and we continuously explore potential similarities in ‘Fast Moves’ that turn out to be ‘Real’.

Fast Moves in Stocks

Because the levels have demonstrated historical significance, we can assume that a move to an extended level (ML2-ML3/MS2-MS3) and beyond in early trading:

  • Would be considered a ‘Fast Move’
  • Would likely demonstrate that the High or Low of the day may be near in terms of price.

What stocks have the potential to move FAST:

  • NEWS driven stocks
  • Stocks coming out of tight consolidation – NR4/NR7 Patterns / Boomer
  • Extremely Overbought/Oversold stocks
  • Volatile Markets

In stocks, a move to the ML1 or MS1 in the first several minutes of trading could also be defined as a ‘Fast Move.’ However, it would be wise to watch for ‘news’ related moves. News often can move an individual stock quickly and relatively far.

Fast Moves in Market-Based ETFs

Markets do have different tendencies, in regards to ‘Fast Moves.’ An individual stock is much more likely to have a ‘Fast Move’ to an extended level than an ETF. This is particularly the case with ‘market-based’ ETFs such as the SPY, DIA, QQQ. Fast Moves in market-based ETFs would be any level reached within the first 15-30 minutes of trading. The quicker an ETF reaches the level, the faster the move would be considered. While there are situations that may occur where these moves are tradable, we need to determine which ‘Fast Moves’ to trade and which ‘Fast Moves’ to fade. Our goal is to quantify the ‘Fast Move’ and define patterns to identify these trading opportunities.