What is this indicator?  Click for explanation.

Click to view the chart.         


When we perform our scans, a considerable amount of data is automatically collected.  We have created a model/algorithm that makes use of the collected data to derive inferences, projections, and probabilities.  The advantage of using a computer-driven algorithm to gather data, conduct tests, and draw conclusions is that it tends to minimize if not completely eliminate human emotions and biases from the process.  Humans often overlook data available to them, or they may underestimate the importance of some data.  We make frequent reference to our model.  Because using the word "model" repeatedly can get tiresome, we have created a name for the model.  Some of the output of our system is generated by Probability-based ALgorithms.  For the sake of brevity and convenience, we therefore sometimes refer to our model/system as PAL.  It is PAL that has been calculating "Intraday Key Levels," resistance levels, Group Pressure Gradients, and probabilities.  No human or system can predict precisely what the markets will do the following day.  That is why PAL uses probability algorithms to draw some of its conclusions.  PAL gathers the basic data it requires each day, then applies numerous algorithms to analyze and interpret the data.  It then generates the report that we display for our visitors.  PAL's report is expressed in a manner that approximates the speech patterns of a human reviewer rather than as a printout of probabilities and statistical data.  

It is important to remember that even when market conditions seem to have clarity and definition, sentiment can change in a moment because of a news event.  The result of sudden shifts in sentiment cannot be predicted, and they may result in market behavior that is completely outside the existing probability envelopes.  News events, by definition, cannot be predicted.  Thus, sudden trend reversals and other unexpected market behavior can occur at any moment of any day. 

PAL sometimes references a specific probability level, such as 80% or 30%.  PAL has been set to estimate behavior patterns at probability levels that are practical for the behavior being measured.  For example, if we were to use a 90% probability level, the envelope of probable excursion would be wide (less focused).  If we were to use a 70% probability level, the envelope of probable excursion would be more narrow (more focused), but then the probability of market behavior actually being contained within that excursion envelope would be less.  We have programmed PAL to use probability levels that give a reasonably good chance that the action being analyzed will actually fall within the predicted range, without the range being so broad that it is of little practical use.  To say, for example, that the average age in a room of 10,000 people has a 100% probability of being between 0 and 150 years is a highly accurate statement but of little use.  To say that the average age in a room of 10,000 people has an 80% probability of being between 35 and 50 years is to provide much more useful information, even though the probability is less certain.

PAL computes resistances and supports.  Some of these are based on a probability analysis and recent volatility patterns.  For example, PAL can determine that there is a 98% probability that shares will retreat when a certain level is reached.  As with all lines of resistance, sellers may begin to unload their shares a little before that level is reached in order to avoid having to sell when others are driving prices lower.  The same thing occurs in reverse when shares approach a level of support.  The probability patterns tell PAL that sellers or buyers are likely to enter the market as a certain level is approached.  Other levels of support and resistance are based on past patterns of accumulation and distribution.  For example, PAL can spot levels where support or resistance is likely to be encountered based on price patterns and the way share behavior tends to respond to those patterns.  Technicians know that there is likely to be support or resistance at a trendline or moving average, and that whether a trendline or moving average acts as support or resistance depends on whether current prices are above or below that line or average.  PAL reports may include such supports or resistances.  PAL reports at least one level of support and one level of resistance, but it may report up to three levels of either.  Why?  Knowing the location of support and resistance can be extremely helpful to tactical positioning, regardless of what the market does.  Knowing where supports and resistances are located can be the most important and useful information a trader/investor can use in buying or selling.    For example, smart investors often wait for share prices to approach or reach support before buying.  Then, they place the stop loss just below that support to reduce potential loss.  If there is sufficient selling to overwhelm the buyers at that level, there is good reason to sell.  Since the position was taken just above support and the stop loss is just below support, the potential loss is minimal.  That reduction in risk can enable a person to take a position when it would not be advisable otherwise.  A stop order to buy placed just above resistance can enable a person to take a position early on a breakout with minimal risk and without a need for constant monitoring.  Also, knowledge about the strength and location of support or resistance can be a help in estimating the probabilities associated with the market's next move, or how far it is likely to be able to continue in a particular direction.  Some supports and resistances are static.  That is, they remain at the same level day after day.  Others are dynamic.  They vary from day to day.  For example, a long-term declining trendline will result in resistance (selling) at a lower price level each day until there is a breakout above the declining line of overhead resistance.  A rising 50-day moving average will provide a higher level of support each day until there is ultimately a break to the downside through that support.

PAL reports must never be interpreted to be personal recommendations that anybody buy or sell any securities.  Neither we nor PAL ever make personal investment recommendations.  Please read our Terms of Use.     

Links To Other Places On This Website 

Home   Market Review   RC Allen Alerts   Price/Volume Surges   Stock Scanner   Momentum   Strongest ETFs   Breakouts   Strongest Stocks   Stop Losses   Tutorials 1   Tutorials 2   Products   The Valuator   StockAlerts   Refund Policy   Index/Directory  

All pages on this website are protected by copyright
Copyright © 2008 - 2017 by StockDisciplines.com
No part of this publication may be reproduced or distributed.

1590 Adams Avenue #4400
Costa Mesa, CA 92628 USA.

Trading and/or investing in the securities markets involves risk of loss. This website NEVER recommends that ANY individual buy or sell ANY securities.  It does not give individual investment advice, and nothing herein should be interpreted as if it does. Readers of this site's content should seek advice from a licensed professional regarding their personal investments. StockDisciplines.com will not be responsible for any loss that results from using information provided on this website.


By using this site, you agree to our Terms of Use and Privacy Policy.  See them by clicking on their links near bottom of menu on left side of every page.