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Sequential® Analysis
An indicator designed to identify market exhaustion
using price patterns. It can help to anticipate trend reversals.
Overview
- Developed and trade marked by Tom DeMark, this indicator helps
identify market exhaustion (based on the premise that price reversals
are the result of market exhaustion).
Interpretation
Sequential Analysis involves a three step process of counting
the daily bars on a bar chart:
- Set Up:
- Buy set up: count nine consecutive daily price closes
which are lower than the close four days earlier.
- Sell set up: count nine consecutive daily price closes
which are higher than the close four days earlier.
- Requisite filter (Intersection):
This step is designed to filter-out false expectations of a reversal
when the trend is strong.
-
To confirm a buy set up the highs of day 8
or 9 must intersect the lows of three or four days previous.
-
To confirm a sell set up the lows of day 8
or 9 must intersect the highs of three or four days previous.
-
Countdown:
-
A buy set up is 13 closes lower than or equal
to the close 2 periods earlier (unlikely that these will be
consecutive)
-
A sell set up is 13 closes higher than or equal
to the close 2 periods earlier (unlikely to be consecutive).
Signals
Only after the entire three-step process has unfolded,
would you enter the market.
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42.97
