Page 230 - THE MARKET WHISPERER

226 PART 7 - Indicators: The Trader’s Compass

Even though the TICK indicator shows NYSE data and not NASDAQ data,
you should relate to it as though it represents data for the entire market.

Exercise
The market is rising, the trend is up, and the TICK shows a strong up

reading of 1000. The stock you want to buy has just reached the trigger

point. Should you buy, or not?

We can utilize the TICK in two ways:
1. Point of extremity.
A reading of minus 1000 is an extreme reading. This is an extreme negative
status in which the quantity of stocks falling is greater by 1000 than the
stocks rising. Conclusion: the market is showing an exhaustion low and
should therefore be reversing upwards.

A positive reading of 1000 also represents an extreme status in which
the quantity of rising stocks is 1000 more than those falling. Conclusion:
the market is showing strong upward exhaustion and may therefore be

returning downward shortly. In rare instances, the reading may reach a
positive or negative 1300. Generally around the 800 to 1000 mark, it will
turn around as the market pattern reverses.

Did you understand the answer to the exercise?

An extreme high or low point can occur several times a day and generally
correct within several minutes. Following the pattern reversal, the TICK
returns to the sideways area of between -500 to +500, an area in which the
indicator is basically telling us nothing.

SMART An extreme reading will not stop us from entering the
MONEY market for a long-term swing of several days, where brief
intraday fluctuations have no effect.

Answer to the Exercise:

How does an extreme reading affect our decisions as traders? Very
simply. If you plan on buying a stock trending up, believing that it will
continue to trend up, you need to buy it at the optimal time and not at
the point of extremity which holds a greater feasibility of it dropping.
Therefore, before buying, it is worth checking the TICK indicator.

Let’s say you saw the indicator display a positive reading of 1000. As we
learned, this is an extreme reading meaning that the market anticipates an
impending reversal. It is very reasonable to presume that the stock you are