Period: 4 for chart looking at a 6 month time frame on the chart
Period: 5 or 6 for longer
This indicator is designed to identify shares that are moving within parallel lines of support and resistance, i.e. a regular trend or channel. The indicator attempts to find stocks that are rising from the lower level of the trend, off support moving up to the higher level, the resistance. The indicator can alert us to shares trading in both ascending and sideways patterns. Ideally, we want to avoid shares trending down, and therefore, the indicator does not signal down channels.
Trend following system
All equities, not options
There are only two variables for the Conductor:
This is the minimum number of days to be included in the search. The smaller the setting the more volatile the selections.
Trend Reversal Up or Trend Reversal Down
This setting refers to the direction of the reversal. If you were searching for shares that had been trending down and had suddenly changed direction, you would choose Trend Reversal Up. If you were searching for a share that had been trending up and had suddenly changed direction, you would choose Trend Reversal Down. You can choose to leave both boxes ticked and be alerted to share reversals in both directions.
If you were searching for a share that had been trending up and had suddenly changed direction, you would choose Trend Reversal Down.
You can choose to leave both boxes ticked and be alerted to share reversals in both directions.
The diagram below shows how the Conductor Pre-Alert Indicator is searching for the shares. The actual formula is of course proprietary; however, you can see the pattern.
For a trend reversal up, using a setting of 6 days, the chart below illustrates the pattern being searched for.
You can see that there have been 6 days in a downward trend before the reversal up.
For a trend reversal down, the chart below shows the pattern and reversal.
Again, you can see that there are 6 days in an uptrend before the down turn.
The Market Conductor can give us some insight into how the Conductor works. Do not confuse the Conductor and the Market Conductor as two separate indicators. The Market Conductor simply indicates the count of required days in the one trend prior to a reversal.
As the diagram below indicates, the Conductor appears below and below the chart depending on whether it is a reversal up or down. The Conductor is the search engine, and you can see how it alerts us to the potential trades, however, it is the Market Conductor that you can overlay onto the chart later to indicate to us why the C’s came up.
As you know the C needs 6 days (using 6 days as the example) in an up or down trend before you will be alerted to it. These days can be either positive or negative days in either.
The chart below has the market conductor overlayed onto it. It is easy to see, and in fact count the number of green days required before a trend reversal down and how many red days are required before a reversal back up occurs.
As with all the indicators, the Conductor is an alert to possible trades. It is different however as it waits for the change, unlike the Accumulation and Distribution indicators that are pre-emptive As with all indicators, although the conductor alerts us to a selection of shares that have changed direction, you need to determine how significant that change in direction may be.
The chart below looks at how technical analysis helps “weed” out the selections less deserving of your time. It is important you establish the position the indicator is alerting, in relation to the share price, and the overall chart, for example, is the stock at a level of support or is it in a descending or ascending trend?
You can see on the chart the indicator alerted us to reversals up, however the reality of the stock advancing far was unlikely.
The chart below indicates how you would use other charting methods to sieve the number of selections to find a share that suits our trading strategy.
While you may not be interested in trading as often as this, it is a good example of how a combination of the Conductor and other technical analysis need to work together. The red horizontal lines indicate the support levels, while the red angular lines represent the resistance and trends of the stock. Our entry would come on a break in the resistance, provided other conditions are met. It is important to appreciate that the indicator can alert us to, say, an up reversal while the day in question is a negative day. This would make the decision to trade the stock less likely. To purchase a share, you like to see a positive day to indicate to us that the buyers are in control. Likewise, when being alerted to the possible down reversal, it can be with a positive day, however you like to see a negative day before you sell, to indicate the sellers are in control.
If you look at combining the Conductor with other indicators, the Accumulation and Distribution indicators work you will. The A and the D alert us the share and the C can help confirm that it has now changed direction.
The Conductor is alerting us to shares that have made a reversal in the most recent trend. It is a counter trend tool.
The length of that trend depends on the Conductor setting you chose. The smaller the setting the less significant the break in trend may be. For example, a resistance line drawn over twenty days and having been broken, has less significance for a trend reversal than, say, a resistance line drawn over twenty days and being broken.
It needs to be used in unison with other technical analysis and methods of trading. For those who would like to see some more detailed research using the conductor please refer to the module ‘Building a trading system- step by step’