03.25.2009 TICK?

(This is my second update today, please see my expanded S&P chart below this post)

Before I start, I am considering using Twitter to fire out intraday thoughts about the market. However, I don't want to talk to myself. So if anyone wants me to tweet, please leave a comment. Otherwise, I will continue to think that this whole blog experience is an act of self-discussion (which is fine with me).

I have had a couple of questions recently about the TICK and its use. Here is my spin (I got this from the book Master the Trade and Brett Steenbarger's TraderFeed blog... p.s. I have Dr. S's new book on order and will report back as to how it is).

To start with, here is the TICK from yesterday's monster rally:

The values on this TICK chart are from one of my data providers, and for some wacky reason they can't do negative numbers for the TICK, so they add 10000 to it. This is not the feed I use during the day, but I just wanted to clarify. Any value you see on that chart... just subtract 10000 and that is the "real" TICK index.

At any rate, notice a few things:

1. Green lines at extreme readings of +/-1000

2. Red lines at significant readings of +/- 800

3. Blue lines at notable readings of +/- 600

4. Green line at zero

The blue line is a 5 period SMA, and the whole chart is a five minute TICK from yesterday.

Rules for the TICK (modified from Master the Trade):

1. No short or long positions until at least one reading of +/- 800 (+800 for longs, -800 for shorts).

2. Readings of +/-400 or in between are meaningless.

3. Tighten long stops significantly on a reading of 1000 and vice versa.

4. Watch the TICK trend (the candles, up all day yesterday) as well as where the blue MA spends most of its time. That is a good key as to which side of the trade you should be on.

Yesterday I traded BGU, my favorite vehicle as of late. I usually give the market about 20 - 30 minutes to open and get over itself in the AM, then read where things are in relation to TICK, VWAP, and the direction of the VWAP and 5 day MA (thanks to Brian Shannon for that one). Those are good pointers as to what kind of day it will be, at least in the immediate moment.

So yesterday I was long BGU with decent success. I did allow myself to try one short position once we hit a TICK of -800 (short BGU) at about 12:30 but quickly got out when the price action down got wobbly. I ended the day riding the wave up and just trailing my stop up to a final exit of $25.32.

Utilizing the TICK kept one from trying to guess the top of an "overbought" (whatever that REALLY means) market until there was a small crack in the rally shell. That crack did quickly heal itself, but this is an invaluable tool. Even swing traders can utilize it on days they want to initiate new positions.

Other things to track:

1. When the market is rallying, the intraday P/C ratio should be rallying as well (like yesterday)

2. Watch the trend of the intraday TRIN - going up is bearish, down is bullish, down and flat is VERY bullish.

Hope this helps somebody out there!