I decided to forgo a market update tonight as it should be pretty clear the bears own the trend right now. Instead, tonight’s post is going to cover a trading strategy that I found today entitled, “Long Entries and the Opposite Thirds Rule.” This strategy comes from Steven Lee Jones, a well known forex trader.

His strategy combines a very unique set of Moving Averages, price movement, and a unique single Japanese Candlestick Pattern, called the Opposite Thirds Rule.
Steven goes into great detail explaining the development of the rules for this trading strategy in his blog post, which you should study if you plan to implement this trading strategy.

At the highest level, the entry criteria for this trading plan is:

“The first close above the 72 period Simple Moving Average”

The rules for entry are as follows:
1. The 72 period SMA must be above, or have touched the 21 period SMA.
2. The real body of the candlestick on the entry day (called the signal candle) must cross the 72 period SMA.
3. The candle must be white
4. The candle must have a larger than average real body.
5. The open and close must fall in opposite thirds of the candles real body.
a. If you are not familiar with the opposite thirds rule, it is explained here

Of course, I’m not one to see a trading plan without wanting to see some real time charts that it can produce. So, I went over to StockFetcher and started working on a stock screen. Now, before I get to the video on how to run the screen, I thought I’d show you some of the charts it produced today, which as was the 5th down day in 7. 5 of the Top 10 where UltraShort ETF’s. I’d say the bulls are in trouble!

1. QID – Proshares Ultra Short for the QQQ ETF

click to enlarge

2. BGZ – Another Bearish ETF

click to enlarge

3. SDS – Proshares Ultra Short for the S&P 500. Notice today’s pattern is a bearish engulfing pattern. OUCH!

click to enlarge

Ok, so now here comes the stock screen. I have received several emails from readers asking for a video showing exactly how to execute these stock screens. Therefore, I put the code for the stock screen along with the demonstration video together in one nice package.

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