As longtime readers will know, I analyze charts utilizing a concept I call "symmetry" -- that is, similarity or equality when comparing swings in the same direction. I mostly use this on price but, on occasion, I also apply them to timing -- and that's certainly the case in today's column.
As you'll see in the following examples, time symmetry on daily or weekly charts may point to a big reversal. (This stands in contrast to symmetry in intraday charts, which can indicate a reversal that's short-term in nature.) After we look at these, I'll make my case for the development of a potentially important low in iShares Barclays 20+ Year Treasury Bond (TLT).
But, before we get to that, let's look at our first example: a daily chart of Costco (COST). This past November, time symmetry helped me identify an important turning point in this stock. Notice that this chart shows four equal or similar swings in timing: Three declines lasted 24 trading days, while the other one that lasted 25 sessions.
This symmetry helped me gauge when Costco might bottom and resume the rally within its larger uptrend. I saw that the stock had put in a low 24 trading days from the Oct. 10 high, so I started to watch for my buy triggers, and a beautiful rally transpired in the following couple of weeks.
My second example is in Joy Global (JOY). As this stock underwent a huge decline last July, I noticed that the move looked similar to a few of the other prior pullbacks on the weekly chart, which had lasted between 23 and 27 weeks. Besides this time symmetry, the stock was also testing some key weekly price support. At that time, the most recent low had been made 24 weeks from January 2012 high, so the timing here was very similar to what we'd seen in a couple of the prior downswings. Also note that the 24-week low was then retested 27 weeks after this same key high.
This same tool helped me identify a two-week period when Bidu (BIDU) might terminate its decline. The stock's first low, in late November, was short-lived. But we witnessed a beautiful, tradable rally after the second signal against the time and price parameters. Notice the time symmetry here: This downdraft, and the one immediately prior, each lasted for 16 weeks. You can't make this stuff up! It is certainly worth watching.
We now come to our last example -- a weekly chart of Chevron (CVX). Not all the timing swings are similar here, as you can see. However, many of them lasted between 11 and 13 weeks, or eight to nine weeks. This is information that can really help pin down reversal times, especially when you combine them with my methods of price analysis.
At last we come to the weekly chart of TLT. I'm looking at some rather important time symmetry here, and currently it tells me the fund might already have an important low in place -- or that one is more likely to develop within the next couple of weeks. Note that the timing of the prior declines lasted anywhere from 24 to 28 weeks.
The most recent low in TLT was made 23 weeks down from the July 2012 -- very similar to the 24-to-25-week declines made in the past. Also on the weekly chart, the fund is testing key price support.
Bottom line: Time symmetry tells us that we should stalk the TLT for buy triggers in the next few weeks. If we do see these, we should take them to signal much higher odds for the development of an intermediate-term low; in other words, time will be on our side (video link).
For more information on trades and triggers, please refer here.