The turn forecast is given on the first line. This indicates that a change in price behavior is very probable within a day. If the market has been rising this could mean that prices could go flat or fall. If the market has been flat, the turn could mark the beginning of a new rally or decline. The importance of a turn is that something is very likely to happen that is different from what has happened during the preceding days. Turn forecasts are always predicted basis the close of trading on the indicated day. A trader should be on the lookout for a reversal or breakout within a day; this also means that the event could have begun before the close on the turn day. We provide the Precision Turn calendar to give advance warning of turn days.
The second line contains our direction forecast, which is either Up or Down. The market should move in the indicated direction, but there is always a possibility it could move in the other direction, which is why a trade reverse point is suggested. The direction is determined using a special neural network that analyses price, volume, and sentiment behavior during the period just preceding the turn.
The third and fourth lines contain the trade suggestions. The suggested trade entry is always at the next day's open. However, if the market moves against the forecast and through the reverse point, it is likely to continue in that direction. If a trade is elected, the management of the trade is left to the client. Studies have shown that the expected duration of a trade is about 4-8 days, and at least partial profits should be taken if another turn occurs during the trade.
It is important to consider how far the trade is likely to go. Our price channel lines provide an excellent reference. If the market is on the high end of a wide channel, and the move down to the lower channel boundary has enough profit potential, then taking this trade may make more sense than one in which there is little room for gain. It should be remembered that stops do not necessarily prevent major losses.
The lines drawn on the chart show the most significant price trend channels. The high and low channel lines are found automatically by selecting only those which have the most contacts, are parallel to within 0.75° tolerance, and are the closest together (the narrowest channel). Channels provide a sense of perspective as to what the trend has been recently on two different time scales: a broad, longer-term channel and a narrow, shorter-term channel. Insight into profit potential is gained by evaluating current price levels relative to the broader trend channel. For example:
if the direction forecast is Up and the price is currently at or near the lower edge of a broad, longer-term channel, one could infer profit potential was good. The market has ample room to rally even if it stays within the broad trend channel.
if the direction forecast is Up but the price is currently at or near the upper edge of the broad trend channel, one might be more cautious in taking a buy trade. The market would have to break upward out of the trend channel for the position to have any significant amount of profit potential. Although an upward breakout is certainly possible, it is by definition more likely that the channel boundaries will hold. In this case, the trade reverse point should be carefully considered.