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Here we will use PCLN from daily to the intra-day in order to give clear example of how the algorithm readings define imbalances and allow us to exploit varied degrees of strength or weakness per the readings as they present themselves.

We start with the PCLN daily and define a few key spots from middle of chart and then we will move to the right-side of chart and the present.
At chart center we have a RED arrown around the 1291 and in the DOC indicator in 1st sub-graph we have the corresponding reading. What are we looking for in the DOC ? We see RED line is well above zero, while bullish is overbought in the sense most can understand. To reach a bearish conclusion we have several components to look at.

Cyan above the green is 1st, and then second is cyan above RED, if not we dont expect a deep contraction. The trigger for shorter side is the steel line move below the cyan as steel represents our short term buyers, therefore steel is moving lower this means they are not active at this time and the balance has moved to bears if cyan is over green. If green had been over cyan then green buyer would have the lead over the steel fast buyers. Moving to the middle sub-graph and ShakeOut Indicator we see lower white histogram readings at the RED down arrow of DOC. The reason the histo stays white and not a stronger yellow color short is that cyan is below the DOC red and that is still a bullish trend. (just weaker than it had been for weeks).
The broader expectation for a BIGGER decline comes when cyan DOC move above red and we start getting lower red. By Aug. 25 we have the bull last gasp as the green DOC and cyan DOC meet and cyan moves up and green lower and our expectation of a faster fall begins to mount.
As you see the chart paintbar turns to deep RED and shakeout turns yellow histograms and starts decline. The #1 appears to let us know that RED DOC has moved below -13.5 a typical time we can describe as "oversold" but in NO way signalling a new buy! Shakeout histogram at this point is brown and below the yellow and magenta buy above levels an below the shakeout -13.5 which indicates no new buyers in algo form looking to even jump in. We see how true that is as price falls fast and hard. The last bar on chart did make new low and closed above open. Most will see this as a reversal but until we see several things its just normal range trade.Those items to look for are for a bullish reversal are: DOC: green above red,steel above cyan,cyan moving below zero. Shakeout, brown above or equal to blue level, or yellow above blue,and histogram greater than yellow and best above magenta. Extreme Histogram Indicator : turning green from the magenta which is below -60 and bearish and not going red which is overbought.


This 15min chart from Monday Sept 8,2014  shows all the way back to start of month and RED arrows showing the SAME setup as the daily did on more recent. The 2nd red arrown shows DOC cyan is above red,green,white,and steel. The Shakeout held up for 1 bar but by next we see the deep RED ,now a normal read of DOC where steel does NOT come from under the green and green then crosses red is an early indication of a continued weak setup. Why? The steel long player are not engaged in adding to the position, something we saw on daily as well, this is why when you see the #2 BUY signal, they have a #4 above, telling you that any pop will not do well and you can look to fade pumps in price.


On this chart we move to a close up of last day plus. we see mid chart the dotted vertical, coming off the reversal but again the Green DOC fails to cross the cyan and the pivot away is the short signal. Also we see steel moving above the +13.5 line and the tip down of that is usually followed by several weak bars. the next buy comes at start of Monday 9-8 and while shows a #4 we have a much better shakeout reading ,the histogram is inside the yellow and magenta and rising, and RED doc is also higher than previous green cross of red DOC.


The blue trendline shows the rising red DOC line, but we have to note the Steel line did NOT come from under the green or from above the +13.5 and suggest ANY pop in the short term here will not last! This type of detail allows us to understand which BULL and BEAR signals have a greater expectancy. While PCLN is exaggerate in its beta it points out how the algorithm trading impacts price and intensity. We did not cover here the positive extreme histograms that often give us retrace levels to work from as it was not relevant to this current chart and how to read from daily to 15min timeframe.


Tuesday PCLN Intra-day 15min showing our stop following ABM in the RED line over price. Short started with the magenta value stop for short at 1206  on close of 1st bar. $1195.50 was the short entry.Each #3 were short adds if desired. Notice DOC where steel line never dips below green indicating any long signal will be very weak.
End of day we see 1st sign of turn as shakeout histogram improves just a fraction,and short stop is very tight at that point. The yellow line at price of 1183 becomes a buy above level.


After the big sell-off and a series of failed #2 buys, as the #4 warned they would not be lasting. This last #2,4 combo comes on rising shakeout white histogram. Imporoved bullish, key is continued bullish market(check) and green line of DOC getting over cyan. If cyan pivots higher we retest lows. That puts us in very cautious buy and if still short stop at 1191 from the 1291 short.

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