A three-lock reversal drill: line, oscillator, and volume

Two jobs on one chart

The case treats technical work as two jobs: describe the regime from successive highs and lows, then time when that description is changing.

Price swings first answer what regime is in force. The same tools later answer when that regime is changing.

The trendline is only a hypothesis

A trendline is a straight line across swing extremes that states the prevailing channel. A close through it is the first falsifiable clue that the channel may have ended.

A down trendline is drawn from the highest high to the last minor high before the lowest low. In the case that line ran from above 18 to the early-September 11.50 high and was broken in October 1993.

The remaining structure checklist

A downtrend is treated as reversed only after the down line breaks, a higher high and higher low appear, and price closes through the last minor high of the old decline.

After the line break, an unfilled six-session gap, a higher high and higher low, and a close through the prior downtrend's last minor high were treated as the remaining price-structure evidence of reversal.

The oscillator vote

The oscillator is defined as the 21-session sum of raw accumulation/distribution divided by 21-session volume, where each day's volume is scaled by where the close sits in that day's range between +100% and -100%.

That reading is a 21-session ratio of volume-weighted close-to-range accumulation to total volume. A persistently positive reading means closes clustered in the upper part of the daily range on heavier activity.

Into the October 1993 low the oscillator formed higher lows against price's lower lows, then moved into positive territory as the down trendline broke.

Volume as a confirmation filter

Volume confirmation treats an unusually large session, or heavier volume on days that close strong, as independent evidence that the price-structure signal is executable demand rather than a thin print.

The case used outsized sessions: more than 900,000 shares on 15 October 1993 versus typical 200,000 to 400,000-share days, and a 1.7 million-share close at the highs on 8 December.

When the long was opened

The long was opened on 8 November at 10.75 after the line break and unfilled gap, before the close through the September minor high.

That close printed on 12 November at 12.50 as the oscillator reached a 10-month high.

The inverse exit

The long is no longer supported once price closes through an up line drawn across corrective lows and the oscillator moves to the negative side.

The position was exited on 7 March at 15.25 once price closed through an up trendline drawn across corrective lows and the oscillator had turned negative, the inverse of the entry triad.