Technical analyst Jonathan Krinsky said yesterday that the current volatility of the DOW index in the stock market this year is the “narrowest first-half trading range in the history of the Dow” assuming this low volatility holds to the end of this quarter.
Is that a good thing, or a bad thing?
Personally, I’m excited about it. No predictions about the DOW or the stock market here, and I’m not giving you any buying or selling investor or swing trader advice, just my personal opinion.
There are many types of MARKET CYCLES and one of them is the “Volatility Cycle.”
This refers to the market dynamic of going into periods of contraction (low volatility), followed by periods of expansion (high volatility).
Price patterns that constitute contraction cycles are ascending, descending and symmetrical triangles and also wedges.
A well-known technical analysis pattern that also indicates a contraction pattern is the Bollinger Band Squeeze.
And then sometimes the market just creates a narrow channel for a period of time.
The exciting part is that contraction cycles are often followed by expansion cycles (a period of time where volatility kicks into high gear and covers a large range of price in a short period of time).
If you think about that last statement, that means it may provide an opportunity to make a lot of money fast. And that’s the exciting thing about trading “Expansion/Contraction Cycles” or as I call them “Ex-Con Trades.”
Below is a video on 3 approaches to trading Triangle Patterns. Enjoy!
Thank you for the video. I was wondering if you could elaborate on cycles. When you drew the lines for the triangle you said you were something cycle highs and cycle lows. What is/are your cycle indicator/s and what settings does/do it/they have?