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Volatility, Turtle Breakout and Point & Figure charts
  • : December 22, 2020
  • : B. Krishnakumar

Volatility, Turtle Breakout and Point & Figure charts

As always you guys did not disappoint me by not responding to the query. There were a few who did respond, and I am thankful for their time and efforts. Let us recap what I mentioned in the previous newsletter. Here is the recap from the previous week:

How does turtle breakout fit in this context? Think about this scenario:
  • Price is in a strong uptrend and pulling back or correcting in the higher time frame or bigger box size
  • There is a turtle breakout in the smaller box size or time frame
  • There is a noticeable shrinkage in the number of boxes in the columns of X & O. This means columns of X & O were getting relatively smaller before the turtle breakout in the smaller box size.

Let me share a screenshot of the trade that I took recently based on this concept. Here is the chart of Mastek in the Renko as well as Point & Figure format.

In the above chart, price was in a correction while the overall trend was bullish. I normally prefer to buy bullish stocks that are correcting in the bigger time frame.

Let us look at the Point & Figure chart which offered a nice entry.

Notice the bullish turtle breakout after a series progressively smaller columns of X & 0 indicating contraction in volatility. Price has corrected in the bigger time frame suggesting that any bullishness in the lower time frame could signal the start of the next leg of uptrend.

Using this logic, I went long in Mastek on turtle breakout and holding on to this trade. This is just an idea where I used my belief system and designed an approach to suit that. It may or may not suit your style of trading.

As I have mentioned on numerous occasions, it is essential to identify your belief system about price action and build a process suited to that.

Until you find that sync between your system and belief, you will not stick to your system and will always be looking around for newer systems or methods.

Feel free to share your style and approach. I am eager know your approach so that I can learn a thing or two from that. Looking forward to your responses.