Developing Hot Zones by Massimiliano Scorpio
Can you forecast a barís close from its open? This
technique is helpful in trading recently introduced
tradables that donít have historical charts yet, such
as single-stock futures.
In the December 2001 STOCKS &
COMMODITIES, I demonstrated a simple
method that uses a statistical indicator
to help identify profitable patterns.
Here, I have taken the method one step further: Iíve analyzed the
behavior of each bar and the
relationship between the open
and close. If the market is
showing a specific pattern, is
there any way to forecast the
close from the openís position
in the bar? I used the key reversal
up day (see Figure 1) for the
pattern to see whether such a
forecast was possible.