Another 2-Hour Chart

Here's yet another example of what you can do with 2-hour charts - Again it is AKS but what I wanted to show you was a simple three-pronged set-up.


What you see here is an RSI(2) < 2 coupled with a tweezer bottom (the black diamond below the third candle informs that formation) coupled with an S1 pivot point.

Note that a purchase on the tweezer bottom candle - say at the cross over on the S1 at 29.88 and this morning it hit 31.60. That would have been an excellent return for a couple of days of swing trading.

Two Hours For Fun and Profit

If you really want to see what your planned purchase or sale is doing bring up a 20-day view of the 2-hour charts. I've written about these before but I have a couple of new readers and they may not appreciate the concept of using multiple time scales to inform trading. (Now before anyone writes in to correct me - I know that there aren't 4 2-hour periods in a trading day - there are 3 2-hour periods and 1 30-minute period - these are just called the "2-hour charts").

Let's take a look at a 2-hour chart.


As you can see you can use the same technical analysis tools on the 2-hour charts that you use with any other time frame. The difference being you cross day boundaries when using 2-hour charts.

The prevalent formation on the 2-hour charts is the cross over but you will find a BOB every now and then. I've circled the two cross overs on this one and put a rectangle around the BOB.

Here's another 2-hour chart.


Again we find both the cross over and the BOB.

And one more - this one is HST and it contains a number of strange patterns -


But when we look at this on a color-coded chart such as the ones I use in QuoteTracker you can see that it is actually an RSI(2) < 2 and I use those to inform me when to add to my holdings or to day trade using my holdings.


The long purple bar is how I have the chart tell me about the RSI activity.

You can also see on this chart how the 2-hour charts support pivot points as well.

I currently own all of these stocks. That doesn't mean that I will own them later today or even five minutes from now - but right now I do own them.

Two Hours to Tombstone

Ok – it wasn’t a movie – but it is an apt title for a process that looks at 2-hour charts to find bottoms. I’m going to show you three examples starting with one that contains a little dummy spot. After a period of relentless selling as shown on the 2-hour charts it is always a good idea to watch the opening hour or so the next day. If you see some movement in the opposite direction you probably have a winning trade developing even in the absence of any traditional set-ups. I call this selling exhaustion. Now some people would say well I could look at the RSI or other momentum indicator and see that to which I respond – maybe, maybe not. In fact of the three examples I will show here not a one of them printed an RSI below 25, at least not on the 2-hour charts.

First up – DHI. This is a homebuilder, and builders as you know have been beat up mercilessly over the past several months. However, every once in awhile a buyer or two steps in and starts to grab up shares. This usually happens right after some heavy selling. Here is what that looks like –



That little candlestick in the final position on Thursday is an actual “dummy spot”. When you see that the next move is generally up.

The next day on the 15-minute charts you can see that DHI gaps up a bit then loops down then takes off for the sky. Because of the gap up and the dummy spot on Thursday this would have been a good stock to watch for just this type of move on Friday.



I know Sally, I wish I'd had it too.

The next example is just relentless selling. No dummy spot, NR7 or any other indicator – GS was just being hammered down on Thursday. So on Friday what happens but a gap up and the rest is history. Again – in the face of relentless selling as seen on Thursday for this, a generally well-regarded stock, it pays to keep it on the watch list and if you see a change in direction, scoop some up.





The final example is one of my favorites, HANS. And this one is exactly the same as GS – relentless selling all the way into the close. The next day however there is a gap up and a very clear indicator (hammer) that the direction for the day is going to be up – up - up. I took a position off the confirmation second bar and held nearly to the top. Lucky me.





One way to make this work is to do some after hours or pre-market work and find a list of stocks that have gone down that day or preferably over several days. Then view them on two hour charts and see how they did it. If they were stone cold drops they might be plays but are risky. But if they show relentless selling over the course of the day you might want to watch them the next day.

Once more props to prophet.net - the excellent charting service that I use. I don't get anything from them so go on over there and take a look. You might like their site.