This just shows you how the model is set up: chart to the left and price/time distribution graphs to the right.
This model interprets a “trend pattern” that has been detected with an algorithm and matched against other similar patterns. No visual charting criteria involved (no head&shoulders, etc.), this is just based on MATHEMATICAL algorithms, i.e. numbers and calculations, it’s all formulas.
So we are looking at the NDX WEEKLY here, and here is what is relevant: the NDX index is getting close to a point where the probability of reversal starts to be quite good, =>75%.
If the market is about to roll and fall again, maybe just to find a double bottom, it may happen somewhere around here.
This is the right portion of the model and it shows the distribution graphs. These are used to determine the probability of reversal: you can see that hovering with the mouse over a bar in the graph shows the “resistance” price target with its associated probability of reversal.
Note: the NDX has been rising for 2 weeks, so the Time model (Pattern: Consec.Closes Up, right hand side) is showing 63% probability underneath the 2 weeks up section of the graph. Translated in english: if this week closes up, the time model says 63% probability of reversal next week. But you need to consider also the Price model Resistance probability to the left: 73% probability, so the final probability is somehow an average of the 2 models, price and time.
Now, let’s have a look at the DAILY to see if we can find confirmation (i.e. similar probability at similar price zones on multiple time frames increase the accuracy of the forecast): here we can see that the NDX DAILY model fundamentally agrees with the WEEKLY, the 18827 DAILY target is in the same price zone of the 18875 WEEKLY target and both indicate 75% probability of reversal, so they agree.
If there is a pullback, you can use the red levels (support), to find out how far down the pullback may go, this information can help you select both the Options Strike and the expiry date of the options (NDX has daily-expiring, cash-settled options, so it is ideal for this type of trade).
If we look at the DAILY time model for the pullback, we can see that this pattern in history had pulled back for up to 7 days down (see image below). However the most common behavior was 1 to 3 days down. The 2 days down event, for example, covered 78% of the events, i.e. only 22% of the events closed down for a 3rd day in a row when this pattern was encountered and there was a pullback. That means this pattern usually does not see pullbacks that last for more than 2-3 days down. (note: after 2-3 days down the market may bounce, even just for 1 day, and then go down again, so the model is only saying what happens until there is 1 candle closing up, that candle up ends the forecast and the model from there is recalculated).
High prob. of reversal at around 18008 (left hand side) is also indicating the market will probably not fall below that level.
So, here you have an idea for a trade with the help of this model: 18000 NDX PUTs, expiry in 2-3 days max.
