Interpretation and Strategies

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Whenever market is changing from a bullish cycle to a bearish cycle it is going through a period of changes, where hesitation and fight between the bulls and the bears are the name of the game. This is what a transitory cycle looks like and the best binary options to be traded here are the one touch options. Now, it depends very much how the bullish or the bearish market ends, in the sense that if we have clues we might consolidate in a contracting triangle then Chinkou should help us looking for one touch options.

During a transitory cycle, the following strategies can be applied:

  • wait for Tenkan/Kinjun lines to cross;
  • if the previous cycle was a bullish one, look for the first green candle that closes between the Kinjun and Tenkan lines without touching the Tenkan nor Kinjun;
  • previous candle should be red;
  • this is normally a continuation pattern and points to more weakness and this is our signal;
  • invalidation level should be if price is changing direction and closes above Kinjun again;
  • the opposite is true as well, if the transitory cycle comes after a bearish market, then we should look for a red candle that comes after a green one but the red candle should not touch the Kinjun nor the Tenkan. This is a continuation pattern on the short term and implies more strength ahead.

Normally such a strategy should be used on time frames no smaller than the hourly chart and expiration date for the binary options traded should be from five minutes expiration dates to even end of day.

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