How to Read The Proper “Setup” for a Trade

The Solar/Lunar reversal dates work best when the proper “trading setup” is in place.

A trading setup is in place when an isolated low or high forms within the solar/lunar reversal dates. For video instruction on this, please watch this video on our YouTube channel. Otherwise, the following steps describe the proper setup that should be in place for maximum trading benefit, and without this set up, the trade is negated:

1. A weighted value score of 138 or higher is most desirable. Anything “higher than norm” should be considered, especially if above 114. Above 138 is “high.” Above 150 is “very high”. The higher the score, the more frequent it has correlated with a reversal (isolated low or high) in the past from which prices have reversed 2.5% or greater within the following 1-7 trading days (and even longer depending on the labeling of the primary cycle).

The dates given in the MMA Solar Lunar Forecasting App are based on the position of the Sun and Moon at noon that day for the DJIA, and 11:00 AM Greenwich (London) for Gold and Silver. However, since futures markets trade nearly 24 hours, from Sunday evening through Friday evening, traders should also understand that the anticipated reversal may apply to late the day before and early the day after those shown in the Solar Lunar Forecasting App as well. For an overview of the MMA Solar Lunar Forecast App, please visit our How to Use the MMA Solar Lunar Forecasting App Video on our YouTube channel.

The key is to be aware of exactly when the Moon enters the sign that correlates with a reversal in each Sun sign. The MMA Solar Lunar Forecasting App will identify exactly when (time of the day) the Moon changes signs as well as when the Sun changes signs. It is at that point that the solar/lunar weighted value scores should apply – which might be before noon Eastern Time in the case of the DJIA cash , or 11:00 AM Greenwich time in the case of Gold and Silver futures.

2. After entering a solar/lunar reversal time band (high weighted value score), the next step in the setup is to see the price take out the low or high of the previous day. If it takes out the high, a reversal down is likely setting up (“picking a top”). If it takes out the low of the prior day, a rally is scheduled to start (“picking a bottom”). This is known as the “trigger” for the full set up based on solar/lunar trades.

3. The proper setup is “confirmed” when the next day’s price is lower than the prior day’s high (isolated high) or higher than the prior days low (isolated low). In other words, an isolated high is a day in which the high is higher than the day before and the day after. An isolated low is a day in which the low is lower than the day before and day after. We are looking for isolated lows or highs on solar/lunar days with high weighted value scores, which is shown in the first column in the MMA App.

4. You do not want to wait for the setup to be “confirmed” because much of the move will be over by then. Once the “trigger” is underway, the market is in the solar/lunar reversal period and takes out the low or high or the prior day. You must be prepared to initiate the trade on the “trigger” date. For this, you need to pick a price with a reasonable stop-loss that is either above the prior day’s high or below the prior day’s low. The following factors can help you choose an entry price:

Use daily support or resistance zones from MMA Daily or Weekly Subscription Reports as entry points to buy (support) or sell (short, resistance).

Use intraday (5- 30, 60-minute) momentum indicators to determine if a market is overbought or oversold.

For instance, you may want to see a 30-minute stochastic or RSI below 20%, or a CCI below -200 before buying. With that, you may wish to also see a 5-minutes stochastic or RSI below 10%.

Look for divergences. For instance, if buying, perhaps the 30-minute stochastics is below 20% but a lower stochastic was noted earlier on a higher low. Now price is lower but the stochastic is not lower, which is a case of “bullish oscillator divergence” and a strong signal to buy in the solar/lunar reversal zone. You can do the same with RSI and CCI studies. A lower price with a higher oscillator reading is a case of bullish oscillator divergence and constitutes a buy signal if the price is lower than the prior day and the market is in a solar/lunar reversal period with a WV greater than 138.

5. Once the setup is confirmed, move your stop-loss up to just below the low of the move if it’s an isolated low and you are buying, or above the high if it is an isolated high and you are selling short.

6. Start taking profits when you reach your price target for the move and/or the technical studies indicate the market is overbought (if long) or oversold (if short), using the same parameters given for the entry point. Generally speaking, we like to see a move of 2.5% or greater, but sometime that doesn’t happen before the oscillator points to a reversal.


Additional Notes

The Solar/Lunar values are based upon studies that measures 3% swings in the DJIA and Gold, and 4% swings in Silver. Thus, it is best if the reversal follows a 3-4% decline from the high to the low for a buy during a high weighted value day, or 3-4% rally from a recent low to the high for a sell during a high weighted value day. Furthermore, it is best if the reversal then also moves at least 3-4% from the high weighted value day. But in reality, these two swings do not always equal 3-4% price moves.

Still, once the market makes an isolated low in a high weighted value zone, we do expect at least a 2-3% rally to follow, even if it didn’t start from a decline of any substance. Just a simple isolated low is enough to trigger the set up for a 2-3% rally. The opposite applies in the case of a high into high weighted value score day.