Radio | Basil Chapman

The ChapmanWave© Up/Down Sequence.

The ChapmanWave© Up/Down Sequence, is a technical method of identifying price trends, and internal strength or weakness.  The basis for the waveform is the sequential, alphabetically notated, rising or falling peaks or troughs.

Primary technical tools are the MACD and the stochastics. Where needed, trendlines, channels, moving averages, Fibonacci levels, the ARMS Index, the tick, and volume, are utilized.

Because this methodology works in any given time frame, in both rising and falling trends, the expression, “The waveform that never sleeps,” seems appropriate.

What is the ChapmanWave© Up/Down Sequence?

This outline gives an analysis of the CWave© (abbreviation of the ChapmanWave©) in its most basic form.  In these examples no technical indicators are included, yet most of these chart patterns were identifiable by their price formations within the CWave© Up or Down Sequence.

1.   It is a method of identifying turns in price-trend, and gauging the degree to which the new up/down trend can move.

2.   Plus (+) or arrow signs are placed above or below the lowest or highest bar at key turning points, but the actual signal does not begin “officially” until the next higher low-bar (in the case of an uptrend), or next lower high-bar (in the case of a down trend).

Note:  For convenience, the anticipated next letter, and even the + sign or arrow, is placed above, or below, the upcoming peak or trough. However, that designation only becomes official after the next lower or higher bar.

3.   Consecutive higher peaks or lower troughs form the basis of the up or down sequences. When the price makes this ^ pattern it is a peak (not necessarily a top); a v-pattern makes a trough (here as well, it does not imply a bottom).

These two examples are demonstrations of troughs going to higher peaks.   Note how the very next bar after the up or down leg concludes gets the alphabet letter.

4.   Once triggered (as shown by the + sign or arrow), the ChapmanWave© Up Sequence usually forms higher peaks, while the Down Sequence makes a lower trough, or troughs.  Plus signs (+) indicate a potentially sharp reversal is possible (but doesn’t have to happen).  The placing of an arrow usually confirms that analysis.  (But here again, there can be changes made if the waveform analysis requires renaming.)

5.   Each higher peak or trough is given a letter of the alphabet.  (These letters occur sequentially, A-B-C, etc., using upper case in rising trends – also called up modes – and lower case a-b-c-, etc., in down modes.)

Once again, the actual denomination of the letter above or below a bar is only the anticipated wavecount when that up- or down-leg concludes.

6.   The goal of an Up Sequence is to establish at least a peak-D  (the fourth highest peak).  It may or may not turn into a top.

7.   CWave© Down Sequences can have just one leg down before reversing back up in an Up Sequence (by making a higher high than the last highest peak), or they can have numerous consecutive troughs at lower lows in a bear phase.

In the following chart, the CWave© Down Sequence demonstrates a sell mode unfolding with a continuous downward cascade.  Every rally attempt is either minimal, or non-existent.  Not until the final culminating waterfall crescendo to a climactic low reverses powerfully, is there some semblance of internal strength. (The up arrow posted after the first higher low bar at trough-e confirms a CWave©Up Sequence unfolding.)

8.   As the previous chart shows, after going to lower lows, the ChapmanWave© Up Sequences can abort, or re-start after just an initial peak-A, or peak-B rally failure.

9.   A re-start implies that, after an initial rally “up” signal is triggered, there has been a failure.  A backslide that either retests the recent lows, or gets close to that level.  However, almost immediately a new rally begins, swiftly making a higher high bar than the last peak.  These are indications that this rally has fortitude. At this stage the technical indicators often help a great deal in gauging extant strength.

Key points to be aware of in a ChapmanWave© Up Sequence, which will be constantly demonstrated as more charts are analyzed: 

  • In a rising CWave© up sequence, usually from a peak-D, the risk of a sharp decline increases. 
  • However, while peak-D does not automatically trigger a sell (or down mode) signal, it is must be considered a warning.  
  • Even so, still higher peaks are possible; thereby rallying up to a potential peak-E; peak-F, or even a rare peak-G top. 
  • A higher high than peak-G automatically negates the peak-G designation, instead it confirms that a new CWave© Up Sequence is in progress. 
  • As one becomes more familiar with the various chart formations, familiarity with repetitive chart patterns will enhance one’s success rate. 

Remember that one picture is worth a thousand words. These charts show that the basic concept is visually rather clear.  Don’t make the analysis process cumbersome.  Often it is just a matter of waiting for the next peak or trough to recognize the trend unfolding. 

The ChapmanWave© Down Sequence.

Because selling invariably produces a different emotional dynamic to buying, the charts often reflect a quicker downward thrust in prices.  Sometimes a ‘bear’ move down can continue without a significant leg CW-1 (CWave© leg-1) up, with lower troughs coming one after the other.  Or, there could be no more than a sharp, swift, one leg, or maybe three-legs down, and then a new up sequence begins.

Note: Lower case sequential letters are used in down modes. 

This would be a typical example of a continuous “bear” cascade. 

1.   In down modes there can be extensive cascades to lower troughs, as shown in above example. 

2.   CWave© Down Sequences can be as brief as one leg down, or form three-wave consolidation patterns.  Both formations become extremely bullish once new recovery highs are established.

3.   ChapmanWave© Down Sequences utilize the technical indicators far more than on the way up.

4.   Any new high above peak-F must be analyzed as part of a new up sequence before a peak-G is considered.

5.   As noted, in a sharp waterfall-type selloff, there can be numerous trough-f, and trough-g lows, as rallies tend to fail quickly (basically a bear market – even if just a one-minute chart).

6.   The following upside reversal often comes after either a powerful v-shaped cascade lower with an immediate run back up, or a sideways bounce unfolds as the technicals slowly improve.

Important aspects to monitor in the ChapmanWave© Up Sequence. 

  • From peak-D the technicals become increasingly important in analyzing the upside potential. 
  • It is possible that a re-naming of the up sequence letters can occur from peak-D up if the technical conditions concur.  
  • Just as the technicals give the buy signal trigger, so too, at tops the technicals become ever more important in the waveform. 
  • At potential tops or bottoms other technical indicators can assist in the analysis. 
Final Reminder!

It is imperative that I emphasize again and again that when looking at ChapmanWave© notated charts, they will almost always look “perfect.”  That is, in up modes, the peak-Ds, Es, or Fs will always have the + sign or arrow in the “correct” place.  Even a hesitant rally might have to be re-named.  Down mode reversals will have plus or up arrows at just the “right” trough.  That might come after changing a + sign to an up arrow as the chart pattern unfolds.

I call this an “idealized” version of the ChapmanWave© Up/Down Sequence.  That does not mean to say that most of the turns will not be identified correctly.  Rather it signifies the importance of making necessary wave count corrections along the way, thus facilitating the analysis process looking ahead.