A reliable trend exists when multiple moving averages point in the same direction across different charts: Price > 20 EMA > 50 SMA > 200 SMA.
One of the foundational concepts in Shannon’s framework is the identification of four distinct market stages that every stock or asset moves through. These stages provide the context for the trade:
Look for an asset clearly acting within a Stage 2 advancing phase. Ensure the 10-week and 40-week moving averages are sloping upward. Step 2: Drop Down to the Daily Chart A reliable trend exists when multiple moving averages
A sustained downtrend. This is the time for short positions. 3. Precise Entries and "Buying Strength After the Dip"
If you have ever felt like the market was playing tricks on you—where a stock looks like a "buy" on one chart but a "sell" on another—you are not alone. This "trend confusion" is exactly what Brian Shannon, CMT, addresses in his seminal work, Technical Analysis Using Multiple Timeframes . Ensure the 10-week and 40-week moving averages are
: Higher timeframes hold more technical weight and validity than lower timeframes [1].
A cornerstone of Shannon's teaching is that every stock or asset transitions through four distinct structural stages. Recognizing which stage an asset occupies on a higher time frame prevents you from fighting the prevailing trend. your risk distance is very small
Place your stop-loss just below the most recent higher low on the 5-minute or 60-minute chart. Because you used a micro time frame to enter, your risk distance is very small, allowing for a favorable risk-to-reward ratio if the daily Stage 2 trend resumes. Conclusion: Only Price Pays
Brian Shannon often uses the Daily/Hourly/15-minute combination for swing trading. Here is how the book illustrates a long trade: