Jake Bernstein's Trading Methods
Power Momentum Formula (PMF)
The NORMAL relationship between price and Momentum is for them to exhibit parallel trends, as well relatively similar
times for highs and lows. They are “in synch” or coordinated most of the time, however, when they are not (i.e. out
of phase) we can derive valuable information about market strength and/or weakness as well as potential change in
trend. When used in accordance with the PMF setup guidelines we can generate buy and sell triggers.
If Momentum begins to decline while price is moving up then it’s a reasonable assumption that at some point in the
future price will move DOWN unless momentum and price get back into synchronous behavior. The PMF method identifies
potential turning points wherein price makes a new high for a given time period but momentum does not (sell setup)
of price makes a new low but momentum does not (buy setup). Complete rules and detailed examples are found in the
Jake Bernstein books
The Power Momentum Formula - Jake Bernstein trading strategies and
Momentum Stock Selection (McGraw-Hill) - Jake Bernstein trading strategies.
Indicators
- 28 Period Momentum of the Close
Moving Average Channel Breakout (MACB)
The MAC is based on moving averages. As opposed to the use of traditional moving average crossover Methods which use
the moving average (MA) of closing prices, the MAC uses 2 MA’s, one of the high price and one of the low prices.
Typical results with MA based Methods that use closing prices are very poor, usually in the range of 30% to 45%
accuracy. The MAC improves the odds considerably because it is a total method that uses my STF (set up, trigger
and follow through) approach. Rather than using moving averages of closing prices the MAC uses MA’s of highs and
lows combined with a price bar pattern and a confirming indicator or triggers (Williams AD and its MA). Here is an
example of an MACB.
Indicators
- 8 Period Simple Moving Average of the Low
- 10 Period Simple Moving Average of the High
- Williams AD
- 57 Period Simple Moving Average of Williams AD
Moving Average Channel Continuation (MACC)
The Moving Average Channel Continuation method uses the MAC to buy at defined support in up trends and sell at MAC
resistance in downtrends. Here is an example of the MACC on one of our charts
Indicators
- 8 Period Simple Moving Average of the Low
- 10 Period Simple Moving Average of the High
- Williams AD
- 57 Period Simple Moving Average of Williams AD
Cuban Missile Crisis (CMC)
The CMC pattern occurs AFTER a market has triggered a MAC buy or sell signal. Once there has been a trigger in a
given direction we consider the trend of the market to be consistent with the direction of the trigger. What if a
set up occurs that is opposite from the current trend. In other words, the market is in an uptrend and then you see
one bar below the bottom of the channel. What’s the worst case scenario if you went LONG (that’s right LONG) at the
end of that bar? The worst case would be one more consecutive bar below the channel which would trigger a sell, in
which case you would exit the long and reverse to short. However, what if the set up failed to trigger? What if the
market went shooting back up? What you would have is an excellent position (at least for the short term). The CMC
name was derived from the fact that during the Cuban Missile Crisis traders were fearful of what might occur and
stocks plunged. A few brave souls took long positions after determining that the worst case scenario would be nuclear
war in which case all trading would cease to exist. Their bet paid off handsomely when the crisis ended and stocks
surged in a lengthy bull market. Here is a CMC example from one of our charts.
Indicators
- 8 Period Simple Moving Average of the Low
- 10 Period Simple Moving Average of the High
- Williams AD
- 57 Period Simple Moving Average of Williams AD
8 Open Close (8OC)
The 8OC is a simple pattern that is based on the relationship between the opening and closing price of a price bar.
Typically market lows are preceded by a period of accumulation while market highs are often preceded by a period of
distribution. One way to determine pending price lows or highs is to monitor the relationship between the opening and
closing price of a market over a given period of time. If the close of a given price bar is higher than the open of a
given price bar for a given period of time, then a low is likely. If the close of a given price bar is lower than the
open of a given price bar of a given period of time then a high is likely. 8OC setups are identified by our program
but it should be noted that a trigger and follow through are needed. Here is an 8OC signal that has triggered on one
of our charts.
Indicators
- 8 Period Simple Moving Average of the Open
- 8 Period Simple Moving Average of the Close
- Histogram of the 8 Period Simple Moving Average of the Open - 8 Period Simple Moving Average of the Close
More...
As we develop and expand the trading tools available to you on this website will also include more of the Jake
Bernstein indicators which have been developed over the last 44 years of trading and research by Jake. Remember that
profitable trading does not depend solely on good indicators and patterns. Profitable trading is a specific
combination of setup, trigger, follow-through, effective profit maximization, limiting losses, and last but not
least trader psychology. This website prides itself in giving you solid indicators and patterns as well as triggers.
The rest, however, is up to you.
We appreciate your feedback and plan to be responsive to your
needs and suggestions. If you have constructive comments we welcome
them.
Mike and Jake
P.S. For complete information on Jake Bernstein’s books and Webinars go to
www.jakebernstein.com - Jake Bernstein trading strategies
