NYSE TICK Indicator
WHAT IS THE NYSE TICK INDICATOR?
The New York Stock Exchange TICK is a market internal indicator useful for short term trading and is a very interesting market sentiment tool. I'll show you several ways to use $TICK to trade stocks, ETF's or stock index futures.
If you want to try out this indicator on your charting software use the symbol $TICK. That's the market statistic symbol most often used. If your software allows it, plot $TICK below the ETF - SPY (S&P 500) or the stock index future ES. Obviously, make sure the time frame used is the same.
This short term indicator is best used with fast time frames such as, 1 - 5 minute charts. It is completely useless for other types of trading such as multi-day swing trading.
$TICK tells you the number of stocks on the NYSE that are increasing in price versus those that are decreasing in price compared to the previous price quote. In other words, stocks trading on upticks minus downticks.
So, if there are 1200 stocks in the NYSE that are upticking and 400 downticking, you will see a TICK reading of +800.
You'll notice this indicator quickly moving up during periods when traders are lifting offers and raising the ask prices of stocks. And dropping quickly when traders are eating up bids.
HOW IS $TICK USED?
This indicator is often used for counter-trend type trading in a similar way that you could use an oversold - overbought oscillator such as a stochastic indicator. You'll find that most $TICK action will reside in the area of +600 to -600.
Where things can get interesting is when the NYSE TICK Indicator hits extreme readings of +1000 or -1000. A reading of +1000 will often signal a sell off in stocks and the S&P 500 and can be a good place to fade the market.
Using the same logic, -1000 is often a point of selling exhaustion and a good time to buy.
Below is a 5 minute chart with SPY on top and $TICK on the bottom. The green lines indicate +1000 and -1000.
The above logic works pretty well on choppy, range bound type days, however, be aware that on strong uptrending days, you will see this indicator hit +1000 and stock indexes will continue to advance. Readings consistently above zero indicate bullish market internals.
In a strong uptrending market a better $TICK strategy might be to buy once $TICK pulls back to below zero and wait for price to confirm or trigger a move in the direction of the trend.
Another way to use the NYSE TICK Indicator is like any other price indicator divergence trading strategy. Wait for a normal divergence between the $TICK and price.
A divergence in an uptrend will possibly indicate that as the index is continuing to advance more and more NYSE stocks are trading on downticks which can be a sign of weakness in the overall market.
As you can see on the following three - 1 minute charts of SPY / $TICK, divergences did a pretty good job of pointing out top and bottoms.
One more idea for you to take a look at, are the occasions when $TICK hits an extreme reading -- moves quickly to zero or above in this example -- and price just lingers and doesn't move very much.
These situations frequently can show the index or an individual stock lagging behind the greater market and can be profited on.
Notice how the red $TICK candle (chart on right) hits an extreme reading of -1000 and two bars later hits the zero line (blue line).
While at the same time, SPY's price bar closes at practically the same price level as it did when $TICK was near -1000.
Two bars later, price had 'caught up'. Just food for thought.
Just a quick word of caution though...just like any other regular divergence technique, trades are made against the immediate trend and while the NYSE Tick indicator can put you into some great trades, many price trends will simply continue and stop you out.
So, be prepared with quick stops especially on 1 minute charts.
Chart images on this page were created using NinjaTrader.