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The Foundation: Understanding the Terminology

At the heart of this strategy is identifying “oversold” conditions across various timeframes using our proprietary Wave Master indicator. Here’s the foundational structure:

1. Weekly Signal (+):
   When the weekly wave is oversold, a + is added, indicating increased conviction for potential upward movement.
2. Conviction Levels (1 and 2):
   • 1 (Wave Master 9-Day Hold): Indicates that shorter timeframes (1-hour, 3-hour, and 1-day) are oversold. This suggests a shorter-term opportunity with potentially less downside risk.
   • 2 (Wave Master 45-Day Hold): Indicates that longer timeframes (1-day, 3-day, and 5-day) are oversold. This aligns with a longer-term opportunity, but there may still be room for further downside.
3. Strength/Level:
   Strength, also referred to as “level,” signifies the number of waves showing oversold conditions. A higher level means more timeframes are aligned, increasing confidence in the signal. For example, a level of 6 means six waves are oversold.

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How to Read the Signals

• 1+:
  Combines the weekly oversold signal (+) with a shorter-term entry (1). This setup offers both a longer-term vision and a shorter-term entry point, often reducing downside risk.
• 2+:
  Combines the weekly oversold signal (+) with a longer-term entry (2). While this aligns with a longer-term vision, the potential downside may be greater due to higher timeframe influences.

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Putting It Together

When scanning for opportunities, investors manually evaluate the combinations of these signals and their levels. The general consensus is:

• 1+ is stronger than 2+:
  A 1+ provides a better balance of short-term entry and long-term vision, reducing immediate downside risk.
• High strength/level amplifies the signal:
  A signal with a high level (e.g., 7) indicates alignment across multiple timeframes, increasing confidence in the decision.

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Conversation Insights

Key Question

“What about 1+ makes it stronger?”

Explanation

• The 1+ combines a short-term buy signal (1) with the long-term oversold weekly indicator (+), offering an entry with less downside potential.
• Conversely, 2+ aligns with longer-term signals, where further downside is more likely before recovery.

“The + gives you the longer-term vision, and a 1+ adds a short-term entry. A 2+ is longer-term entry, so it could be subject to additional volatility.”

Practical Application

Here’s how you can use this framework:

1. Scan for Oversold Indicators:
   Identify whether shorter or longer timeframes are oversold. Use stochastic levels to assess strength.
2. Prioritize + Signals:
   Weekly oversold conditions (+) provide a foundational advantage, signaling long-term recovery potential.
3. Focus on Strength Levels:
   High strength (e.g., level 7) shows strong alignment across multiple timeframes, adding conviction to your decision.
4. Understand Your Hold Period:
   • For shorter-term holds, focus on 1+ signals.
   • For longer-term holds, evaluate 2+ signals while accounting for potential downside.

Example Wave Master Scanner Result