1. Introduction Support and resistance levels are key concepts in technical analysis. Fractals are tools used in technical analysis that help identify local tops and bottoms in charts. A fractal pattern consists of five bars with the middle bar showing a high or low compared to the surrounding bars. In this report, we used fractals with an optimized parameter to detect support and resistance levels. 2. Methodology To identify the support and resistance levels, a fractal-based approach was utilized. The optimal number of bars before and after the middle bar for fractal detection was determined to be 4 bars. For each window, bullish (potential support) and bearish (potential resistance) fractals were detected.
Now, let's determine the probability of a market regime change:
If the return for the current trading session is greater than mean+2×stdmean+2×std or less than mean−2×stdmean−2×std, this might indicate a significant deviation from the norm, suggesting a potential regime change. If the return for the current trading session is less than mean − 2 × std mean−2×std, it's significantly negative, suggesting a higher probability of entering a downtrend. Based on the current trading session's return and the statistical analysis:
Market Regime Change: The return for the current trading session does not significantly deviate from the norm (beyond 2 standard deviations from the mean). Thus, there's no strong indication of a market regime change. Downtrend: The return for the current trading session is not significantly negative (beyond 2 standard deviations below the mean), suggesting that there's no strong indication of entering a downtrend.
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