Understanding “Lowest Low Value”

In technical analysis, the “Lowest Low Value” (LLV) refers to the lowest price level that a security has reached over a specific period. This indicator helps traders identify critical support levels, potential trend reversals, and breakout points. It is often used in conjunction with other indicators to confirm buy or sell signals.

The LLV is calculated by selecting the lowest price (low) of a stock, commodity, or forex pair over a given lookback period. For instance, a 20-day LLV will return the lowest price observed within the last 20 trading days.

Formula for LLV:

LLV(n) = Lowest price over the past n periods

Where:

  • n is the chosen lookback period
  • The lowest price can refer to the closing price, low of the day, or intraday low

For example, if we are calculating the 10-day LLV for a stock, and its lowest prices for the past 10 days are:

50, 52, 49, 51, 48, 47, 49, 50, 48, 47

The 10-day LLV would be 47 (since it is the lowest price within this period).

Trading Strategies Using LLV

1. Buying at Strong Support Levels (Reversal Strategy)

Concept:

When a stock or asset approaches its LLV, it often indicates a strong support level where demand may increase, leading to a price reversal.

How to Trade:

  1. Identify the LLV for a chosen period (e.g., 20-day LLV).
  2. Check if the price is nearing this level with confirmation from other indicators (e.g., RSI below 30, MACD bullish crossover, or volume increase).
  3. Enter a long position when price action confirms a bounce from the LLV.
  4. Set stop-loss slightly below the LLV to limit risk.
  5. Exit when the price reaches a predefined resistance level or when momentum indicators show overbought conditions.

Example:

A stock has a 30-day LLV of $45 and is currently trading at $46. The RSI is at 28, indicating oversold conditions. If a bullish candle forms near the LLV, a trader can enter a long position with a stop-loss at $44 and a target of $50.

2. LLV Breakout Strategy

Concept:

A price breaking below its LLV can signal a strong downtrend continuation, offering short-selling opportunities.

How to Trade:

  1. Identify the LLV for a specific period (e.g., 50-day LLV).
  2. Wait for the price to break below this level with a significant increase in volume.
  3. Enter a short position after confirmation (e.g., bearish candlestick close below LLV).
  4. Place stop-loss slightly above the broken support level.
  5. Set profit target based on Fibonacci extensions or previous support levels.

Example:

A stock trading at $30 has a 50-day LLV at $29. If it breaks below $29 with strong volume and closes at $28.80, a trader can short the stock with a stop-loss at $30 and a target at $27.

3. LLV Mean Reversion Strategy

Concept:

Assets often revert to their mean after reaching extreme price levels. LLV can help traders spot oversold conditions where prices may bounce back to the moving average.

How to Trade:

  1. Identify the LLV along with a moving average (e.g., 50-day LLV and 200-day MA).
  2. If the price is far below the moving average and near LLV, look for reversal signals (e.g., bullish candlestick pattern, RSI divergence).
  3. Enter a long trade when confirmation occurs.
  4. Exit at the moving average or a prior resistance level.

Example:

A stock trading at $80 has a 50-day LLV at $75, while the 200-day MA is at $85. If the stock forms a bullish engulfing pattern at $75, a trader can buy with a target of $85.

4. LLV Trend-Following Strategy

Concept:

Instead of trading reversals, traders can use LLV to follow strong trends.

How to Trade:

  1. Identify LLV with a moving average filter (e.g., 100-day LLV and 50-day MA).
  2. If price continuously forms new LLVs, the downtrend is strong.
  3. Enter a short trade on pullbacks to resistance.
  4. Exit when a higher low forms, indicating a reversal.

Example:

A forex pair has a 100-day LLV of 1.2500 and keeps making lower lows. A trader can short near resistance at 1.2550 with a stop-loss at 1.2600 and a target of 1.2400.

5. LLV with Bollinger Bands Strategy

Concept:

Bollinger Bands help traders identify when an asset is oversold. Combining LLV with the lower Bollinger Band can strengthen trade signals.

How to Trade:

  1. Identify LLV and check if price is touching or outside the lower Bollinger Band.
  2. Look for reversal signals such as bullish candlesticks or RSI divergence.
  3. Enter a long trade when confirmation occurs.
  4. Exit at the mid or upper Bollinger Band.

Example:

A stock has a 20-day LLV at $50, and the price is touching the lower Bollinger Band. If a hammer candlestick forms, a trader can buy with a target at the mid-band.

Final Thoughts

The “Lowest Low Value” is a powerful tool in technical analysis that helps traders identify support levels, trend reversals, and breakout opportunities. Whether using it for mean reversion, breakout trading, or trend-following, combining LLV with other indicators like RSI, moving averages, and Bollinger Bands enhances trade accuracy.

Key Takeaways:

  • LLV marks critical support levels and potential trend reversals.
  • Combining LLV with indicators like RSI, MACD, or Bollinger Bands improves trading signals.
  • Trading strategies using LLV include reversal trading, breakouts, trend-following, and mean reversion.
  • Risk management is essential—use stop-loss orders and proper position sizing.

By mastering LLV-based strategies, traders can develop a solid technical approach to identifying profitable trade setups in stocks, forex, and commodities.