world indices, markets & news. week 2nd mar'14, page-3

Mower, et al, further to your short cuts on the indices, I have taken the whipper snipper to a chart of the XJO as shown below.

Late this afternoon, while cooling down from attending the Busselton Air Show, on what was a very hot nil wind day, I set up BullCharts with my favourite indicators. Well actually, I could not remember exactly what I was using back in 2006/07, but it was something like that shown below.



Note the following points regarding the above chart.

• The purple # 1 Buy signals and the red # 2 Sell signals are based on an Average True Range (ATR) multiplier. These signals look like something that I may have added with Paintshop later, but they are genuine ATR indicators.


• Obviously I would open a new long at the ATR Buy signal. Then while I have a long trade open, and when the ATR Sell signal presents I might sometimes simply take profit, or alternatively I might move my lower stop up to close to the action.


• Note that the Buy signal on 19-Dec does not have an associated Sell signal generated by the ATR multiplier. In addition, the peak on 2-Jan did not line up with an RSI touch on 70, nor line up with an MACD cross. In this case I would use my lower stop to close the long trade.


• After getting an ATR sell signal I will be looking at other indicators for a short signal. That is, the ATR sell signal is a heads up to consider opening shorts in the near future. Looking at the most recent close on 28-Feb, the RSI did not give me a short signal, but the MACD cross is almost there. Hence, almost time to short, assuming that the XJO presents another down day.


• After entering a short trade I would be looking at the usual indicators for a time to close the short trade. However, due to my eagerness to protect profit, once in profit, my short trades typically get closed via some intraday volatility. This aspect of my trading is something I need to work on as I tend to cut profits short in my eagerness to protect profits.


• One point that I have noted about the RSI is that you can often miss excellent trade opportunities. For example, the ATR buy signal on 11-Oct, which was confirmed by a MACD cross on 16-Oct, was completely missed by the usual RSI signals. Hence, what I typically do in these type of scenarios is look at the RSI direction when the ATR buy signal presents. On 11-Oct, the RSI had ticked up, which sort of loosely confirms the ATR buy signal.


• The histogram shown on the chart is a MACD momentum oscillator.


• I also use candle charts, but often like to look at a simple line chart for clarity.


• You may recall that I was very keen to open up a set of longs on 7-Feb, but held off until 10-Feb due to by concerns about the Global Analysis (GA) at the time. Although I did not have BullCharts at the time, 7-Feb is coincident with the ATR buy signal, and 10-Feb is one day before the MACD cross.


• I closed the 5 long trades that I opened on 10-Feb on 19+20-Feb, which is shortly after the ATR sell signal on 17-Feb. Note that the ATR sell signal is generated by Bull Charts after the close on 17-Feb, hence,the earliest that I could have closed the longs based on the ATR sell signal was 18-Feb.