ARTICLE SYNOPSIS ...Channel breakout by Peter Aan Rules and Formulas: Channel systems use the highest and lowest prices in a series. Many possible trading variations can be employed and the one I tested involves finding the highest high and lowest low for the most recent n days. For instance, if you are using an 8-day channel you will examine the highs and lows for the most recent eight trading days to find the highest high and the lowest low, which are the reversal points. Buy/sell signals for an 8-day channel reversal are shown in Figure 1. This test entailed two separate computer runs . One required the mark...
BY: Peter Aan
ARTICLE SYNOPSIS ...Computer spread analysis by Jim Summers, Ph.D. Many traders shy away from spread trading owing to the extra difficulties of calculating the spread and the analysis of the spread in both its legs. Data and software now available for IBM-PCs and clones can automate this analysis to a considerable degree. To analyze spreads I use Lotus 1-2-3, a charting program such as MetaStock Professional or Market Maker, System Writer Plus and contract-specific data from Technical Tools. One excellent source of information on the subject of spreads is the series of articles by Frank Taucher in Stocks & Com...
BY: Jim Summers, Ph.D.
ARTICLE SYNOPSIS ...Demand Oscillator momentum by Thomas Aspray The Demand Index developed by James Sibbett and its counterpart, the Demand Oscillator, are quite useful in identifying accumulation or distribution in both stocks and commodities. (See ""Fine-tuning the Demand Index,"" Stocks & Commodities, June 1986.) The Demand Index is a combination of price and volume, calculated as buying pressure (BP) and selling pressure (SP). I feel the Demand Oscillator makes signals from the Demand Index easier to interpret and identifies false index signals. To plot the Demand Oscillator, first calculate Buying Pressure...
BY: Thomas Aspray
ARTICLE SYNOPSIS ...Leading indicators with momentum by John Ehlers Newcomers to technical trading are often confused by terminology. Oscillators don't oscillate and stochastics have nothing to do with random variables. Neither does momentum describe the force required to bring a moving body to rest. In the simplest case, momentum is just the difference between two time-related variables. I have found that, when combined with moving averages, momentum can produce some useful indicators. Because momentum measures the difference of two elements in time, we can consider it a measure of the rate of change. More spe...
BY: John F. Ehlers
ARTICLE SYNOPSIS ...LETTERS TO S&C Suggestions for topics Editor, In your March 1989 issue you have an article by Steve Notis called ""Testing breakout systems."" It's described as an S&P 500 system. My question is, will it work with bonds, gold, silver, etc? If it will, but with slightly different parameters, would you write about it in an upcoming issue? If possible could you also write about trading thrusts in general: Are there times a thrust will be a reasonably safe trade, how to tell if it's going to be a failure, volume patterns to look for, etc. One more thing I would like to see is more in-depth rep...
BY: Technical Analysis, Inc.
ARTICLE SYNOPSIS ...Mutual fund point & figure by Charles Idol The idea of applying point and figure (P&F) chart analysis to mutual funds causes some conceptual distress to P&F purists. P&F has no theory, but the basic concept says that the chart patterns are caused by the effect of supply and demand on the price of an equity. When you speak of mutual funds, you deal in a conglomeration of equities and, to make things worse, a conglomeration that changes as the fund manager adjusts the composition of the portfolio. ""So, you see,"" say the purists, ""you don't even know what stocks you are dealing with from day...
BY: Charles Idol
ARTICLE SYNOPSIS ...Price pattern studies Part 1 by Toby Crabel Do prices tend to move consistently in one direction from open to close, given the previous day's price pattern, and do these patterns of intraday bias lend themselves to profitable trading systems? To answer these questions, I have tested all possible two-, three-, four- and five-day open-to-close patterns for the T-bond futures market from 1978 to 1987. My intention is to provide objective statistical data that can be used as a reference in trading. The price patterns in Figure 1 are referred to as ""systems"" because the custom software I used...
BY: Toby Crabel
ARTICLE SYNOPSIS ...Ratio accumulators by William Mason Have you ever noticed how strong market moves are reported in terms of ratios? ""It was a 3-to-1 up day on advance to decline"" or ""It was a 10-to-1 down day on volume."" Ratios inherently give the relative relation of one variable to another. In other words, an advance/decline of 3-to-1 means there were 200% more advancing issues than declining issues. It struck me as odd that I could not find a true indicator based on a ratio. You may be thinking, ""What about the ARMS Index (TRIN) or the Relative Strength Index (RSI)?"" They're both ratios aren't they?...
BY: William Mason
ARTICLE SYNOPSIS ...Normalization When comparing indicators, it helps to ""normalize"" the data first. This adjusts the values in both series to values between zero and 100 and shows the relative movement between the two. As an example, I've used advance/decline statistics....
BY: Technical Analysis, Inc.
ARTICLE SYNOPSIS ...Scale-down buying and scale-up selling by Jerry Kopf Professional traders, like the average retail speculator, are often right and often early. Good option traders promptly jump on a developing trend. But the cost of buying a wasting asset too early saddles the buyer with a temporary loss. Later, when the forecast proves correct and the calls climb sharply, the benefit of scaling down becomes evident. Of course, many traders will abide by the maxim: Never average a loss. For market makers, that may be a good rule. In a bind they can hedge calls or puts with other options. The average retail ...
BY: Jerry Kopf
ARTICLE SYNOPSIS ...The McClellan Oscillator by Richard Mogey The earliest chartists used price data to evaluate markets and found that market prices continually move from overbought to oversold and back again as if they were oscillating about an invisible, neutral line. The need to learn when the market was overbought or oversold led analysts to search for ways other than price to track the market. This led, in time, to the tracking of advances and declines. If a stock was higher at the close than the previous day, it was said to advance. If it was lower, it was said to decline. It became obvious, however, tha...
BY: Richard Mogey
ARTICLE SYNOPSIS ...Trading T-bonds with Equivolume by Thom Hartle A technician attempts to identify areas of price where supply or demand will affect the value of an item. If your method correctly responds to or forecasts the demand or supply entering the market, you may profit by the price adjustment of that item. A technique that helps me understand the subtle shifts in supply or demand (and consequently the change in price) is Equivolume Charting developed by Richard W. Arms, Jr. Equivolume Charting lets me visually interpret the relationship of volume to price movement in a way that traditional bar charts w...
BY: Thom Hartle
ARTICLE SYNOPSIS ...Volume indices by Arthur Merrill The ARMS Index, in the years since Richard Arms Jr. originated and described it in the August 7, 1967 issue of Barron's, has been called MKDS by Bunker Ramo, STKS by ADP, TRIN by Quotron and the Short Term Trading Index. Market technicians, however, recommend the name ARMS Index. The index has a simple formula: ... If declining stocks are more active than advancing stocks, the index will be high and the indication bearish (Figure 1). If advancing stocks are showing the most volume, the index will be low and N the indications bullish. However, analyst John ...
BY: Arthur A. Merrill, C.M.T.