|In my previous article "Technical Simplicity" I showed you the JM technique of market direction using the QQQs as an example. In my analysis I used a moving average as a closing trigger. In this analysis of the I-Unit S&P/TSE Gold Index, I have left out the moving average trigger, relying instead on a stop-loss and basic JM strategy.|
|To recap, the JM strategy is a 15-period moving average offset by a positive and a negative percentage. I have found that 2% works in most instances, but in certain circumstances 3% and even 5% can be used. The object is to look for interim turning points within the bands without triggering too many buy or sell signals. With this chart, I found that 3% was the best percentage to use, and the moving average is therefore offset by 3% and -3%. Occasionally, the positive and negative percentages can vary, using 3% and -2% for example, but I have found this to be a rare occurrence. |
The following chart is of the I-Unit Gold Index.
|Figure 1: Gold S&P/TSE Canadian Gold Index. This chart shows entry and exit points for a shorting opportunity.|
|Graphic provided by: AdvancedGET.|
|I have placed trendlines on the chart so you can see how the JM strategy is inclined to act before a trendline is broken, even keeping you in the market when a resistance line becomes a support line as shown at the "BUY" signal.|
|At the moment, the chart is still positive, and any bounce off the lower moving average band can be considered a position to add stock to your holdings, as long as the RSI indicator is not in an overbought position.|
|I have looked at using the strategy with a bar chart or a candlestick chart, but found that it worked better with a line chart of the closing price only. It is a very conservative strategy. You will only enter the market in the direction of the trend. I have seen on more than one occasion, that a price will break the upper band then continue drifting down using the upper MA as a support level. Most times when this occurs, a stop-loss takes you out of the market for a small loss. On the whole however, the strategy is an excellent addition to your quiver of technical tools.|
|Address:||3256 West 24th Ave|
|Phone # for sales:||6042634214|
Click here for more information about our publications!