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"Price Oscillators Enhanced for the Modern Market" by Martha Stokes CMT

Price Oscillators Enhanced for the Modern Market

How to Create and Use Center Line Price Oscillators

Most traders are very familiar with the standard Price Oscillators which have a high and low range. These Price Oscillators are common and found in nearly every charting program. There are Stochastic, Williams R, Wilder’s Relative Strength Index and many more oscillators created specifically for determining “Overbought” or “Oversold” conditions.

Stochastic however was written in the 1950’s which was an entirely different market than we have today. Nowadays Technical Traders find that Stochastic tends to give a false negative or a false positive signal, just as the stock is beginning a Momentum or Velocity run up with exponential point gain potential. This often frustrates traders who are still using only the older theory of Overbought/Oversold Trend Conditions.

Today with High Frequency Trading Firms HFTs trading stocks in massive order flow on the millisecond scale, Price often appears “Overbought” with the standard Price Oscillators when it is just starting a big run. Often times Overbought Patterns shift to the “Floating Oscillation” Pattern which is a failed signal, due to extreme momentum energy that was not present in the trading environment when these indicators were written.

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Using Price Oscillators Enhanced for the Modern Market is a method that TechniTrader teaches exclusively. TechniTrader shows how to create a CENTER LINE Oscillator very similar to Volume Center Line Oscillators. Using Volume and Price Oscillators together can be a huge benefit in entering stocks earlier out of Bottoms and Tops, which are often flat or basing these days rather than Triple Bottoms or other older style Bottoming or Topping  patterns you may have been taught.

Adding a relational center line that trends with the Price Oscillator can reveal patterns in advance of sudden big moves. See the chart example below.

Wilder’s RSI with its one line for oscillation is the most adaptable and easiest patterns to learn, when incorporating this kind of Center Line Oscillation into your indicator tool set. It was written in the 1970’s and is unique for a Price Oscillator. Instead of just calculating Overbought/ Oversold, its formula analyzes current price action to prior price action similar to what many Volume Oscillators track. This helps reveal Dark Pool activity which tends to precede the sudden runs and gaps caused by HFTs. This makes it an invaluable indicator to use for Short Term Trading.

The Floating Center Line has a softer Oscillation, which provides pivotal signals in the Price Patterns. This Hybrid Indicator can be applied to many other Price and Volume based Indicators as well. This Price Oscillator Enhanced for the Modern Market provides a more three dimensional and Relational Analysis™ that is needed for the more complex Market Structure of today.

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Oscillators can be far more valuable and useful when adaptations and adjustments are made to the older indicators. This gives the Technical Trader more indicator signals, more analysis scope, and further breadth of understanding of Price action. The more a Technical Trader UNDERSTANDS price behavior, the better trading decisions they can make.

Using both Center Line Price Oscillators and Volume Oscillators, enhances and improves the overall indicator analysis for all Trading Styles. Each Trading Style will require modifications to the settings and periods for each Indicator.

The RSI/RSI Indicator is part of the TechniTrader Indicator Tool Set provided to Students with instructions on how to use it with all the Variables, Combination Indicators, Indicator Settings, and Periods. It is one of the most versatile of all the price indicators, and is a Price Oscillator Enhanced for the Modern Market.

Not yet TechniTrader Students can use this theory to design their own Indicators. The ideal Oscillators have one Oscillation Line rather than two.

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Go to the TechniTrader.com Learning Center to  view a Leading Hybrid Indicator video HERE. Sign Up for full access.

Followers may request a specific article topic for this blog by emailing: info@technitrader.com

Trade Wisely,

Martha Stokes CMT

TechniTrader technical analysis using a TC2000 chart, courtesy of Worden Bros.

Chartered Market Technician
Instructor and Developer of TechniTrader Stock & Option Market Courses

Copyright ©2016 Decisions Unlimited, Inc. dba TechniTrader.  All Rights Reserved.
TechniTrader is also a registered trademark of Decisions Unlimited, Inc. 

Disclaimer: All statements, whether expressed verbally or in writing are the opinions of TechniTrader its instructors and or employees, and are not to be construed as anything more than an opinion. Student/subscribers are responsible for making their own choices and decisions regarding all purchases or sales of stocks or issues. At no time is any stock or issue on any list written or sent to a student/subscriber by TechniTrader and its employees to be construed as a recommendation to buy or sell any stock or issue. TechniTrader is not a broker or an investment advisor; it is strictly an educational service.

Posted on January 20, 2017 by Registered CommenterMartha Stokes CMT | Comments Off | EmailEmail | PrintPrint

"Trading Range Market Conditions" by Martha Stokes CMT

Trading Range Market Conditions

Why Big Blue Chip Stocks are Sideways

Trading Range Market Conditions are rather rare. They do not occur on the long term trend often. This is the most challenging market condition for Technical and Retail Traders. It is a challenge because it seems as if the market is chaotic, volatile, or random in nature.

Often times traders do not recognize Trading Range Market Conditions, because they either do not know about this condition or they do not use charts that show what is really happening.

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http://technitrader.com/basics-of-the-stock-market/

The chart example below is a Weekly Chart view, and clearly shows the Range Bound pattern.

This chart has nearly consistent highs as if there is a Technical Resistance above price, and inconsistent lows. Many traders are assuming this is a Bear Market, but it is not.Trading Range Market Conditions occur for several reasons. This one in particular has specific reasons WHY the big blue chip stocks are stuck in sideways patterns.

Trading Range Market Conditions occur for several reasons. This one in particular has specific reasons WHY the big blue chip stocks are stuck in sideways patterns.

Here are the reasons why big blue chip stocks are sideways:

1. The price of stocks over the prior 4 years was artifically inflated, as many big blue chip companies decided to do massive buyback stock purchases. This removed a huge amount of liquidity of the company stock.  Since stock prices are based upon supply and demand as much as fundamentals, the draw ddown of liquidity forced prices upward, as the corporations intended. However, buybacks are a temporary event and do not last. As the buybacks ended, stocks began to show signs of weakness in the chart patterns as far back as the middle of 2014.

2. Fundamentsals and Financials which had a huge growth out of the 2009 economic contraction, started to slow down in 2014 at teh commencement of the Trading Range. Dark Pools who control vast quantities of stocks, started Quiet Rotation to lower their held shares of stock in companies poised for a business contraction. This fueled many Topping Formations late in the year 2014 and early 2015.

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http://technitrader.com/learning-center/

This Trading Range Market Condition was predicated, on obvious and easily seen patterns in the charts. By understanding what was going on with stocks beyond just a mere MACD Crossover or an Engulfing White Candle, Technical Traders who were able to analyze the conditions were prepared for this Trading Range.

Summary

What happens next? Trading Range Market Conditions rarely last a long time. Range bound action is usually, but not always a continuation pattern. To determine whether this is a continuation or reversal, it is necessary to study a longer term timeframe, thereby eliminating the “white noise” present in Daily or even Weekly View charts.

Next week this discussion lesson will analyze the longer term chart, to see whether this Trading Range is a continuation pattern or a reversal pattern.

Go to the TechniTrader.com Learning Center for more information HERE. Sign Up for full access.

Followers may request a specific article topic for this blog by emailing: info@technitrader.com.

Trade Wisely,

Martha Stokes CMT

Chartered Market Technician
Instructor and Developer of TechniTrader Stock & Option Market Courses

Copyright ©2016 Decisions Unlimited, Inc. dba TechniTrader.  All Rights Reserved.
TechniTrader is also a registered trademark of Decisions Unlimited, Inc. 

Disclaimer: All statements, whether expressed verbally or in writing are the opinions of TechniTrader its instructors and or employees, and are not to be construed as anything more than an opinion. Student/subscribers are responsible for making their own choices and decisions regarding all purchases or sales of stocks or issues. At no time is any stock or issue on any list written or sent to a student/subscriber by TechniTrader and its employees to be construed as a recommendation to buy or sell any stock or issue. TechniTrader is not a broker or an investment advisor; it is strictly an educational service.

Posted on January 20, 2017 by Registered CommenterMartha Stokes CMT | Comments Off | EmailEmail | PrintPrint
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