The monthly S&P500 Emini futures candlestick chart has not had a pullback in 14 months. This has...
Five Top Trading Tips for Active Traders (Part 3)
08/13/2008 12:00 am EST
This is the third in a series of trader tips to help time or pinpoint entry levels. The chart below (2) shows the front contract futures market in gold with two simple moving average components based on an average of the high, low and close rather than a simple moving average of the close using two time frames.
I look for signals (red triangles for sell signals, and blue triangle for buy signals), to help identify a conditional change in the market as price relates to the moving averages. The middle section shows a fast Stochastics reading, which helps me identify if the market is overbought or has reached an oversold condition. The bottom section contains the Moving Average Convergence Divergence indicator that also helps identify market turn signals.
On the chart labeled point “B” we see a question mark which represents the potential point in time where the seasonal studies shows gold seasonal bottoming period. As the indicators are showing we are reaching near oversold market conditions. We can now start to plan our trading strategy and make a determination of at what price level may be appropriate to enter long positions.
Once our indicators start to turn and give tradition buy signals (%K & %D crossovers) back above the 26% level and a zero line histogram positive reading we will have confirmation of a potential bullish turn in the market. Keep in mind that all three technical tools are considered lagging indicators so we want to look at one more area of technical analysis using what I consider the best leading price indicator, which is Pivot Point analysis. In fact, looking at the chart you will see two dashed lines. The upper dashed red line is the predicted Monthly R-1 Pivot resistance and the lower dashed green line is the predicted S-1 Pivot support target level. Based on the prior month’s data, we were able to calculate what the next time frames potential high or low might be, therefore giving us a better idea of a hidden value area.
In our next traders tip we will go over how to calculate and use Pivot Points and compare with one more popular leading price indicator, the Fibonacci support zones.
More tomorrow in part 4.
By John Person of www.NationalFutures.com
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