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.

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.

pattern revealed in a trending center line - technitrader

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.

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.

Go to the TechniTrader.com
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Trade Wisely,
Martha Stokes CMT
TechniTrader technical analysis using a MetaStock chart, courtesy of Innovative Market Analysis, LLC dba MetaStock


Chartered Market Technician
Instructor & Developer of TechniTrader Stock and Option Courses
TechniTrader DVDS with every course.

This weekly stock discussion is sponsored by TechniTrader.com a MetaStock® Partner

©2016 Decisions Unlimited, Inc. dba TechniTrader. All rights reserved. 
TechniTrader is also a registered trademark of Decisions Unlimited, Inc.


Disclaimer: All statements are the opinions of TechniTrader, its instructors and/or employees, and are not to be construed as anything more than an opinion. TechniTrader is not a broker or an investment advisor; it is strictly an educational service. There is risk in trading financial assets and derivatives. Due diligence is required for any investment. It should not be assumed that the methods or techniques presented cannot result in losses. Examples presented are for educational purposes only. 

Why Big Blue Chip Stocks are Sideways

Trading Range Market Conditions

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.

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

chart example of a range bound pattern - technitrader

The chart example 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.

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

1.      The price of stocks over the prior 4 years was artificially 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 down 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.      Fundamentals and Financials which had a huge growth out of the 2009 economic contraction, started to slow down in 2014 at the 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.

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 time frame, 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
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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 MetaStock chart, courtesy of Innovative Market Analysis, LLC dba MetaStock


Chartered Market Technician
Instructor & Developer of TechniTrader Stock and Option Courses
TechniTrader DVDS with every course.

This weekly stock discussion is sponsored by TechniTrader.com a MetaStock® Partner

©2016 Decisions Unlimited, Inc. dba TechniTrader. All rights reserved. 
TechniTrader is also a registered trademark of Decisions Unlimited, Inc.

Disclaimer: All statements are the opinions of TechniTrader, its instructors and/or employees, and are not to be construed as anything more than an opinion. TechniTrader is not a broker or an investment advisor; it is strictly an educational service. There is risk in trading financial assets and derivatives. Due diligence is required for any investment. It should not be assumed that the methods or techniques presented cannot result in losses. Examples presented are for educational purposes only.