Sunday, August 10, 2003
Issue Contents:
| 13:49 | The Divergence Trade Example of indicator divergence trade setup. |
| 14:17 | The Anti Trade Example of the Buy Anti. |
| 14:33 | Reading for Success: The Nature of Risk This is the third book on our Reading for Success list. |
by Teresa Lo
A buy or sell divergence using the 3/10 price oscillator occurs when PRICE makes a higher high or lower low but the oscillator does not. The best divergences tend to come between 10-14 bars apart without much retracement during that time, particularly after a nice directional move. The target for these is a retracement back to the 20 ema from the same time frame that the divergence occurs.
You can see by the chart example, the price made a lower low while the oscillator made a higher low indicating the potential for a short term loss of momentum after the extended move down, this buy divergence comes 10 bars apart and leads to a move back to the 20 ema (white line).
by Teresa Lo
In this example we will use a Buy Anti. This setup occurs when the last UPSWING is greater than the prior DOWNSWING in the price and the 3/10 Oscillator fast line is retracing to an UPSLOPING slow line as in the example. The upswing needs to show IMPULSE to the upside and we often see the best Anti's occur after when the market has been in a range.
The rough target for the Anti is an equal length swing, so for instance in the example shown, the upswing that is highlighted in green was 9.5 points (a move from 962.75 to 972.25) so you would add that to the following small swing low of 968.5 to get a rough target of 978.00.
The Buy Anti typically occurs at the lower end of the range and the Sell Anti at the upper end. Sell Anti requirements would be when the last downswing is greater than the prior upswing and the fast line on the oscillator retracing to a downsloping slow line with IMPULSE to the downside.
Reading for Success: The Nature of Risk
After we digest the wisdom of John Magee and Humphrey Neill, the next book on the list is written by the one and only Justin Mamis.
Mr. Mamis is often considered the technician of technicians. In The Nature of Risk, he documents the phases of the stockmarket sentiment cycle like no other. Peppered with amusing anecdotes, it is a fun and educational read. Included are his techniques for looking at the big picture. For a sample of his wisdom, here is a link to the October 2000 Interview with Kathryn M. Welling. [PDF File]
Other books by Justin Mamis: