Click on the chart to enlarge it.
We now roll down to a two-month chart where we see that a Cross Kiss ZeroHit sell setup occurred in late 1998, corresponding to the quarterly NMC zero crossover (see quarterly chart).
Additionally, we see that a dual ZeroHit occurred in early to mid-2000, corresponding to the first of two quarterly dual Cross Kiss ZeroHits (again, see quarterly chart). I've pointed these events out (multiple timeframe agreements, Cross Kisses, etc.) in order to show that the same Ocean logic and techniques that we employ on timeframes as low as 5-minute bars are equally valid at timeframes as high as a quarterly chart.
Since we want to use the most recent price action for our example, we turn our attention to the ZeroHit that occurred on September 30, 2003. This is the currently active ZeroHit sell setup and sell signal which is now underway as of late July 2004.
Using the Ocean-based rules for an entry after a ZeroHit, no entry occurred from this ZeroHit during the two-month period ending November 28th, nor did an entry occur on the next bar ending January 30th.
Therefore, as we roll down to lower time frames we know from the analysis of this two-month chart that no entry was possible before early February, 2004. It's also significant that the NMM ROC exceeded its upper boundary during the most recent ZeroHit setup (as had occurred in mid-2000), indicating that a swift move down was likely to occur.
Please note the line plot in the bottom pane. This is another Ocean tool that expresses the width between the Fast NMA upper and lower boundaries (shown as dashed lines and labeled on prices). It offers us a very helpful way to measure the volatility that is present in the market.
When the width between the upper and lower bands is very tight we should expect to see price action become more directional and volatile very soon.
Although you can't see all of the data, as of May 2004 (marked as Very Tight Bands on the bottom pane), the Fast NMA bands had narrowed to a degree not seen since 1985, almost 20 years ago. That's a sign of a market ready to explode, and if Ocean can help us identify a logical spot to safely enter this market we want be there selling with both fists!
Let's dial down to lower time frames looking for a good trade location to get on board:
(This is the end of Part 3. Go to Part 4.)
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