(Click on image to enlarge it)
(This is Part 15 of a series. Go back to Part 14.)
Here we see that on the 6-week period ending 1/5/2007 there was a dual NMC and NCX Zero Hit. The next 6-week bar (ending 2/16/07) is a Delay bar (think energy build up), and also meaning that one of the standard entry techniques taught to Ocean Masters was not triggered until the bar after the 2/16/07 bar. That means that we were aware of a potential very high time frame Zero Hit setup as early as 1/5/07, and were patiently waiting for some sort of confirming evidence on a lower time frame that the market was ripe for a reversal.
The +TX/-TX pivots on the 2-week chart occurred on the bars ending 2/2/07 and 2/16/07. That is, the actual +TX/-TX extremes occurred on the 2/2/07 bar, and the “hooks” (down in the –TX, and up in the +TX) developed on the bar ending 2/16/07. Note that this was the exact same day (a Friday) that the 6 week chart had generated the NMC Zero Hit Delay bar, so when the market tripped an entry the following week, we had ample warning and evidence to potentially enter the trade.
Obviously, we would want to consult additional time frames to validate and finesse this setup, but due to this very high time frame formation, we would be expecting to see a lot of price movement from it. In this case, the subsequent rally produced more than $1.00 of movement, which is $25,000 in the copper market.
Another confirmatory piece of evidence about this 6-week Zero Hit shown here is that it is forming at the precise level indicated by the Ocean Regular Moving Average (RMA), which is shown as the solid magenta line on the price bars (see red triangle). Note that the “bounce” off of the RMA as the Zero Hit sets up and confirms is the first return to the RMA support level since prices broke above it (from an SD band pinch) in late 2003 (far left edge of 6-week chart) as the bull market began in earnest!!
There are a couple of additional points that I’d like to make concerning the Ocean Regular Moving Average (RMA) on this chart. Note the two locations where prices have exceeded the upper SD of the RMA (shown as red triangles above the bars). One of the unique qualities of the RMA SD bands is that they are extremely helpful at pinpointing locations where a pause or reversal is likely to occur.
When the majority of the range (>50%) of a bar exceeds one of the SD bands, it’s a good indication that the move is in its terminal phases. In fact, prior to developing the STX, we often taught the SD violation along with price based logic as a potential exit strategy. Now the STX tends to do a better job, but the SD band violation still offers an excellent warning sign for us to pay attention to the market.
The first location where the majority of the range exceeded the upper SD was on the 6-week bar ending 4/2/04 (red triangle). Remember back to our analysis of the market in April 2004 when BTX rolled over (pt. F on primary chart - the BTX high was made on the 3/19/04 bar, and the first lower value from BTX which created the pivot was made on the 2-week bar ending 4/2/04).
Also, the TX lines turned and began converging at the same time. It’s curious to note that here on the 6-week chart, the 4/2/04 bar generated a major range violation of the upper SD band at exactly the same time of the BTX pivot!! The BTX / TX formation is what ultimately led to the STX stop being hit on the bar ending 4/30/04. This event here on the 6-week bar offered yet another clue as to the potential top in the market in the spring of 2004.
The next location where the range violated the upper SD band by more than 50% occurred here on the 6-week bar ending 6/9/06 (red triangle), which once again, was the precise location where the BTX generated the pivot (pt. J on primary chart - the BTX high was made on the 5/26/06 bar, and the first lower value from BTX which created the pivot was made on the 2-week bar ending 6/9/06). When multiple events in multiple time frames point to the same conclusion, it makes the task of market analysis a whole lot easier, doesn’t it?
I hope that our primary 2-week example of how these tools from Ocean Pro enhance your ability to perform solid technical analysis was useful. The majority of the example has focused on four tools from Ocean Pro, but of course they were never designed to function in a vacuum. They were created to add two primary pieces of Ocean-based technical analysis; quantifiable measurement of trend identificatio (BTX & TX), and a solid stop placement technique (STX).
These new tools are really intended to be used in conjunction with the Ocean Classic tools, where their synergy is quite potent. However, I believe that we have seen that these new tools from the Ocean Pro library perform quite well as stand alone tools, and in my opinion, when applied in cooperation with the Ocean Classic tools they are awesome, extraordinarily helpful and accurate.
—pat raffalovich
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