(Click on image to enlarge it)
(This is Part 14 of a series. Go back to Part 13.)
Let’s use the monthly chart June STX value to compare it to the 2-week STX stop which was hit on the 2-week period ending 6/23/06. The STX stop for the month of June 2006 (which was never actually hit) was 274.15. The STX value here on the 2-week chart that was triggered was at 315.65, for a difference of 41.5 cents. That’s $10,375 per contract better exit price. Another way to view the differences in the STX is to compare the stop out here on the 2-week vs. the ultimate location of the stop out on the monthly chart.
The monthly STX hit occurred during Nov. 2006, at a level of 305.15 vs. the 315.65 here on the 2-week chart. That’s still a difference of 10.5 cents, or $2,625 per contract. However, that’s not the whole story. By using the 2-week STX hit which occurred during the 2-week period ending 6/23/06 vs. the monthly STX which occurred in Nov. 2006, we got out of a position that, on the monthly, did nothing for the next 5 months. The much earlier exit then freed up trading account money (and more importantly, mental capital) to find better trending trade opportunities.
In this analysis of the STX, it’s critically important to note that we are not arbitrarily deciding when to look to other time frames for STX information. There is no curve fitting, or Monday morning quarterbacking taking place in this analysis. We’ve discussed at length how we are letting the information obtained from the BTX on one time frame tell us precisely when to go to lower time frames to finesse our STX exit strategy!
This simple methodology works on time frames ranging from quarterly bars down to intra-day time frames measured in minutes or ticks. The Ocean Plus STX now offers you a highly accurate, quantifiable way to lock in profits as the behavior of the market in multiple time frames dictates.
As is often the case after a spike, prices broke hard, with BTX falling precipitously, and the TX line converging. Once the TX lines crossed their center moving averages while BTX still remained above 35 (shown by the arrows just after pt. G’), we had a clear indication of a likely new downtrend in the market. This was further validated when the +TX line crossed below the –TX line in Dec. 2006 (pt. H’).
However, after the TX lines have achieved such wide separation as occurred in mid 2006, we would always use the earlier dual cross of their moving averages (note arrows) rather than the actual +TX/-TX crossover to indicate the direction of the market. Actual crossovers of the TX lines in this type of environment will usually occur well after the market has experienced a reversal, but can be sometimes be used to add to positions taken earlier.
Lastly, the bottom in early Feb. 2007 is confirmed by the pivots in the +TX and –TX lines (labeled pts. J’), primarily because at the time that they developed, both the –TX and +TX lines were outside their respective SD band extremes. This +TX/-TX formation might appear somewhat nebulous and arbitrary to non Ocean Masters. However, when the basic Ocean tools are once again utilized, this particular formation comes sharply into focus.
The Genesis Trade Navigator software offers us the ability to analyze custom time frames that most traders don’t have access to. In fact we can load any custom time frames from yearly bars to quarterly bars to 2-day bars and anything in between. For this example and to make the point about the 2-week TX pivots at J’, I’d like to show a 6-week bar chart with a couple of the basic Ocean tools applied to it. I’ve chosen 6 weeks because it’s one half of a quarter, and the next 2-week step up from a monthly bar where we began our analysis.
(This is the end of Part 14. Go to Part 15.)
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