Click on the chart to enlarge it.
Here is a chart of weekly Lumber, a market that is often considered difficult to trade.
As you can see, an Ocean template overlaid on price action makes the analysis much easier to understand. In late June 2002, NMC2 offered a sell setup (left-most circled arrow on NMC2) which was confirmed as a short entry and ultimately led to a 6 month decline.
Notice also how well the Fast NMA trailed prices, and how the upper and lower boundaries surrounding the Fast NMA contained the price action throughout the entire chart example. The down arrows on prices indicate the locations where prices have exceeded the upper boundary.
In early 2003, prices closed above the upper boundary of the Fast NMA, suggesting that the short position should be exited. Notice too how the boundaries have pinched together, implying an expected increase in volatility. As often happens, prices rallied above the upper boundary as a false breakout, and then quickly reversed.
The Ocean-derived NMM ROC oscillator (in the bottom sub-graph) identified the false breakout by exceeding its own upper boundary (labeled Top), implying a likely reversal sell off.
NMC2 also identified other tops by exceeding its upper boundary at points labeled A, B, C, and D, and marked with down arrows on the bar chart. Points A and B were also confirmed as likely short-term tops by the NMM ROC oscillator also exceeding its upper boundary.
Note the NMC2 ZeroHit buy setups and entries that occurred during the second half of 2003 (marked with the circled arrows). These proved to be very nice entry points to capture the bullish move in lumber that saw prices advance more than 50% from the first Ocean-based entry in early August 2003 to the late July 2004 period when this chart was created.
Notice also the Add On setups and entries in November and December 2003, and observe how the NMM ROC (bottom sub-graph) set the stage for these excellent buy signals by exceeding its lower boundary and/or creating divergences at the time of the NMC2 setups.
These “slingshot” NMM ROC formations at the time of NMC or NMC2 ZeroHits are great examples of classic textbook Ocean trading!
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