Click on the chart to enlarge it.
There were multiple intra-day time frames that supported the bearish analysis of the market at this point, but to simplify this example let's look at a 9 minute chart. Notice that a couple of new Ocean tools have been added to the analysis brew.
There are more than six fundamental Ocean concepts, each of which is unique in the mathematical approach being applied to price action, and more than a dozen additional software offshoots and refinements to enhance your trade analysis. (Lessons that explain precisely when, why, and how to utilize the entire set of Ocean tools are richly detailed during the Ocean Workshop.)
On the 9 minute chart, notice that in addition to the Ocean NMA (magenta line), there is another more responsive moving average overlaid on price action (dark green line). This moving average, known as Fast NMA, incorporates the basic underlying math of the NMA but has a unique built-in, yet non-arbitary, automatic volatility factor that allows it to instantly adapt to rapid price action.
The result is a highly responsive, non-arbitrary moving average that can be utilized in a number of creative ways. Here it is shown as a confirmatory tool to validate the bearish price action in that prices have decisively crossed below both Ocean moving averages.
Additionally, the extreme resistance that the market now faces with the moving averages “hugging” each other with prices unable to penetrate the MA's from below (see the area of the circled down arrow) almost guarantees that the outcome involves a substantial sell off.
Note also the sub-graphs below prices. Immediately below prices we see the same NMC oscillator that was used on the higher time frames described above. Notice how at the same time that prices have slashed below the NMA's, the NMC is generating a Zero Hit, indicating a valid Ocean sell setup (see down arrow).
In addition to the familiar NMC, the bottom sub-graph demonstrates another version of the NMC, called NMC2, whose components are arrived at in a completely different mathematical algorithm, yet often confirm and validate the traditional NMC.
The difference is that NMC2 usually generates fewer signals and is a bit smoother and more subdued than NMC. However, when NMC and NMC2 both confirm a trade setup you can count on some fireworks taking place in the market! The dual signal setups occur within 3 bars of each other (around 10:50 to 11:15 MST), and as expected the market begins its meltdown.
As an aside, notice how the Fast NMA tightly hugs prices all the way through the decline. This moving average can easily be used as a trailing stop to lock in profits as the market racks up additional open equity. The correct application of this technique is also taught at the Ocean Masters workshop.
As an added bonus trade, look at the additional NMC based Nested Add-On trade setup and entry that occurred at roughly 1:00 MST. When a big trendy move gets underway, there are often numerous (and very clear and definitive) Ocean-based signals to add to existing positions.
This is one of those cases, and the secondary add-on alone was worth more than 10 points ($2,500) using a market-on-close order to exit the trade. Notice how the Fast NMA provided lock-in profit protection as prices collapsed throughout the remainder of the day.
(This is the end of Part 3. Go to Part 4.)
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