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Step 2

Use the 23- to 30-day EMA band to determine the major trend of the market

The program rules are as follows:

  • To generate a buy signal:

     
    1.
    On the daily chart, the market must first close above the band. (That's both the 23 and 30 moving averages.) This day forms what is called the set-up bar.

    2.
    The market subsequently must exceed the high price of the set-up bar.

    When both steps are met, a new buy signal is generated, indicating that the market is now in a confirmed up-trend.

  • To generate a sell signal:

     
    1.
    On the daily chart, the market must close below the band (both the 23 and 30 moving averages). This is the set-up bar for a potential sell signal.

    2.
    If the market then exceeds the low price of the set-up bar, a new sell signal is generated, indicating that the market is now in a confirmed downtrend.

    Using these simple rules, 13 signals were generated for the 2003 crude oil contract year.


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