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Chapter 9. Moving Average Trading Channe... > Moving Average Trading Channels in O...

Moving Average Trading Channels in Operation

In addition to a 14-day moving average line, around which are upper and lower band boundaries (8% above and below the moving average), the chart shows the 19- to 39-day MACD indicator. Its patterns interact well with patterns that can be observed in the relationships between daily levels of the Nasdaq Composite and its moving average trading channel.

Area A: The Chart Opens with a Market Downtrend

As Chart 9.1 starts in March 2001, a serious stock market downtrend is underway. Price levels of the Nasdaq Composite are declining, tracking along the lower boundary of the moving average trading channel, which, itself, is in a clear downtrend. In addition, the declines in price trend and channel direction are confirmed by the 19- to 39-day MACD indicator, in its most negative configuration, declining below its signal line and below 0. This confluence of negative price trends, negative longer moving average trend, and negative MACD patterns suggests lower prices ahead.


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