Reversal Higher Again

Now, prices have reversed higher again. Note the signals in order:

1. Reversal higher on Klinger Volume indicator before prices reverse. Again, the Klinger indicator has shown its remarkable consistency as a leading indicator.
2. Both the Bollinger Squeeze and stochastic indicators turn up almost simultaneously.
3. The Hull Moving Average and Gaussian filter (which are both smoothed exponential moving averages) turn up together.
4. The MACD turns up just as prices turn up.
5. Lastly, the 7 and 23 period moving averages turn up.
   

Indicators usage explanation

This was a post I placed in the Tradestation forums on Nov 19th. It explains how I use some of my indicators.

Here is the 15 minute chart for soybeans today, beginning at the dotted line from 7:30 pm EST last night. Soybean futures are my favorite instrument to trade because it has more volatility than wheat or corn, but moves slowly enough for me to be able to get in an out with good executions, combined with strong liquidity (soybeans are the USA's second largest grain crop - corn is #1). I include this chart to show how nicely the 8 period EMA works as dynamic support and resistance. Don't ask me why, but it does. (In his Encyclopedia of indicators, Rober Colby says that EMAs tested better than any other indicator he has tested; he also mentions an interesting phenomenon of EMAs is that they change direction ONLY on the candle in which prices close on the opposite side of the EMA. Note this phenomemon occurs in the price graph of my chart, changing between red and blue in the 30 tick chart of my prior post. It makes it easy to see.)

Note also that the Klinger + ATR indicator tonight is suggesting a bullish reversal is very likely, especially since soybeans are in a long-term bullish trend since Oct 9. There appears to be strong buying activity, and I will wait until at least one of my MA's (Hull, Guassian, or EMA) before I buy. This leading signal is what makes Klinger so useful, I believe.

The pale yellow horizontal dashed line is the settlement price from the prior days' trading. With grains, there are daily lock limits, and I mark those with solid yellow lines. (Soybeans rarely reaches the lock limit price of 50 cents, but wheat and corn quite frequently hit their lock limits of 30 cents and 20 cents respectivly.) I mark them every day, however, so I don't take a trade right before lock limit is reached. I also change the color daily, so I don't mistake a prior days' line that was above or below my visible range on the chart for today's lock limits.

I also use MA's to help me gauge when the reversal of trend is occuring, and the MACD to confirm that one is under way (bottom subgraph). Klinger is a wonderful leading indicator of a change in accumulation/distribution, but I use the MA's to help me time when this is happening. The Hull MA is located in the 2nd subgraph (blue for UP, magenta for DOWN), and the Gaussian is located in the 3rd subgraph (green for UP, red for DOWN).

I also use the Bollinger Squeeze indicator to help me know when a loss of momentum is under way and continued add-ons or new trades would be inadvisable.

I have tried my hand at trying to program a strategy, but after spending months at it, I finally realized my programming skills were simply not up to the task. Still, this method is working well for me. Just don't ask if I have automated it; the answer is "no".

Anyway, this is my contribution thus far, in the spirit of sharing. Any suggestions or additional ideas (or questions) are welcome. However, since I am trading every day, I don't spend much time in these forums. Regards to all my fellow traders.

One last observation - quite important and interesting, too:
Note in the second and third subgraphs that when the MAs cross below the other indicators, this moment quite consistently represents the nadir/apex of the trade. It is usually the best point to exit. I like BOTH the Hull MA and Guassian to cross over the other indicators (Klinger in the 2nd subgraph, and slow stochastic in the 3rd subgraph) at nearly the same time, which they do almost perfectly in this example. They often cross on precisely the same candle. If they don't cross nearly simultaneously, I question the signal. You can see this phenomenon in both of the charts I've posted tonight (the 30 tick chart, and the 15 min. chart). I believe this occurs with such consistency, at least partly because stochastic and Klinger (with my settings) are very sensitive and leading in nature, while MAs are lagging by nature.

Daily Soybeans losing momentum, volatility

I am posting here a daily chart for soybeans. It is showing all the signs of an imminent reversal. Note in the last candle, prices have crossed convincingly through the EMA. Prices tried, but failed, yesterday. I have programmed my EMA so that it changes from blue to red when this occurs. (By the way, I use Tradestation, both for my charts and as my futures broker).

At the same time, notice in the 2nd panel that the Klinger Volume indicator has already turned down days before, and has now also crossed below its yellow trigger line, which is also moving lower.

On the same candle, BOTH the Hull Moving Average (magenta and blue in the 2nd panel), and the Gaussian filter (not pictured in this graphic, but typically shown as green and red in the 3rd panel of my other chart examples), also turned DOWN on the same candle. Thus, all 3 moving averages turned down at the same time. I should also note that the slow stochastic and MACD have also turned down, as has Open Interest.

Will soybeans turn down in price? Only time will tell, but this is a good hint of lower prices to come, or at the very least, fading upside energy and momentum. If I had to guess, I would bet that prices will rise again until the longer Bollinger Moving Average in the top panel draws closer to prices. A sideways movement may be more likely until more long-term traders realize that the big soybean move of the past year is finally coming to an end. I'll be ready, however, for a new move up and amplification of the bullish trend, as has happened in the past. Be ready for anything the market gives you.

One last thing: Since hedge fund traders and hedgers (not the same thing) often use them, I have added the 50-day (light blue) and 200-day (magenta) Simple Moving Averages to my daily chart. Since so many people consider them to be important, I wanted to be able to see them. They represent important potential support.