The general rules for calculating a 3 Line Break chart are: If the price exceeds the previous line's high price, a new white line is drawn. If the price falls below the previous line's low price, a new red line is drawn. If the price does not rise above nor fall below the previous line, nothing is drawn.
In a Three Line Break chart, if rallies are strong enough to display three consecutive lines of the same color, then prices must reverse by the extreme price of the last three lines in order to create a new line: If a rally is powerful enough to form three consecutive white lines, then prices must fall below the lowest point of the last three white lines before a new red line is drawn (this is what was confirmed for the Nasdaq: 5 white lines followed by 2 red lines). If a sell-off is powerful enough to form three consecutive red lines, then prices must rise above the highest point of the last three black lines before a new white line is drawn.
The following are the basic trading rules for a three-line break chart: Buy when a white line emerges after three adjacent red lines (a "white turnaround line"). Sell when a red line appears after three adjacent white lines (a "red turnaround line"). We now have a sell signal for the Nasdaq (2 red lines, which is even "better" than one). Avoid trading in "trendless" markets where the lines alternate between red and white.
The Nasdaq also demonstrated a new thin red yin line (sell) on the Kagi Chart for the past two days. This is also a sell signal.
No comments:
Post a Comment