Since the June, 2012 rally attempt hit the wall at the 62% Fibonacci retracement (the lower end of the Death Zone) this OIL ETF, much like GLD, has managed only to touch near the 50% Fibonacci retracement for a couple trading sessions.

Also like GLD, we’re not seeing a Point Zero for any kind of reasonable trade entry point. Granted, we’re only doing a brief analysis, but sometimes that is all you need.

The Roadmap Channels are not ordinary trend lines, which are drawn after the fact. You could have placed the Roadmap on this GLD ETF back in October, 2012. One very good reason for W.D. Gann’s success was that he put in the time necessary to really understand the tickers he traded. He often carried 100 year charts into the trading pit, and knew by heart every important high and low, the price range between them and the number of days in each and every swing.

Like Gann, the Roadmap becomes more effective when the trader knows his tickers cold and what degrees of change have been effective in the past. Only experience can provide the confidence needed to make any technical tool effective.

With respect to GLD, we would have to see price trade consistently above the Ghost Line before starting to think that a major bottom was in place.

The chart was drawn with the software that comes free with our book “Trading the Square of Nine With a Pencil and a Calculator.”

This bull swing has blown through many resistance levels, but that does not mean we should ignore them. Not a complete analysis for sure but worth noting is that Fibonacci Expansions from the three immediately preceding internal swings cluster around the most recent high in the SP500. Worthy of note also is that Square Roots from the swing origination point anchor at the upper end of the Fibonacci Expansions.

Short term cycles suggest that Google (GOOG) may be hitting the wall at around 896. The chart is from the software that comes free with our ebook on the Hurst Method. We use three displaced moving averages projected forward in time to indicate the mid-point of a swing.

The second GOOG chart shows Roadmap Channels drawn from the November, 2012 low along with a couple Fibonacci projections taken from prior swings. The Roadmap channeled the bull swing perfectly for nearly four months even though it never changed and could have been drawn back in November. We have found that Roadmap Channels that hold for months often continue to serve a purpose even after the channeled swing has finished. In this case the lower channel line appears to be offering resistance to the bull swing that started in April of this year.

NOTE: The major update to the ebook training software will be released in the near future. Current book owners will be notified of availability by email.

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By Elliott Wave International

"Guessing or going by gut instinct won’t work over the long run. If you don’t have a defined trading methodology, then you don’t have a way to know what constitutes a buy or sell signal. Moreover, you can’t even consistently correctly identify the trend."

-Jeffrey Kennedy

Jeffrey Kennedy is an accomplished teacher and a Senior Analyst here at EWI. Yet he often says that the Wave Principle alone is not a trading methodology. It does not tell you how much trading capital you can afford to risk, or specific guidance about which entry or exit levels are best suited for your trading style or where to set your protective stop.

Kennedy also says that along with risk management and emotional discipline, the right technical tools are a vitally important part of supporting your wave count.

To enhance trading confidence, Jeffrey’s 3 favorite technical tools are Japanese candlesticks, RSI, and MACD. (read Part 1 on Japanese Candlesticks and Part 2 on RSI ). Today’s lesson shows you how MACD can help identify trading opportunities with an example from USDCAD.

This 2-minute video and overview of MACD are adapted from Jeffrey’s Elliott Wave Junctures educational service (which empowers subscribers with information on nearly every aspect of trading. Try it risk-free for 30-days >> ).

Moving average convergence divergence (MACD) is a momentum indicator developed by Gerald Appel. It consists of two exponential moving averages, the MACD line and Signal line. The difference between these two lines yields an additional indicator, MACD Histogram.

Since these studies evaluate momentum, they work optimally in trending markets. When combined with reversal candlestick patterns, MACD and MACD Histogram can increase confidence in these patterns as well as continuation of the larger trend.

MACD divergence occurs when prices move one way and MACD moves the other. Bearish divergence forms when prices make new highs and MACD does not. Conversely, new price lows without lower MACD readings is bullish divergence. These conditions aid traders in identifying potential changes in momentum and trend.

MACD is constructed using two lines referred to as the MACD line and the Signal line.

When the MACD line appears to penetrate the Signal line, but fails to do so, a hook forms. The significance of a hook is that it coincides with countertrend price moves.

MACD is excellent technical tool provided you know how to use it and what to look for.

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This article was syndicated by Elliott Wave International and was originally published under the headline (Video) Top 3 Technical Tools Part 3: MACD. EWI is the world’s largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.

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