Charting Made Easy by John J. Murphy

By John J. Murphy

Here's a treasure trove of simple to exploit instruments for mapping your direction via modern-day industry. no matter if you are utilizing on-line charts or a qualified charting software, those recommendations from grasp technician John Murphy can raise your buying and selling good fortune.

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The March 2000 move to new highs by JDS Uniphase was accompanied by a flat OBV line. That was an early warning of a possible top. Charts powered by MetaStock OBV Breakouts During periods of sideways price movement, when the market trend is in doubt, the OBV line will sometimes break out first and give an early hint of future price direction. At market bottoms, an upside breakout in on-balance volume is sometimes an early warning of an emerging uptrend (See Figure 9-4). Other Volume Indicators There are many other indicators that measure the trend of volume — with names like Accumulation Distribution, Chaikin Oscillator, Market Facilitation Index, and Money Flow.

However,volume provides important secondary confirmation of the price action on the chart and often gives advance warning of an impending shift in trend (See Figure 9-1). Volume can also be monitored on a weekly basis for longer-range analysis. Volume measures the pressure behind a given price move. As a rule, heavier volume (marked by larger vertical bars at the bottom of the chart) should be present in the direction of the prevailing price trend. During an uptrend, heavier volume should be seen during rallies, with lighter volume (smaller volume bars) during downside corrections.

The bigger the price range, the more significant is the reversal signal. Charts powered by MetaStock Charting Made Easy 25 The wider the day’s range and the heavier the volume, the more significant the warning becomes and the more authority it carries. The key reversal day is a relatively minor pattern taken on its own merits, but can assume major importance if other technical factors suggest that an important change in trend is imminent (See Figure 7-1). 26 Trade Secrets Chapter 8 PERCENTAGE RETRACEMENTS M arket trends seldom take place in straight lines.

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