Volatility in Gold is pointing up after break-out witnessed in August 2011. As I mentioned before nice support exist at 1537 (Head and shoulder pattern) and then 1487 (Pitchfork) – 1500 (Trend channel). In coming days first stop on upside is at 1620 which is 200 day moving average.

On weekly chart Gold is now out of parabolic circle suggest price to remain weak.

On weekly chart we are getting nice support around 1487 as per Pitchfork.

Few Support for Gold Prices.

Head & Shoulder Pattern – 1537

Lower end of Trend channel – 1500

Silver has taken support at Head & Shoulder neckline. Persistence weakness can lead silver prices lower; 27.5 and then 26.5.

On fibonacci level market may hold 4075. Break of this may lead us 4050.

You can see XJO bounced from 4075.

Declaimer:

Do NOT use these commentaries to trade futures contracts. The commentary is to explain how to analysis patterns rather investment advise.

Daily chart of Dow Jones (29th Nov)

Australian Index future (APZ1)

System  trading is based on predefined set of conditions and rules. System takes position based on set of rules. Traders continuously hold position in market either Long or Short. While some systems allows entry only when predefined conditions met.

In this section I have explained the calculation of various trading indicators in Microsoft Excel. You can learn how to calculate them in Microsoft Excel.

Bollinger Band,

Ketner channel,

Average True Range,

Commodity Channel Index (CCI),

Stochastic,

Gann HiLo indicator,

Directional Moving Index,

AROON Indicator,

Moving average,

Ulcer Index.

This spreadsheet contains back-testing of  DOW Jones Industrial Index based on various Technical Indicators.

File (Click the link below to access)

Excel Indicators.xls

Click on the Link

1.   Long Term Crude Oil Chart Video

                                  2.  Triangles Exciting Wave Patterns  Video 

 Triangular break out with volume break out.

Price – Volume Break out with Breakaway Gap

The Stochastic Oscillator is made up of two lines that oscillate between vertical scales of 0 to 100. The %K is the main line and it is drawn as a solid line. The second is the %D line and is a moving average of %K. What makes the Stochastic unique is its use of a “smoothing factor” for the initial

%K line. The %K (full) line plotted is a n-period SMA of the initial %K line (wheren is equal to the middle parameter).

Three ways to interpret the Stochastic Oscillator:

Buy
when the Oscillator (either %K or %D) falls below 20 and then rises back above that level.

Sell
when the Oscillator rises above 80 and then falls below that level.

Buy
when the %K line rises above the %D line and

sell
when the %K line falls below the %D line.

Calculation

The Stochastic Oscillator has four variables:

%K Periods.
This is the number of time periods used in the stochastic calculation.

%K Slowing Periods.
This value controls the internal smoothing of %K. A value of 1 is considered a fast stochastic; a value of 3 is considered a slow stochastic.

%D Periods.
This is the number of time periods used when calculating a moving average of %K. The moving average is called “%D” and is usually displayed as a dotted line on top of %K.

%D Method.
The method (i.e.Exponential, Simple, Time Series, Triangular, Variable, or Weighted) that is used to calculate %D.

The formula for %K is:

(Today’s Close – Lowest in % K periods)  / (Highest High in % K Periods – Lowest low in % K period)

For example, to calculate a 10-day %K, first find the security’s highest-high and lowest-low over the last 10 days. As an example, let’s assume that during the last 10 days the highest-high was 100 and the lowest-low was 60–a range of 40 points. If today’s closing price was 90, %K would be calculated as:

75 = (90 – 60) * 100 / (100-60)

The 75% in this example shows that today’s close was at the level of 75% relative to the security’s trading range over the last 10 days. If today’s close was 80, the Stochastic Oscillator would be 50%. This would mean that that the security closed today at 50%, or the mid-point, of its 10-day trading range.

The above example used a %K Slowing Period of 1-day (no slowing). If you use a value greater than one, you average the highest-high and the lowest-low over the number of %K Slowing Periods before performing the division.

A moving average of %K is then calculated using the number of time periods specified in the %D Periods. This moving average is called %D.

The Money Flow Index (“MFI”) is a momentum indicator that measures the strength of money flowing in and out of a security. It is related to the Relative Strength Index, but where the RSI only incorporates prices, the Money Flow Index accounts for volume.

Interpretation

The interpretation of the Money Flow Index is as follows:

• Look for divergence between the indicator and the price action. If the price trends higher and the MFI trends lower (or vice versa), a reversal may be imminent.
• Look for market tops to occur when the MFI is above 80. Look for market bottoms to occur when the MFI is below 20.

Divergences at points “A” and “B” provided leading indications of the reversals that followed.

Calculation

The Money Flow Index requires a series of calculations. First, the period’s Typical Price is calculated.

Typical Price = (High + Low + Close) /  3

Next, Money Flow (not the Money Flow Index) is calculated by multiplying the period’s Typical Price by the volume.

Money Flow = Typical Price * Volume

If today’s Typical Price is greater than yesterday’s Typical Price, it is considered Positive Money Flow. If today’s price is less, it is considered Negative Money Flow.

Positive Money Flow is the sum of the Positive Money over the specified number of periods. Negative Money Flow is the sum of the Negative Money over the specified number of periods.

The Money Ratio is then calculated by dividing the Positive Money Flow by the Negative Money Flow.

Money Ratio = (Positive Money Flow)/ Negative Money Flow

Finally, the Money Flow Index is calculated using the Money Ratio.

The Accumulation/Distribution is really a variation of the more popular On Balance Volume indicator. Both of these indicators attempt to confirm changes in prices by comparing the volume associated with prices.

When the Accumulation/Distribution moves up, it shows that the security is being accumulated, as most of the volume is associated with upward price movement. When the indicator moves down, it shows that the security is being distributed, as most of the volume is associated with downward price movement.

Divergences between the Accumulation/Distribution and the security’s price imply a change is imminent. When a divergence does occur, prices usually change to confirm the Accumulation/Distribution. For example, if the indicator is moving up and the security’s price is going down, prices will probably reverse.

A portion of each day’s volume is added or subtracted from a cumulative total. The nearer the closing price is to the high for the day, the more volume added to the cumulative total. The nearer the closing price is to the low for the day, the more volume subtracted from the cumulative total. If the close is exactly between the high and low prices, nothing is added to the cumulative total.
= (Close – Low) – (High – Close) * Volume
                (High – Low)

Recent fall in Nasdaq and Dow create worries in the minds of investors. But for technical analyst satisfactory feeling by watching that each principle is followed by both the key indices. Even in the last couple of years numbers of investor investing in stock market increasing rapidly, stock market follows technical theories perfectly.Let’s look at the chart of Nasdaq1. Lets creates Extension from High on 31st Oct, 2007 of 2861.51 to Low on 26th Nov. 2007 of 2539.81 and last leg extend to High on 11th Dec, 2007 of 2734.82 that gave us the support level at 2428.56 (1.618%) and second support at 2239.29(2.618%).Surprisingly on 9th Jan, 2008 Nasdaq took support exactly at 2428 and bounce back to 3%.
2. Now let’s use retracement. From high of 31st Oct to Low of 26th Nov, give following three resistance level at 38.2%, 50%, 61.8%. Again surprisingly market took resistance at 61.8% twice, and then fall again.3. Lets creates another Extension from High on 11th Dec, 2007 to Low on 18th Dec,2007 and last lag of High on 26th Dec, 2007. Which give us another set of support at 1.618% and 2.61.8% 4.263%. After analyzing that we received key level of 2435 and 2255.
ConclusionNasdaq has two important support at 2428 and 2435 breaking of that leads to 2255 and 2239.

Nifty chart as on 21st Jan 2008

ABB Chart on 21st Jan 2008

Crude Oil Head and Shoulder pattern

BSE SENSEX WEEKLY CHART AS ON 21st JAN 2008

The Parabolic SAR provides excellent exit points. You should close long positions when the price falls below the SAR and close short positions when the price rises above the SAR.

If you are long (i.e., the price is above the SAR), the SAR will move up every day, regardless of the direction the price is moving. The amount the SAR moves up depends on the amount that prices move.

Another use of parabolic SAR is that when Parabolic SAR is coming down on every day and on particular day closing price ended above SAR value, investor may create long position and opposite. 

• Tops and Bottoms.
  The RSI usually tops above 70 and bottoms below 30. It usually forms these tops and bottoms before the underlying price chart.
  
• Chart Formations.
  The RSI often forms chart patterns such as head and shoulders or triangles that may or may not be visible on the price chart.
  
• Failure Swings.
  Also known as support or resistance penetrations or breakouts. This is where the RSI surpasses a previous high (peak) or falls below a recent low (trough).
  
• Support and Resistance.
  The RSI shows, sometimes more clearly than price themselves, levels of support and resistance.
  
• Divergences.
  Divergences occur when the price makes a new high (or low) that is not confirmed by a new high (or low) in the RSI. Prices usually correct and move in the direction of the RSI. 

  Calculation: 
          RSI =      100 – (100/1+ (U  / D))

Where:

U=an average of upward price change

D=an average of downward price change