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Chart 7 - Template 7 - Keltner Bands and Buy/Sell Signals -
Combines Support/Resistance at Keltner Bands with B-S Signals

Chart Legend: The Keltner Bands are the thick cyan lines on either side of the dashed centerline…The BLine Buy/Sell Setups are in the top Window… The DBS5 Buy/Sell Setups are above the oscillators in Window 3… The BLine and DBS5 oscillators are in the bottom Window.

In the month of November, prices had risen above the Keltner Band and traded sideways until the BLine generated a Sell Setup Signal shown by the first red diamond. Significantly, the DBS5 did not generate a Sell Signal as the oscillator turned down well below 50. This trading pattern is worth watching, as it can be followed by continued lower prices.

This is a Sell Trading Pattern to watch for -

The BLine turns down and generates a Sell Signal. The DBS5 Oscillator is below 50 and turns down at the same time as the BLine oscillator moves down. The lower DBS5 oscillator high shows weakness, and gives additional validation to the Mechanical BLine Sell Signal.

In December, prices dropped to test the lower Keltner Band, and the BLine generated a Buy Setup Signal indicated by the green diamond (the diamonds do not plot with the Template) below the price bar. This signal identified a daily trading cycle bottom that was followed by a line move up to test the upper Keltner Band. Reaching the upper Keltner Band, a combination of a DBS5 Sell Setup and BLine Sell Setup generated a 1-2 Pattern shown by the red diamonds.

One Sell Signal followed a second Sell Signal is often an indicator of a top, especially with the oscillators at a high level as the Keltner Band is tested.



The market then declined into late January/early February when the BLine generated a Buy Signal following consolidation that tested the lower Keltner Band.

This is a reverse picture of the Sell Trading Pattern in November in that the BLine generated a good Buy Setup Signal, while the DBS5 turned up at a high level, just below the Sell Line as indicated by the blue dot.

The market then moved higher into March where, once again, there was a 1-2 Sell Pattern indicated by the red diamonds. The DBS5 generated a Sell Setup Bar; then, the BLine generated a Sell Setup Bar as prices were testing the upper Keltner Band. This Pattern was again followed by a sizeable down move as prices first tested the lower Keltner Band; then broke through it and continued lower to make a final bottom with a 1-2 Buy Pattern of a DBS5 Buy Setup followed by a BLine Buy Setup, indicated by the green diamonds.

Keltner Bands can be used to see Support/Resistance levels as a market moves sideways; and using more sizeable Standard Deviation moves away from the centerline will often seem to stop a price move at a 6, 7, or 8 Standard Deviation move, as occurred at the 1-2 Buy in late April.

Plot GE yourself and change the Standard Deviation move from 1.95 to a 6 to see how it stopped the down move.

Additional PT indicators, such as Timing Bands and Trend Indicators would normally be applied to the chart (or perhaps to another chart to prevent "chart congestion").


Next: Combines Trend With B-S Signals
The PT Detrend Template with the EMA Trend Indicator, %Diff lines, and Buy/Sell Signals identifies high probability trades that often occur at cycle tops and bottoms in a trending market.