Chart Trading Cycle Overview
The weekly chart (not shown) had a severe decline and looked as though it had made a 20-week cycle bottom.
The daily October sugar chart shows a 20-day trading cycle bottom at A that was also the bottom of the weekly cycle. Prices rose to the trading cycle top at B, then retraced 53% to the probable trading cycle bottom at C.
The red and blue lines are the EMA Trend Indicator.
When the red line is below the blue line and the distance between the red and blue is widening the trend is down. When a declining red line turns up it is an indicator that the trend may be reversing. When the red line flattens the market is often beginning a trading range or congestion area.
Buying a market when the red line is below the blue line and the distance between the two lines is widening, as at A means you are trading against the trend and the odds of a successful trade are marginal at best.
But the situation is much more positive at C.
However, the RSI3M3 oscillator did not first drop below the buy line at 30 to have an oscillator upturn generate a setup bar and buy signal.
The price bars of the 115-minute chart to the right are each one half of the daily trading session. This time frame will often get you in and out of a market at a better price than the daily chart. A 20-bar cycle in this chart is the same as a 10-day cycle in the daily chart. Notice that a losing buy signal was generated before the cycle bottom at A. This is a relatively common occurrence in all markets as a daily trading cycle is bottoming at the same time as the weekly cycle is bottoming. It is often better to wait for the first trading cycle low after this bottom, which is what we did.
The CCI58 oscillator at the bottom of both charts is an excellent companion oscillator to the RSI3M3 to help identify cycle tops and bottoms as they occur. It is used in our update to the 4-year cycle in the S&P; Index and will be published on the Web site this week. You will be notified by email.
The technical picture here is excellent for the long side.
Our mid-cycle pause price objective for the daily trading cycle indicates a rise to 10 cents is likely as it tops. To calculate the mid-cycle price objective, subtract the price at A from the high at B and add it to the price at C.
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