Strong and Weak Confirmation

Another way that signals combine is via strong confirmation results. Confirmation can be set up in this way with any combination of signals, including Western and Eastern technical signals, volume, moving averages, and momentum oscillators.

For example, in Figure 7.2, price drops below support and immediately gaps even lower. This is a troubling signal, often forecasting a fast reversal back into range, but the gap needs to be confirmed.

Image

Figure 7.2 Strong confirmation—gaps and spikes (Chart courtesy of StockCharts.com)

Two strong forms of confirmation appear immediately after the initial gap. First is a volume ...

Get A Technical Approach To Trend Analysis: Practical Trade Timing for Enhanced Profits now with O’Reilly online learning.

O’Reilly members experience live online training, plus books, videos, and digital content from 200+ publishers.