Second Benefit: Applying the MDC to the Problem of Price Porosity
As we saw in the previous chapter, “porosity” and “elasticity” are terms Levine used to describe cases where price penetrates a MIDAS S/R curve marginally before responding to it. Rather than illustrate this with another chart, we can go back immediately to Figure 14.5 and look at the porosity of price in relation to a standard MIDAS curve between points (1) and (2).
The problem with this phenomenon is that price can penetrate an S/R curve more deeply, so it is sometimes difficult to conclude whether we have a genuine case of porosity because the percentage seems too great. This can obviously affect trading confidence.
We can avoid the problem of porosity in an uptrend by using ...