Pivots, Patterns, and Intraday Swing Trades: Derivatives Analysis with the E-mini and Russell Futures Contracts, + Website

CHAPTER 15

MA Pattern Concepts

Moving averages aren't normally thought of as patterns. Mostly they're used to derive entry signals based on the crossover of a faster moving average through a slower. In this text, the 89 and 200 Exponential Moving Averages in the 1-minute bar frame have been described for their use as dynamic short-term exhaustions levels, components of our overall Pivot/Exhaustion Grid. As a crossover signal system, they would be far too slow and lagging. Instead, their plots should be thought of as a sort of trampoline net to pricing, giving way to a sudden price spike, but bouncing right back with the enthusiasm of a spring, at least until the trend is ready to reverse altogether.

Trends do change direction. A 2nd Persistent Trend Day Model occurring on the heels of one in the same direction will not behave like the first. And if the Trader can learn to observe the price action around, through, and between the 89 and 200EMAs, a number of trend signals can contribute to Trade Entry Models at this battle ground and crossroad of trend outcome.

■ The EMA Pinch

As discussed in Part Two, “Day Model Patterns,” the 200EMA exhaustion zone is best represented by the action on a Persistent Trend Day. On that day, these two EMAs, the 89 and 200, are usually well out of play until well after the 1st Frame, as price slows it advances and allows the look-back ­window of the moving average calculation to play catch-up. As price momentum wanes, the EMA line plots inch closer ...