Moving Average Trading Channels in Operation

In addition to a 14-day moving average line, around which are upper and lower band boundaries (8% above and below the moving average), the chart shows the 19- to 39-day MACD indicator. Its patterns interact well with patterns that can be observed in the relationships between daily levels of the Nasdaq Composite and its moving average trading channel.

Area A: The Chart Opens with a Market Downtrend

As Chart 9.1 starts in March 2001, a serious stock market downtrend is underway. Price levels of the Nasdaq Composite are declining, tracking along the lower boundary of the moving average trading channel, which, itself, is in a clear downtrend. In addition, the declines in price trend and channel direction ...

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