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Technical Analysis: Power Tools for Active Investors by Gerald Appel

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Moving Average Channels and the Major Trend

Like the MACD, moving average trading channels can be employed to reflect major- as well as intermediate- and short-term market trends. Monthly based charts can be employed for this purpose.

Market indices such as the Standard & Poor’s 500 Index and the NYSE Index (shown here, adjusted to reflect changes in its calculation) performed strongly between 1995 and early 1999. We will track the major perambulations that appear in Chart 9.3.

Chart 9.3. A Long-Term Moving Average Trading Channel: The NYSE Index, Monthly Based, 1996–2002

Moving average channels did a fine job in defining major-term trends between 1996 and 2002. This chart employs a 21-month moving average, with band boundaries set 11% above ...

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