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Mikula Forecasting
Company: Trading Strategy #2
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Written by: Patrick Mikula CTA
Copyright (c)2003-06 by Patrick Mikula All Rights Reserved.
(Please to not copy or foreword this article).
Mikula Forecasting Company
P.O. Box 152672
Austin, TX 78715-2672
USA
www.MikulaForecasting.com
support@MikulaForecasting.com
====================
This trading strategy is the second in our series which
focus on using the Square of Nine or Super-Pitchfork with
traditional technical analysis indicators. This article will
show how to combined the support and resistance price levels
from chapter 2 in the book "The
Definitive Guide to Forecasting Using W.D.Gann's Square of
Nine" and the Slow Stochastic. To
see the exact calculation method for these price lines see
Chapter 2 in the book listed above.
When the support and resistance lines described in
chapter 2 are applied to a chart it quickly becomes apparent
that tops and bottoms form against these lines. To help
focus in on the most valuable tops and bottoms which form on
these lines we can apply a Slow Stochastic to the chart. The
Slow Stochastic tells us when the market is overbought and
should soon make a reversal down, or oversold and should
soon make a reversal upward. When the price bars are
touching one of the Square of Nine price levels and the Slow
Stochastic is over bought the market should be watched for a
top to form. The opposite is also true, when the price bars
are touching one of the Square of Nine price levels and the
Slow Stochastic is oversold the market should be watched for
a pivot bottom and upswing.
Setups With The Square of Nine Method from Chapter
2.
First Example:
In this first example uses the stock symbol NITE. The
support and resistance lines are drawn on the chart as
horizontal lines. The indicator "Stochastic of RSI" is added
to the subchart. Notice the letters A, B, C and D on the
chart. These letters represent the location where the stock
made a pivot right on top of a Square of Nine support level
when the Stochastic of RSI was either over bought or
oversold. At point A and C the Stochastic of RSI was
oversold and the market made a pivot on the 135Dg Square of
Nine line. At points B and D the Stochastic of RSI was over
bought and the market made a pivot on the 90Dg Square of
Nine line and the 45Dg Square of Nine line.
Second Example:
The chart below shows the March 2004 Oat futures contract.
The indicator Slow Stochastic is in the sub-chart and the
Square of Nine support and resistance lines are drawn on the
chart as horizontal lines. Notice that at points A, B, C, D,
E and F . The market made pivots right on the Square of Nine
support levels. At points A, B, D and F the market made top
pivots on the Square of Nine 0Dg line, and 270Dg line while
the Slow Stochastic was in the over bought zone. At points C
and E the market made bottom pivots on the Square of Nine
90Dg line which the Slow Stochastic was over sold.
Third Example:
On the next example uses the stock symbol VRSN. In the
sub-chart is the MarketWarrior 3.0 Moving Average Oscillator
and on the main chart is the Square of Nine support and
resistance levels. This Moving Average Oscillator has top
and bottom over bought and over sold boundaries which
indicate when the market is overextended. At point A the
market made a top pivot on the Square of Nine 315Dg support
level and the Moving Average Oscillator was above the upper
boundary. When both of these two items occur together it
gives the trader a heads up that the market is going to
reverse.
MORE:
To see the second half of this article with
more examples and setups see the version of this Strategy 2
on the MarketWarrior
owners page.
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Mikula Forecasting Company
P.O. Box 152672
Austin, TX 78715-2672
USA
====================
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Mikula
Forecasting Company: Trading Strategy #2