P1: PIC/PIC c02
August 18, 2008
Printer: Yet to come
Multiple Time Frame Momentum Strategy
often not reaching the OS zone on price corrections. This is a characteristic that you should be aware of. The larger-degree trend bias will affect how the Stoch indicator cycles. Letâ€™s take a look at more data. The next daily S&P chart (Figure 2.15) was for a four-month period with a strong bullish trend with only minor corrections. The chart has the same Stoch indicator with the same settings as the previous chart. Do you note any differences in how the Stoch cycled with the price cycles in this chart compared to the earlier one? The Stoch hung in the OB zone for much of the trend, only making momentum declines below the OB line on the larger corrections that lasted several bars. Frequent momentum oscillations were made in the OB zone without a decline to below the OB line. This is a similar Stoch momentum pattern to what we saw on the previous chart, which had much larger corrections during the bullish trend. Even that chart showed a Stoch bias to hang in the OB zone and make relatively shallow momentum corrections.
FIGURE 2.15 Stochastic Momentum Reversals