The Handbook of Technical Analysis + Test Bank_ The Practitioner\'s Comprehensive Guide to Technical Analysis ( PDFDrive )

Introduction to the Art and Science of Technical Analysis

Figure 1.14 is an example of applying a couple of additional forms of analysis

to the basic linear regression band. In this chart, price action analysis is used in

conjunction with volume analysis to forecast a potential top in the market, evi-

denced by the preceding parabolic move in price that is coupled by a blow‐off.

In Figure 1.15, volatility band, volume, and overextension analysis are all em-

ployed to seek out potential reversals in the market. We observe that price exceeds

the upper volatility band, which may potentially be an early indication of price

exhaustion, especially since it is accompanied by a significant volume spike. The

moving average convergence‐divergence (MACD) indicator is also seen to be resid-

ing at historically overbought levels, which is another potentially bearish indication.

fIgure 1.13 Linear Regression and Divergence Analysis on the Same Chart.

Source: MetaTrader 4

fIgure 1.14 Linear Regression and Volume Analysis on the Same Chart.

Source: MetaTrader 4