In 1997 I began using price charts in my analysis of the stock and other financial markets. Ever since, I have focused on reading price bars and identifying patterns and trends. However, there have been periods where I tested and tried indicators and methods, but they added little to nothing to my approach. The only technical tool I have found helpful is the moving average – which basically is just an automated, curved trendline or a smoothing mechanism.

Below is a daily chart of my preferred U.S. stock market index, the Value Line Geometric. There one can see the measures I use most of time to manipulate the raw price data. The teal-colored lines are a simple moving average channel of highs and lows (SMAHL), generally used to help detecting major reversals. My longer-term moving average (LTMA) is the purple line and in the lower window is a deviation measure (in %) of price from its LTMA.

First note the positive divergence between the index level and the deviation measure in end of September, reflecting lessening downward pressure. Second, recently the measure has pushed twice to new highs and above the green horizontal line – showing increasing upside momentum (see arrows). The circle drawn shows me which levels will be added to and dropped off the calculation of the SMAHL and LTMA.

These are the price measuring tools I am mostly using to analyze the markets. They are simple but effective and very easy to apply and understand.

If the VLG Index can push convincingly through and stay above the 574 level, higher levels are likely to been seen.

(Click on image to enlarge)

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