Edition

IFTA JOURNAL
2017 EDITION
Forecasting Prices Via Overlays 18
Figures 23 and 24 are of the Dow Jones Index, and Square of
Nine of increment equal 100 is going to be used.
The bottom of 2002 (7181) is plotted in the Square of Nine.
Cells that are located at 240 degrees from the plotted point are
forming a clear resistance area; thus, the Triangle overlay can be
used in the future forecasting.
Figure 26. Dow Jones Index Monthly Chart
Figure 23. Dow Jones Index on a Monthly Basis
Figure 24. Dow Jones Index Monthly Chart
The Idea and The Logic Behind the
Square of Nine Indicator
From the explanation given in the previous examples, to
get the cycle target, a specific shape is added on the price
movement that was calculated from overlaying the low in the
Square of Nine. The new idea is to replace the low by a value that
represents the 20 days ago lows; thus, a 20-day exponential
moving average is calculated for the lows. On the other hand, in
the case of price decline, the highest high value will be plotted in
the Square of Nine; the shape that matches with the overlay will
be selected; the decreased value of the cycle will be calculated,
thus replacing this high by a value that represents the 20 days
ago highs; and the 20-day exponential moving average for the
highs will be calculated.
Then, it is suggested to have a Median Line =
(EMA20(high)+EMA20(low))/2.
Based on this analysis, the 240 degree overlay is expected to
remain working as a resistance area. The following figures will
show the future action.
In figure 25, the low of 2009 (6440) is plotted on the Square of
Nine, and the overlay will be a Triangle.
Based on this analysis, the 240 degree will act as a clear
resistance in the future that will face all the circled cells.
Figure 26 illustrates how the market really acted during this
period.
Figure 25. Dow Jones Index on a Monthly Basis
If the price closes above the Median Line, this infers that it is
targeting the increased cycle, and if it closes below the Median
Line, this infers that it is targeting the decreased cycle.
The Upper Primary Band is the target that is calculated from
the rotation of the EMA20 (low) of one increased complete cycle
of 360 degrees (default value may be changed by the analyst
based on the nature of the chart price movement).
The Upper Secondary Band is the target that the price is going
to reach if it succeeds in breaking above the Primary Upper Band.
It is calculated from the rotation of the EMA20 (low) with double
primary increased cycle, and this level of pricing is considered
an extreme level that the price may retrace from it at any time.
The movement to continue between Primary Upper Band and
Secondary Upper Band shows strength of buyers or a very
strong uptrend, and failing to reach the Primary Upper Band is
considered an alarm of weakness in the purchasing power.
The Lower Primary Band is the target that is calculated from
the rotation of the EMA20 (low) of one decreased complete cycle
of 360 degrees (default value may be changed by the analyst
based on the nature of the chart price movement).
The Lower Secondary Band is the target that the price is going
to reach if it succeeds in breaking below the Primary Lower
Band. It is calculated from the rotation of the EMA20 (low)
with double primary decreased cycle, and this level of pricing is
considered an extreme level that the price may rebound from it
at any time. The movement to continue between Primary Upper
Band and Secondary Upper Band shows strength of sellers or a
very strong downtrend, and failing to reach the Primary Lower
Band is considered an alarm of weakness in the selling power.
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