The distance between the Cloud and the current price is not significant.
Again,Western methods often suggest that when prices are a long way from a trendline, or two averages, the market is unstable and possibly out of control. Not so with this method.
In some ways it is a similar idea to that of the 26-day moving average which, when very steep, means a powerful trend in place.As a concept, it is the opposite of the Relative Strength Index, or reversion to the mean.
However, when faced with soar-away price-action, I watch far more closely for reversal candlesticks. It does feel churlish to warn that ‘the end is nigh’ when others are rushing in to buy, and we all know not to count our chickens before they hatch. And powerful moves can be short-lived but take prices way beyond what anyone had hoped for. But it cannot last forever, so watch for signs of instability in the candlesticks themselves.
This major market is up 25% in just one month – probably difficult to sustain. Note also the massive Shooting Star candle on 12 December; certainly warning of instability.
Again,Western methods often suggest that when prices are a long way from a trendline, or two averages, the market is unstable and possibly out of control. Not so with this method.
In some ways it is a similar idea to that of the 26-day moving average which, when very steep, means a powerful trend in place.As a concept, it is the opposite of the Relative Strength Index, or reversion to the mean.
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