To enhance trading efficiency, investors need to evaluate and view the markets with perspective. Is a market at an extreme level and likely to reverse? Having perspective can save an investor from buying at market tops or selling at market bottoms. The Elastic indicator is designed to pinpoint over bought (OB) and over sold (OS) territory. Like a rubber band, a market can reverse at varying degrees. The Elastic indicator therefore has three different definitions for short-term OB and OS levels; Modest, Strong and Extreme.
The best use for the Elastic Indicator is in conjunction with Trend Level indicator. First, we establish the longer-term trend of the market using the Trend Level indicator. Is the market in a bull, bear or neutral mode? Second we use the short-term Elastic indicator to refine our market observation by establishing if the market is Over Bought (OB) or Over Sold (OS) within a trending phase. Buying opportunities may arise when a market is in an established Bull trend yet is in a short-term Over Sold dip. On the flip side, a selling (shorting) opportunity may occur when a market is in a Bear trend but is in a short-term Over Bought top. A long exit opportunity may occur if a market is in a long-term Bull trend but is also extremely Over Bought. Once again the flip side, could be a short exit if the market is in an established Bear trend that is also extremely Over Sold. These two examples, from both the long and short side, should provide the necessary insight into the power of the Elastic Indicator.
Elastic Level (EL) Descriptions:
- Extremely Over Bought (OB) / Over Sold (OS) +/- 12
- Strongly Over Bought (OB) / Over Sold (OS) +/- 8
- Modestly Over Bought (OB) / Over Sold (OS) +/- 4
- Neutral market between +4 and -4
Elastic Levels: High/Low Breakdown
Elastic Level Sector Comparison:
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