Midas Analysis

Trading and Technical Analysis with MIDAS

Trending with Standard Deviation Bands

Another powerful tool in the MIDAS arsenal is Standard Deviation Bands.   Experience shows they are applicable in a variety of market conditions, including both sideways and trending markets.  Standard Deviation Bands are created by calculating the standard deviation between price and a MIDAS S/R curve, applying an adjustable multiplier, and plotting that above or below the S/R curve.  The multiplier is adjusted so the band catches early pullbacks, and the longer term curve has predictive properties — such as indicating points of pullbacks + reversals.

 

After the recent uptrend in equities, we had a cooling off period on Friday with DOW futures (YM) trending down to retest 12,000 levels.  We could apply S/R curves like we’ve done in numerous other posts, but let’s focus on our new tool – Standard Deviation Bands.  Let’s look at a 2min chart of YM.  First, we launch a primary R curve from the high of the regular trading hours, around 7:30.  Second, we activate standard deviation bands, pulling a lower curve to match the pullback around 8:30.  This produces a powerful stddev curve that resists the pullbacks at 9:50, 11:26, 12:38  to within a few ticks.  Nice catch!

 

 

 

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