When you employ the histogram cross sell, you will be selling when the histogram is "crossing" the zero line. Remember these main points:
1. A sell signal is created when the histogram changes from a positive number to a negative number. This happens when the histogram bar crosses the zero line.
2. A sell stop is placed one tick below the low of the price bar, which corresponds to the first histogram bar that crosses the zero line.
3. Our software also gives you the exact order to give your broker for this signal.
Figure 5-19 is a schematic of the requirements to create an AO histogram crossing the zero line sell signal. Figure 5-20 lists the rules for taking this trade.
Figure 5-21 illustrates the AO histogram cross sell signal on a Swiss Franc commodity chart. The chart illustrates two Profitunity concepts for increasing and maximizing profits. You will notice that the following bar did not take out the signal bar's low. That following bar had a higher low and the momentum continued to go more negative, creating what we label as a "blue light special." (The term is borrowed from department stores that put on special sales for a short period of time for the people who happen to be in the store at that time.) The market
gives those who are watching the market closely a chance t~ sell at 2 higher pric~ than the first signal. The wheat stock chart in Figure 5-22 is another illustration of how these techniques work on all markets. This fulfills "selfsimilarity," one of the primary characteristics of fractal geometry. In the markets, it means that the various dimensions in nonlinear
• ~Iways read from left to right.
• It only takes two bars to create this signal.
• First bar must be abol/e the zero line, second bar must cross below the zero line. (From a positive number to a negatil~e number.)
• You can not ha~le a buy and sell at the same time.
• Once a signal has been created go to the oorre~ponding price bar and subtract 1 tick; this is your sell stop price.
Figure 5-20 RuLes for the AO histogram crossing zero Line seLl signaL. Figure 5-Z2 The A() histogram cross sell signal in wheat.
dynamics must work not only across all markets but also in all time frames—a requirement of fractal geometry.
lWIN PEAKS AO SELL SIGNAL
With the Twin Peaks sell signal, you will be selling when the histogram is above the Zero Line. The key points are:
1. This signal is created when you have a upward peak (highest high) above the zero line followed by another upward peak that is lower (smaller positive number and closer to the zero line) than the previous upward peak.
2. The histogram must stay above the zero line between the two peaks. If the histogram crosses the zero line between the peaks, the sell signal is invalidated. However, crossing the zero line would create an AO cross the line sell signal.
3. Each new histogram peak must be lower (smaller positive number and closer to the zero line) than the previous peak.
4. Most software can be configured to color the histogram bars for simple and easy observation.
Figure 5-23 is a schematic of the elements that are necessary to
I create an AO histogram Twin Peaks sell signal. This is the only sell signal possible when the AO histogram is above the zero line. Figure 5-24 summarizes the rules for a Twin Peaks AO sell. It is a mirror of the AO Twin Peaks AO buy signal when the AO is below the zero line. Figure 5—25 shows the Twin Peaks sell signal as it appears on a histogram chart. Notice that point (A) was a peak and the AO histogram turned down from that point. It continued lower until three bars to the left of point (B). It then went higher, forming another peak at point (B) but lower than the peak at point (A). At point (C),
• This is the only sell signal abol~e the zero line.
• The firgt peak must be a larger positil/e number than the second peak.
• Your trigger bar H~ill be a Red Bar and a smaller positive number than either peak. • If any bars in the Twin Peaks cross the zero line, the signal is invalid.
• A ~aucer buy ~ili be created be~ore a T~in Peaks sell.
• Once a signal has been created, go to the corresponding price bar and subtract 1 tick; this is your sell stop.
Figure 5-24 RuLes of the Twin Peaks selL signaL.
the histogram turned lower, creating a Twin Peaks sell signal at one tick lower than the low of the price bar that corresponds to the bar at point (C). Now let's put the price chart up to see how this plays out in this stock. Figure 5-26 duplicates Figure 5-25 but adds the price bars. Note that at point (C) we place a sell stop just below the low of that price bar. That signal was not triggered on the following bar because its low was higher than the signal bar's low. Also note that all three bars at Point (D) had progressively higher lows. This formed a "blue light special," allowing us to sell at a higher price than was first signaled. It is very important to note that, during these time periods, the histogram continued to fall, creating red bars. This stock was finally sold at the first bar that rr.ade a lower low (circled on the price chart). Had the histogram turned upward (the bar would be painted green), this sell signal would have been canceled. Repeating for emphasis: You cannot sell on an AO signal if the current histogram bar is green, and you cannot buy any AO signals if the current histogram bar is red. In the corn chart shown in Figure 5—27, you can see a situation
that is similar to the Liz Claiborne chart. Remember: This is the only AO sell signal that can be generated while the AO is above the zero line. At this point, it is a good idea to review all the buy and sell signals that are created by the Awesome Oscillator (Figure 5-28).