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Greece's ASE: A Lesson in Keltner Channels
How to use Keltner channels to complement your wave analysis
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By Nathaniel Williams
Tue, 25 May 2010 12:15:00 ET |
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The major indexes of the PIIGS nations are down more than 20% since April, entering the "official" bear-market territory. The exception among this bunch is Greece, which started its downward march far before its debt-ridden brethren.
The movement of Greece's stock index, the Athens Stock Exchange, provided Elliott Wave International's European Short Term Update editor Chris Carolan an opportunity to teach his subscribers about one of the useful technical indicators that he likes to combine with Elliott wave analysis -- Keltner channels.
As you can see in the chart above, the ASE kept pace with top of the Keltner channel when prices moved up in October 2009. Prices then turned lower and bounced off the bottom of the Keltner channel around the beginning of November. After a slight tick up again, the ASE rode the bottom of the Keltner channel until mid-December, inched up, grazed the top of the channel and retreated once again.
What does all of this mean? Much! The interaction of the price and the channel can help you determine whether the unfolding Elliott wave patterns are impulsive or corrective. In impulsive waves, the channel "bends": visually, it appears to accommodate a price trend. In corrections prices reverse and cross the channel.
Being able to differentiate between an Elliott wave impulse and correction helps you determine the larger trend. And that's what investing is all about, isn't it?
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Tags: technical analysis, Keltner channels