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The logic behind this pattern lies in the formula of the CCI: The Commodity Channel Index shows us the average distance between price and the 14-period Moving Average. Therefore, a zero-line-reject is in fact showing us that price touches the moving average and bounces in the trend-direction. You can place a moving average of typical price on the chart and see it for yourself.
That’s one of the most powerful patterns of the Woodie’s CCI, and even if you trade that pattern only – you’ll do just fine.
Another pattern is the TLB – trend line break. The idea of this pattern is to enter the trade when a trend line on the indicator chart is broken, in the direction of the breakout.
This pattern is slightly less reliable but still generates good signals. The logic behind it is that a breakout of trend line shows a change in the momentum of price, therefore a good signal to enter in the opposite direction.