Rising Intraday Support

Apr 21, 2008: 10:42 PM CST

I thought the rising support pattern provided by the 20 period moving average was interesting and wanted to show the diagram.

I’m showing the DIA (Dow Jones ETF) on the 15-minute chart with a 20 and 50 period exponential moving average.

While I often trade off the 5-minute chart, I view the structure of the higher time frames (yes, a 15-minute chart is a slightly higher time frame for me!). Higher time frames can develop biases or expectations for you, and can also provide risk management points and trade entry points.

The typical interpretation is to identify the trend structure on the higher time frame and then time your entries and exits (targets too) on lower time frames.

For example, if a 30 minute chart shows a resistance level just ahead, and your 5-minute chart gives you a buy signal, you may use the resistance level on the 30-minute chart as a target for when the market might reverse.

Anyway, let’s look at the above chart.

Notice how price is supported as it trends higher by the 20 period moving average. As price gaps higher and forms a U-Turn sell (or rounded top), retracements (pullbacks) are deeper but still are supported by the rising 50 period average.

Trend reversals are often preceded by such ‘loss of momentum’ situations where price retraces deeper and deeper before ‘rolling over.’

Nevertheless, I thought this was an interesting example for you to review.


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