Color Keltner Channel Chart into Highs for SP500 and NASDAQ

Sometimes it’s helpful to look at one indicator at a time, and we can do that with our special “Color Keltner Channel” Chart – as seen on the S&P 500 and NASDAQ indexes.

Let’s take a look at where price trades relative to the Keltner Channel sand what message this activity sends to the market.

We’ll start with the S&P 500:

Keltner Channels plot two ATRs – Average True Range values – above and beneath the midpoint or 20 period moving average.

While Bollinger Bands reflect standard deviation, Keltner Channel bands reflect a slightly different measurement of volatility over time.

Nevertheless, the logic is roughly the same in that pushes (or touches) of one Keltner Channel extreme tends to result in a quick reversal or retracement down against the band.

I highlighted instances where price pushed and closed BEYOND the Keltner Channel.

For reference, I’m plotting a 2.5 ATR band (black line).

The main idea here is that price pushed up off the lower Keltner Channel into the upper channel without stopping.

I suggest you compare the current action specifically with February’s bullish non-stop action and then to a lesser extend with that of April.

This is just another way to show what I’ve been highlighting for you in the prior updates:

Studying the “Repeat Pattern” that Forecasts New Highs for the S&P 500 (achieved!)

“Onwards and Upwards to New Highs for the S&P 500?

Planning a Breakout (from a Repeat Pattern) in the S&P 500

S&P 500 “Breaks on Through to the Other Side

Decision Point for the Dow Jones

We can see the same type of pattern playing out in the NASDAQ:

Notice how the NASDAQ is squeezed into the upper Band – similarly, you can chart prior examples of tests (touches) of the upper band.

While price could squeeze a bit higher as it did at the end of February 2014 (and June), do keep these levels in mind as you consider the new landscape for risk/reward management at fresh new highs.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter: http://twitter.com/afraidtotrade

Corey’s book The Complete Trading Course (Wiley Finance) is now available along with the newly released Profiting from the Life Cycle of a Stock Trend presentation (also from Wiley).


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