Rainbow 3D Moving Averages

Rainbow 3D Moving Averages were developed by Ivan Ballin (Forum Profile: Ingot54)) as a variation of the Multiple Moving Averages of Daryl Guppy. Exponential moving averages ranging from 2 weeks to 200 weeks are plotted on the price chart using the full color spectrum. The indicator is very useful in highlighting trend changes -- when your eyes have adjusted to the array of colors.

Trading Signals

Signals are similar to Multiple Moving Averages:

Convergence and Divergence

The most important signals are taken from the spacing between the Exponential Moving Averages (EMAs) in each group; not from crossovers.

• When moving averages within a group are parallel and close together, the group are largely in agreement;
• When the moving averages widen, this signals divergent views within the group;
• When moving averages converge, this is a sign that the group view is changing.

Trend Strength

• Parallel long-term EMAs signal long-term investor support and a strong trend; and
• Short-term MAs tend to bounce off the long-term MA group.

Trend Weakness

• Both groups of EMAs converge and fluctuate more than usual.

Trend Start

• A change in price direction accompanied by expanding EMAs in both groups.

Short-Term Reversals

• The short-term group cross over, diverge and then again converge; while the long-term group remain parallel.

Example

Aquarius Platinum Limited (AQP) is shown with Rainbow 3D Moving Averages.

1. Short-term retracement gives an entry signal (long)
2. Another short-term retracement
3. Moving averages diverge, increasing risk of a reversal
4. Strong retracement indicates changing short and medium term views, but long-term view holds firm
5. Short-term retracement signals recovery
6. Moving averages diverge, warning of another reversal

Setup

Select Rainbow 3D Moving Averages in the left column of the Indicator Panel. Adjust the settings as required and save using the [>>] button. The default is Weekly moving averages.