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.
Mouse over chart captions to display trading signals.
- Short-term retracement gives an entry signal (long)
- Another short-term retracement
- Moving averages diverge, increasing risk of a reversal
- Strong retracement indicates changing short and medium term views, but long-term view holds firm
- Short-term retracement signals recovery
- 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.