Rainbow 3D Moving Averages System

[Leth]

Rainbow 3D Moving Averages
by Unknown Author

Rainbow 3D Moving Averages were developed by Ivan Ballin (Ingot54) as a variation of the Multiple Moving Averages of Daryl Guppy. Exponential moving averages ranging from 2 days to 200 days 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 MAs 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 MAs 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 MAs converge and fluctuate more than usual.

Trend start

-A change in price direction accompanied by expanding MAs 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.

aqp_rainbow_3dma.png

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