Here we’ll look at some of the key things to look for when using S.E.X. lines on a daily chart. BUNCHED – There are periods of time that your lines will appear bunched together; kind of messy. What this is showing you is that there is no clearly established trend. The markets are moving sideways – they go a bit up, they go a bit down, and keep bouncing within a rather small range. You should
already be familiar with the concepts of “consolidations”, “ranges”, “triangles”, “channels” and other sideways-moving market phenomena by having read the eBook “Forex Surfing”. Since you are looking at daily charts (a bigger picture chart than say a 5- minute chart), when you see “bunched lines” this indicates that the markets are (on a rather large scale) consolidated, and that you should be looking at a few particular styles of trading. Suggested styles of trading would be range trading techniques (i.e. Channel Surfing Zones done on a large scale), and Forex Surfing techniques working on catching the “micro trends” that develop inside the large scale consolidation (after all, markets can be trending up/down for days within the large scale sideways movements). Here are a few chart shots showing some “Bunches”, along with my commentaries: Messy as heck, the lines clearly show that there isn’t any prevailing trend in the market. Obviously time to employ short term trading techniques to capitalize on the small trends that last just a few days (good profits to be made doing that of course).
Here is an interesting observation to make that can be clearly seen on the chart above… notice how the bunched lines can sort of show you approximately the mid-point of a consolidation. One useful application of this is to look for opportunities to get into the market (long when below the bunch, short when above the bunch) and to start tightening your stops when you get over to the other side of the bunch to exit the trade when it starts to turn around. Of course you would use techniques to enter the trade once your technical indications show that the market has turned for you, such as “Channel Surfing Zone” techniques, or surfing Forex waves when the smaller trends have shown clear reversal patterns and are moving back inwards. Though you can profitably surf the smaller trends within the large-scale consolidation pattern shown by the “Bunching” you must remember that sooner or later this sideways trend will end, a large-scale up/down trend will develop, and you’ll need to quickly change your trading strategy from a consolidation trading approach to a trend trading approach, especially if you want to catch on early to a gorgeous trend that could potentially last for a few thousand pips. Here you see another “Bunch” that occurred after a nice trend and before continuing on with the same trend (we’ll get to trends shortly).
This chart here is a little zoomed out so you can see a few places where you got bunches, and how they can appear differently. Notice that in the first circle (the big one on the left) it formed a triangle pattern where the lines bunched. After the market broke out of the apex of the triangle formation it trended upwards and sort of paused in a small consolidation (second circle) where the 5 & 20 S.E.X. lines bunched (but not the 60 as it couldn’t catch up yet). The market then exploded upwards and then got bunched in a large consolidation (circle 3) that still had an upward slant. I just want you to see that bunches can be large, small, in a perfect sideways motion, slanted, in a triangle, or just about any sideways moving variation you can think of. Parting thought about the “Bunch” – sooner or later all trends have to end, or a pause in a trend must occur. When the markets loose steam and become indecisive before a trend change happens you’ll see a bunch happen. The bunch is your friend (this won’t rhyme eloquently like the well known cliché) as it presents excellent trading opportunities (within the consolidation) and because it too must eventually end by becoming your BEST friend, the start of a trend!
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