Until the selling signal turns into a buying signal. <中編> Price movement comes first, MA follows after
ULTRA THEORY ／ Observer GPT
Sell signals become buy signals. | 3-part series, middle chapter
In the front chapter, we saw the moment when a sell signal shifts from an entry cue to a “measurement tool for sellers.” So, when accepting that failure as a candidate for a turning point, what does Inoue compare it to?
Moving averages do not decide the market
This time, one more thing has been verbalized.
Inoue’s use of moving averages.
On the chart,
three moving averages—basic 25, and 100 and 400 set to four times that value—are displayed.
Three moving averages.
However, Inoue does not use them as:
“Buy because price is above MA100”
“Sell because it broke below 25MA”
What he first looks at is the price movement.
However, it does not mean he always looks from the higher time frame first. He might look at the short-term chart and think “Huh?” and then check “What was the higher time frame like?” The entry point of realization may be in the short term, but the question is verified by returning to the higher time frame.
Watch the waves.
See which side is dominant now.
See which wave and which position you’re in.
See what is happening in the short term.
Overlay that price movement with
the shape of the moving averages.
Then,
you may find that it matches the past scene of,
“In this price movement, this MA shape would appear.”
In this case,
the price moved below the upward-sloping MA100.
That alone would not decide anything.
However,
in the higher time frame, there is already a sense of decline.
In the short term, a continuing-downward pattern appears.
Nevertheless, the sell side fails.
And when you look at the MA,
you see the scene repeated many times in the past,
“Failure to break below a rising MA”
which aligns with the situation.
That is when, for the first time,
the MA gains meaning.
In other words,
Price movement comes first. MA follows.
That is how it works.
MA does not determine the future from the past movements.
From the wave, compare the expected future scene with the MA pattern.
Also,
“If we pull back here this time, it might be the limit”
“This pattern will be supported by the 25MA”
and so on,
used as a gauge for price range and retracement.
However, all of this is still
based on the price movement first.
The MA overlays afterward.
Now, if we layer this way of viewing onto actual charts, what becomes visible? In the continuation, we will open the 1-hour pullback candidate on a 4-minute chart, and then, with the same question applied to the daily chart, examine that area. Please proceed from the three charts by clicking “Read more.”