I decided yesterday to post this idea as a PAIRS trade against a long position in CAT, but IR was the inspiration for the trade in the first place.
I'd like to suggest that this is the proper way to draw regression channels as it is the only way that I have ever drawn them because it makes logical sense to me. The logic is that you diagram "uptrends" separate from "downtrends" and analyze them independently.
The "lowest close" is the simplest way to diagram. You can also use the lowest-low and have the regression use the lows for its calculations instead of the close.
Cheers.
Technical Tim, Wed, May 30, 2012 11:49AM EST
I'd like to suggest that this is the proper way to draw regression channels as it is the only way that I have ever drawn them because it makes logical sense to me. The logic is that you diagram "uptrends" separate from "downtrends" and analyze them independently.
The "lowest close" is the simplest way to diagram. You can also use the lowest-low and have the regression use the lows for its calculations instead of the close.
Cheers.
Technical Tim, Wed, May 30, 2012 11:49AM EST
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