The McClellan Oscillator (MCOR) is an oscillator that is used as a trading tool for timing purchases and sales. It is useful for interpreting short term to intermediate term market moves.
MCOR is constructed from the historical advance-decline data that comes with your Investor's Advantage package. This is a very popular oscillator that is used to measure overbought and oversold conditions in the market. These moves may last from several days to several weeks.
MCOR will peak or bottom at extreme levels (above +100 or below -100) ahead of market turning points. This will provide you with an early warning of market reversal and prepare you to make the appropriate trading decisions. Watch for the MCOR to pass through the zero line at or soon after the market turning point.
There are many different patterns to watch for that are indicative of turning points in the market. Some of which will be discussed here. A more complete explanation may be found in the booklet "Patterns for Profit - The McClellan Oscillator and Summation Index" by Sherman McClellan and Marian McClellan. This booklet may be purchased through The Trader's Press, Inc. P.O. Box 10344, Greenville, SC 29603.
Trendlines can be used in conjunction with MCOR just as you would use them for individual securities. You can use support or resistance lines in which a breaking of the trendlines can indicate impending reversals.
Also watch for triple-tops and triple bottoms another market reversal pattern. The three-wave zig-zag pattern which represents either one wave down a second wave up and a third wave down. Or you might see the reverse of this pattern.
You can also watch for divergence where the DJIA may be making new highs MCOR may have lower tops which is a sign of internal weakness in the market and should be approached with caution.
Another recurring pattern to watch for is a regular cycle pattern of 22 to 24 weeks between bottoming formations. This can help you purchase issues closer to market bottoms.
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