Momentum Stock Indices Technical Analysis and Momentum Trading Signals

The Moving Average Envelope indicator creates two lines around the stock index price forming a channel. The upper and lower channel lines are drawn at an equidistant level above and below the Moving Average. The distance to draw the envelopes is calculated using a percent or a number of pips.

Moving Average Envelope

Stock Indices Technical Analysis and Generating Stock Indices Signals

MA Envelope can be traded using several different trading rules. The main method of generating stock index trading signals is to use the stock index price penetrating the upper channel or lower channel.

Bullish signal

Indices Price penetrating the upper channel is a long buy stock indices signal.

Buy Stock Indices Signal

Bearish signal

Indices Price penetrating the lower channel is a short sell stock indices signal.

Sell Stock Indices Signal

In a trending market the MA points upwards in an up stock indices trend market or downwards in a down stock index trending market. It is good to use the envelopes together with other technical indicators such as stock indices trend lines so as to confirm the signals generated.