Education: Advanced Masters Rules Tutorial
Power Graph
The Power Graph, which sits below the Trend Graph, measures the strength of an upward or downward trend. The black and blue lines are are called "Power Lines".
Definition
- The black line in the Power Graph represents Upward Price Strength.
This indicates whether the price strength of the position is gaining or losing momentum.
- The blue line in the Power Graph represents High Price Strength. This indicates whether the volume of the position is gaining or losing momentum.
- located on the
right side of the Power Graph are the numbers 15, 50 ,
and 85 . These numbers correlate with the Blue Moving
Average in the Trend Graph . These numbers are represented
in the Power Graph by the white dotted lines that run
horizontal across the graph. These white dotted lines signify
important support or resistance points for both the Upward Price
Strength and High Price Strength .
- Red Zone appears when either one of
the Power Lines falls below the dotted line and turns the Power
Graph the color Red instead of Green.
The area that is red instead of green is called the Red Zone . This change occurs when either of the Power Lines drops below
the 15 white dotted lines.
Application
- In addition to the North of the Blue Entry Rule: Make sure the
Black Power Line is above the Blue Power Line. (Apply the rule: Black over blue times two is good for you.)
- The Black and Blue Power Lines in the Power Graph are used to help
determine the directions of a Trend in a position. To help
identify said Trend the numbers 15, 50, and 85 have been placed on the right side of the Power Graph . This
will help correlate the Trend Line in the Trend Graph to the Power Lines in the Power Graph . This means
when the Power Lines cross the 50 Line in the Power
Graph that most likely the Trend Line will be crossing
the Blue Moving Average in the Trend Graph .
- Power Exit Rule : When both Power Lines in the Power Graph merge together and drop below the 85 Line this is a
strong signal to exit the position. This rule enhances the results from the Basic Exit Rule.
Power Exit Example
Power Exit Rule Results
Obtain Position |
Exit Price |
Gain |
% Gain |
Days Held |
$50.10 |
$65.89 |
+$15.79 |
31.5% |
36 |
The Difference in the Two Exit Rules
| |
Obtain Position |
Exit Price |
$ Gain |
% Gain |
Days Held |
Basic Exit Rule |
$50.10 |
$60.63 |
+$10.53 |
21% |
52 |
Power Exit Rule |
$50.10 |
$65.89 |
+$15.79 |
31.5% |
36 |
Comparison of Rules |
Same |
Exited Earlier |
Gain |
Gain |
Days Held Decreased |
| |
$50.10 |
+$5.26 |
+5.26 |
+10.5% |
-16 |
Reasoning behind the Power Exit Rule
If the Trend Line in the Trend Graph begins to drop off while the Power
Lines in the Power Graph merge together and fall
below the 85 Line this movement is a strong indicator to exit
the position instead of waiting for the Trend Line to cross
the Blue Moving Average. This allows you to exit the position
at the higher price.
When the Power Lines cross the 85 line, North of the Blue is indicating that a strong Trend is likely to occur. As we said before, the 50 line in the Power Graph represents where the Trend Line usually crosses the Blue Moving Average in the Trend Graph. This is to help define the North of the Blue Entry Rule. When the Power
Lines fall through the 85 line they are signaling that the strong Trend may be ending. This can only be seen in the Power Graph as the Power Lines fall through the 85 line.
The Trend Line may continue to fall rapidly lower towards the Blue Moving Average.
Trend Rebound
North of the Blue has a second entry rule called the Trend
Rebound Rule.
The Trend Rebound Rule has a checklist to follow.
- The Black Power Line must be above the Blue Power Line
- The Trend Line must be close to the Blue Moving Average or a support line.
- The volume graph must large volume with little loss in the day or a blue column of volume
Disclaimer:
Please note that North of the Blue is not an investment advisory firm nor does it broker stocks or bonds. It is not a substitute for the advice of your own investment advisor, financial advisor, legal or tax advisor or broker. North of the Blue helps you make your own decisions in your own financial matters. If you seek investment representation, are involved in complex trading strategies or have personal or business issues that cannot be resolved on your own, we recommend that you hire an investment advisor, tax advisor or an attorney. Click here to learn more about our service.
As you know, past performance is no guarantee of future performance. But, would you rather work with a company that has a long history of successful performance or with a company that has a dismal history of past performance or no history of past performance. That decision can only be made by you.
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