The confirming pattern

Most traders prefer the long side of the market and look for an uptrending market. The confirming pattern identifies exactly that condition. When the Adx and Macd move up in unison, they confirm rising price direction; the Bristol-Myers Squibb Co. (Bmy) chart in Figure 2 offers a good example of a confirming pattern. The Adx and Macd rose as price moved up strongly in September to December 2000.

When price changed direction in January 2001, both the Adx and Macd followed suit. The falling Adx was not indicating that a downtrend had begun; merely that it no longer could find a trend. In this example, the Macd showed that price was retracing its prior upward march. But sometimes when both indicators fall, price forms a sideways trading range, rather than the more pronounced downward move seen in this chart.

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