Hubert Senters here.
Got a question from Elliott. My question is concerning the ADX. If the lagging line is below the cloud and the price has closed below the cloud for at least 3 days, wouldn’t it make sense that the ADX be below 20? example BA. Elliott.
Not necessarily because they’re going two different things. The ADX is a trend identification tool so it could be going. The price could be going lower. The ADX would be rising going above $20.
Let me walk you through and you say your example is Boeing. Let’s take a look at Boeing really quick. I’ve got some lines on here.
The first thing is yes you are below the cloud here by one, two. Look out that when it’s three although it’s slightly in there. So this is the cloud so below the cloud. And the ADX reading is $13.
It’s actually believe it or not. It’s trying to hook and go up. All of the ADX is doing and telling you if you are in a trend mode. It’s not going to give you the direction.
The cloud will give you the direction. And then the ADX will tell you if it’s trending. So when you look at this and this is a good example. You can see here the ADX and see how Boeing went during the covid situation.
How it went the price action broke down below the cloud. And the ADX went higher that was telling you that was trending. And then you can say oh, look here it went up.
The ADX was still about $20 and trending. It’s never going to tell you the direction. It’s just going to tell you like hey, I’m in trend mode. I can go either up or down strong one way or the other.
But now we are talking about this. What you’re asking is you’re below the cloud one to three days. Shouldn’t this below the? It doesn’t have to be if this thing is trending it would be.
Just remember when the ADX is below $20 like it is right now it’s telling you that hey, probably not trading this thing, it’s sideways and you’re probably grind your account to dust. The ADX just means it’s a non-trending mode when it’s below $20. Hopefully that helps you out Elliott.
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Good luck. Hope it helps. See you on the next video.
Hubert.
