Here's a trade setup I'm exploring that looks similar to the GE/NYAD setup but, in this case we're looking at the dollar as reflected by the UUP, the Proshares double dollar bullish ETF. The big difference between GE and UUP is, of course, that the dollar typically trends opposite the major market indices, so a chart of the UUP looks a lot more like the VIX than it does the SPY.
In the above chart, the UUP is shown (colored candles) with the NYAD in the shadow candles.
The trading box in orange describes the divergence and reversion setup.
The lower chart annex is the true NYAD overlaid with the 8/16 MAs and a 5,20,3 MACD signal line and a classic 12,26,9 MACD histogram in the lower study panel.
Notice how the zero line crosses on the MACD histogram have provided solid confirmation of either the 8/16 MA crosses or the parabolic SAR signals.
The technique of using the MACD signal line in conjunction with the MACD histogram is something I've been fiddling with lately and in the process developed this pairing which produces fairly consistent results when used in conjunction with the NYAD. Whether this pairing can deliver similar results with other indicators and/or equities will be a subject for future post explorations.
As with the GE/NYAD trades, the UUP/NYAD trades involve a lot of waiting around. On trending days no trades typically develop, while on volatile range days, 2-4 setup opportunities may present. This type of trade can test the resolve of the more hyper traders, but, as usual you have to let the trades come to you and avoid the perils of seeing a setup (and trading) when no setup and no trading edge exists.