A Regression-Based Oscillator by Patrick E. Lafferty
Editor's note: Mr. Lafferty originally submitted this article as an entry to the June Traders' Challenge
contest. We decided to run it as a separate article because the idea that Mr. Lafferty presented in his
entry intrigued me and we thought that STOCKS & COMMODITIES readers would similarly be interested in
Although my primary interest in trading is in stock index options, after reading the June STOCKS &
COMMODITIES interview with John Murphy, I realized that my stock index analyses could benefit from
better understanding the behavior of other markets, including gold futures. The June Traders' Challenge
looked like a good opportunity to become more familiar with the gold futures market. So I decided to
give it a shot.
My analysis consists of three parts: an assessment of long-term support and resistance levels, based on
gold futures data from the past four years; an analysis of recent data in terms of support and resistance
levels, trends and cyclic characteristics; and a mathematical determination of the underlying trend for the
last three months, formulation of a trading model and identification of near-term trading opportunities.