102 Aberration or Keltner Channels

Similar to the Bollinger Bands. In this indicator a buffer of variability (Average True Range: ATR) is added on both sides of a moving average. When price returns to the buffer, probably indicate times in which price is trending back to the average. It could be used to profit from small price corrections.

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Figure 12.1: Aberration

During a Bullish Trend, a breakthrough above the upper envelope can be seen as a sign of strength and the uptrend is likely to continue.

Figure 12.2: Keltner Channel

When a market is choppy or trading sideways, Keltner Channels can be useful for identifying overbought and oversold conditions. These conditions can typically lead to price corrections where price moves back towards the moving average (Middle Line).

Figure 12.3: Keltner Channel

Aberration can be recalculated by measuring the distance between price (e.g., HLC3) and the moving average, and quantifying that price difference in ATR times. Basically, how many ATRs is the current price from the average price.

Figure 12.4: Aberration as solo indicator