Hathaway Average Price
Overview
The Hathaway Average Price tool is a proprietary indicator available with the Hathaway Tools add-on from Pattern to Profit. The tool takes the average closing prices from a designated starting point, which accumulates over time, as opposed to a simple moving average which averages the closing prices over a designated fixed period of time.
This allows us to compare any period with the average of an entire preceding trend, usually starting from an important low or high. This compares the period in question (usually the current market, or a recent possible major low or high) with the prevailing trend or correction.
Select the Hathaway Average Price tool and click on the bar from which the average is to be calculated. In the above example it is plotted starting from the close of the low (L1). The value of the cumulative average during the period labeled L2 offered the average of all closing prices that occurred previously starting with the close of the uptrend low (L1).
The average is offset +1 period (‘TD’, or trading day), which allowed for the market at L2 to have this fixed value of potential support directly underneath.
This next chart adds a cumulative average tool to the high at H1 (red):
Although support holding on the blue cumulative average offers an ideal aggressive long entry, a successful breakout above the red cumulative average from the high (and subsequent support) offers confirmation of the resuming uptrend, and a more conservative long entry.
For more information see Pattern to Profit.