Reading the Cat Signals
Monitoring and interpreting the signals for a top or bottom with the help of the Catman system is basically the same no matter the time frame of your chart. Your reactions to these signals will be different dependent on the type of trade and your direction towards or away from the trade. The signals remain the same for every chart whether it’s a 15 tick or a 15 minute chart.

A. Setting up your chart.

Your chart should be organized to have all of the 5 indicators that we have talked about before. This a color code for each indicator.

MA, P = 5 – Green

MA, P = 15 – Red

%K, P = 14 – Yellow

%D, P = 14 – Blue

OBV – Brown or Orange

B. Make up of a bounce

Indicators of a bottoming

%K falls to 0

5 MA starts to move upwards towards the 15 MA setting it on a path to collision such that id the 5 MA continued, they will end up crossing paths and the 5MA will go beyond the 15MA. The more perpendicular, the better.

%D goes to a point below 20 and starts to move upwards

%K shoots up crossing the %D

OBV faces upwards

Enter trade and set stop

Confirmation of up trending

The “MA test”. The 5MA steadily goes up, hitting the 15MA mark indicating an uptrend

The %D keeps climbing

The %K stays above the %D

OBV stays facing upward

C. Anatomy of a Top

Indications of a topping

%K shoots to 100

5 MA starts to go downwards facing the 15 MA thus setting them on a Collison course where they will end up crossing each other and the 5 MA will go below the 15 MA. The more perpendicular the better

%D goes above 80 and starts to move downwards

%K falls, going below the %D

OBV faces downwards

Enter trade and set stop

Confirmation of a downtrend

The 5MA keeps going down, going below the 15 MA indicating a downtrend

The %D keeps falling

The %K stays below the %D

OBV stays facing downward

Using the Cat signals

The Cat signals are simple and clear to see. The basic principle looks like a traffic light in operation. At every traffic light, you get a warning sign in the form of a yellow light before the signal changes. The second signal is a stop signal. In Germany the yellow light goes both ways. When you are stopping, it first gives the yellow signal and then the red. When it changes again, it first hits yellow before green.
When driving on the road, you will decide what to do when the light hits yellow. You can choose to stop early or speed up to make it n time before you get the red signal. But when you decide to move on the yellow, you are taking a risk. You get to your destination faster if you move forward with the yellow signal but you take on more risk.