Many find it difficult to identify and use cycles with any precision or confidence. The use of centered, moving average channels is a relatively simple way to identify cycles. It is a powerful method to isolate ahead of time periods of exceptional probability of price reversal. The opportunities, having been identified, you use other means to pinpoint the timing of entry or exit. If the midpoint of a cycle can be identified then the theoretical end point can be simply calculated.
Prices fluctuate about the average, in effect forming a channel of variance about the average.
Visually a channel of variance can be drawn so that the line of the channel touches most of the extremes of the variance. The amplitude, the price range, of the cycle can be estimated from the range of the channel of variance. We can, therefore, fairly easily illust-rate a centered moving average with an appropriate percentage channel of variance which should contain nearly all the extremes about the average. Cycles of various duration are recognizable. That cycles within cycles exist can be made apparent with a centered moving average technique applied to cycles of different length.