The Envelope consists of moving averages calculated from the underling price, shifted up and down by a fixed percentage. When prices rise above the upper band or fall below the lower band, a change in direction may occur when the price penetrates the band after a small reversal from the opposite direction.
Only previous data is used to compute a Moving Average, thus it will always lag behind the actual prices. As a result, Moving Averages will not predict a change in trend, but rather follow behind the current trend. You can use them for trend identification and trend following purposes and not for prediction.
Calculation:
MA = Moving Average
Shift = Percentage of the shift
Inputs:
Data Array = Close
Indicates Open, High, Low or Closing price.
Period = 14
Indicates time period(the number of days for daily analysis, the number of weeks for weekly analysis, etc.).
Moving Average Type = Simple
Indicates Moving Average type.
Vertical Shift % = 0
Used to shift upper and lower bands upwards or downwards.
Horizontal Shift = 0 (Valid only in MyChart.)
Used to shift the values backward or forward on the time scale.
Indicator Type: Support and Resistance