Archive for the ‘Advanced’ Category
Outside Key Reversal: OKR, for Candlestick afficionados
The second to last red Japanese Candlestick you see below, a red candle that with its length from top to bottom and from high to low (daily) that seems to swallow up the previous green candle wholly is called an OKR, or outside key reversal. It is, as the name implies, a revesal point for a trend, some times minor, some times major. in the example I chose below, for Juniper Networks it may signal the start of a painful downtrend, if not only for the severly morbid looks of the OKR and its’ classical pattern. That is what an OKR usually does usually, it signals a pattern change, or trend shift. Whether it is to the detriment of the equity, as seen here, or if a green candlestick swallows a small red one, to its’ assistance. See my example for Juniper.
This is the way the Chart looks:
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Swing it with POWER!
The powerswings indicator, as shown below by the zig-zagging alternating red and green lines, was developed by http://www.powerswings.com and is the variant of the known ZIG-ZAG indicator. Though the Zig Zag can theoretically be suited to any size of swing you wish to generate, I find the POWERSWINGS indicator as implemented be eSigmal (http://www.esignal.com ) set up excellently for my uses both as an investor and for analysis on this site.
This indicator shows clearly, in red (down) and blue (up) the down and up cycles inside a trend or pattern. It can make sense of the somewhat mayhem that floods the eye at first glance on a Chart. In eSignal, some paramatrics can be changed, including the color of the lines ( notice I made my upcycle green) and their thickness. Check out the sample Graph and see!
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This is the way the Chart looks:
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Picking up “STIX”
A market breadth-momentum oascillator not well known, though sometimes very useful in determening an entry or exit point in the course of the market when dealing with indices or index-based equities. STIX goes basically like this: pick a point in the past (at least 21 days ago) that there was more or less a balanced situation i.e. sideways pattern and the like and set it at 50. In the next day’s value take advancing issues (in NYSE the symbol is $ADV and is an indexed value) and divide by (advancing + declining) issues ($DECL) together, give it a 9% weight (multiply by 0.09). Take the result and add to it 91% of the previous value; i.e. RESULT multiplied by 0.91. That is STIX. The reason for the 9% and 91% weight given is to give the oscillator a 21 day exponential smooting as is seen in many indicators.
This indicator is not so hard to implement. The author does not have the software that provides this, but you can find it in http://www.equis.com and by surfing the net for companies that can give you more than the avarage 15-20 indicators at a decent price, and those are not lacking. I myself got stuck with a contract (7 months to go) and am doing the best with what I have.
The idea here is to wait until the oscillator balances out (if you didn’t start it out at a balanced time–sideways,triangle and the like), which can take a few weeks, and then, as studies have shown, you should be able to turn a profit if you follow these simple rules:
1. Enter (Buy)———–when the STIX crosses the 49 level on its’ way up.
2. Close (Sell)———–when the STIX crosses the 49 level on its’ way down.
3. Enter (Sell Short)—–when the STIX crosses the 49 level on its’ way down.
4. Close (Cover Short)–when the STIX crosses the 49 level on its’ way up.
Such a method was proven to be very profitable in trading specifically with market indices like the NYSE, DJIA, or NASDAQ, but you may use it on most of the major market indices where the advancing and declining issues variables are available. It is not wize to play around with it on equities and substituting other paramaters to its’ formula that MAY fit the bill. If you pick an equity, or ETF that tracks the index, and go by index values, make sure the ETF really tracks the index well and do your homework there, for that is critical in this situation.
In addition, a positive divergence (where STIX goes up while the daily low prices fall), may indicate a bullish spirit is in the offing. On the other hand, if there is a negative divergence (where STIX goes down while the daily high prices rise), this may be the time to opt out or sell short.