Posts Tagged ‘Indicators’
America’s Retail Markets: Part V
I have decided to add another installment in this series before the final overview chapter is written. And indeed, it can not be written until we examine the United States’ leading retail foods giant, Wal-Mart.
Wal-Mart is now in the midst of a daily downwards fan pattern as shown on the Daily Chart below. This pattern can be somewhat unstable at the end, and it indeed seems to be nearing its’ end. It can break upwards and is likely to given the fresh upwards trends taken by the retail companies mentioned in my 2 previous articles. These are fresh trends and recently the 1st two articles’ stocks has started an upwards trend as well. Wal-Mart’s price level has been at or below the lower bounds of the Bollinger Bands, showing a tendency of over-selling, since the fan has started. The RSI is also right by the 30 level which is, basically, sold-out. The buyers may come, and probably soon, technically speaking. But economically this will rely on the major companies’ sales, revenue and profit margins as quoted in their next fiscal reports.
There seems to be good times ahead for the Retail Markets, as shown by the Bollinger Bands showing their crossing of the price levels, and the indicators that show oversold prices on the way in the Weekly Chart below. As I said, the RSI is sold-out and ready to accept buyers, or rather “bargain hunters”. And the Average True Range, or ATR is low indicating little intra-day changes in prices and signaling a breakout soon. Do not act in any way on this “tip” because there is no breakout yet. Watch your charts daily and, when you see a true pattern break, then it is more wise to act on.
This is the way the Weekly Chart looks:
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The US Natural Gas Fund
The United States Natural Gas Fund (symbol UNG) is now in the process of testing the $7.7 price line that is acting as a resistance. The momentum indicator (MOM) is giving a positive value and that is a good sign; and the RSI is going into buying territory as well. There is a rectangular pattern, as seen in the Closing Line Chart below, that is emerging and is smaller at the right end of the scale and may break upwards, which is the likely way as market indicators show a chance for it to break upwards. The fact that the pattern is diminishing and is not on an upwards ascent and, in contrast the RSI and MOM indicators are showing an upwards trend starting means that there is here what we call a divergence between the indicators and the price line. This shows decision in favor of the upwards trend. This may come soon or later on, but this equity most probably will continue in this pattern for a while.
The indicators show us the way to a good opportunity, though not for certain. There is a high demand for Natural Gas in the US and prices are, fundamentally speaking, supposed to be going up. They may be, if this analysis proves correct and the pattern breaks in the right direction.
Below you see the Japanese Candlestick Chart showing the support/resistance line and the divergence in blue, the indicators going up and the prices down., and the Closing Line Chart showing the rectangular pattern. I picked the Line Chart because is many times makes clear ambiguous signals from the Candlestick Charts as to the placement of Line Studies.
This is the way the divergence looks on the Candle Chart:
This is the way the pattern looks on the Line Charts:
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City Telecom, One of Hong-Kong’s Finest
This Chinese high-tech firm has led a strong upwards trend from November of last year. It broke its’ all time high at the beginning of the year and, contrary to the expected behavior of an equity reached its peak and passed it easily, mightily and with effortlessness. That peak was reached exactly at the same price, at completely different periods of time and was halted directly on that same day, showing its’ strength as a possible resistance. The MACD histogram shows a divergance in the prices and RSI shows a downturn and a long-term negative divergence, both indicating that Telecom has had enough. In my previous report on City Telecom, I wrote that it was headed to fall, probably soon. Time values are very hard to measure in Technical Analysis and soon can also come late. In this case now, after the Monthly red candle it had, the first in more than a year, It may truly pay off to ask “How short is Telecom?” and consider this analysis more seriously because of the vast technical information that is present to support a true answer to that question. Here are the Charts, the black showing RSI, MACD and the trend clearly. And the white showing the SMA’s of 13, 21 and 34 days lined up and, to my opinion, too far away one from the other; and that shows trouble possibly ahead. Also on the white chart are the brown trend channels not broken yet and the black trend inner channel and the current market price resting on it and the long term SMA indicating that this should be a long-term decision to short-sell because it will most probably continue up inthe next week or so, maybe more; though its’ fall is, technically speaking, most certain.
This is the way this Chart looks:
This is the way this Chart looks:
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OBV and a trading strategy
OBV seems to be one of the better volume-based indicators,it is used to show how volumes behave in relation to price changes.. When tested against the classic “buy and hold” strategy, it left it behind in the dust. Testing over a 72 year period on the Dow Jones Industrial Average showed that the specific strategy I will explain, assuming a long long long-term commitment, will derive over 1 million percent better results than “buy and hold”. This may not be as profitable in stretches of a year or less, but I do see that there is a place for it in shorter time-frames of, lets say, a few months or so (weekly and daily charts).
Simply overlay the OBV (available on most system) on the 3-day EMA of the next day’s closing. When the OBV crosses this EMA line from below to above it, buy or cover short. If the OBV crosses the next day’s closing 3-day EMA going down to below it, then sell or sell short(enter). Below is an example of the method working in a relatively short-term period.
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.