Posts Tagged ‘Medium Term Trend’
Japan’s Upswing May End Soon
Japan’s stock market appears to be at a decisive point, one that will determine whether 3-month up-cycle that has remained in place will continue. Notes, technical indicators are giving bearish signals, with Nikkei having fallen below its 52-week moving average and 100-day advance/decline ratio dipping below 95%, pointing to possibility that Japanese shares could remain weak through September. In Today’s trading, the Nikkei Index dipped down to 9378.23, down below its’ previous inter-day 2010 low. This is a critical technical development to watch as going forward with Japanese equity investment.
New Prime Minister Naoto Kan will be judged depending on whether he can rein in finances and promote economic growth, promises unfulfilled by predecessor Yukio Hatoyama. Both Nikkei and Topix both lost over 7.0% during Hatoyama government. Investors see Kan as advocate for weaker yen, often viewed as positive for Japan’s export-oriented market. It would hardly be surprising if Kan envisioned a scenario in which a weaker yen pushed stock prices higher. But analysts say equity market recovery is unlikely unless Kan implements credible policies to lift the broader economy.
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Buying Opportunities for the Eurodollar
Upon observing the European Currency of choice, the Eurodollar, it seems fitting to say that a trend reversal is on its way. The direction has been a long downwards pattern and is now showing signs of shifting to an upwards pattern.
The symmetric triangle it has been in against the Dollar has broken downwards as seen by the monthly chart below. The May candle shows the strong break and other signs such as momentum indicators show the beginning of the end of this monthly triangular resting pattern and the start of a daily downwards trend.
But, the weekly chart at the bottom does indeed show a single candle pattern known as a doji hammer. It indeed looks like a hammer but a straight line instead of an anvil, similar to the small English ‘t’. It comes usually signaling the ending time for a trend, this time a short to medium-term trend. If you add to this the support line that is a strong and historic line and you have the makings of a good, solid buying opportunity.
The US Dollar has broken downwards strongly this month. This is especially true because of the problems that the European Union has had with weak European Countries, especially Greece. Hungary has had its share of problems, but even as a EU Member, it still lacks the Eurodollar and that has been to its own and Europe’s benefit. Maybe the problems with Greece and its effect of pulling down all the economies of Europe are only those of the Currency of Choice. When the Greek Currency is changed back to the Drakma, Europe’s situation might change also in addition to lessening the Greek problems.
This is the way the Monthly Chart looks:
This is the way the Daily Chart looks:
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Understanding the RMO Oscillator
The Rahul Mohindar Oscillator can be used across any time frame and for any financial instrument. It is designed to work with both Bar Charts and Japanese Candlestick Charts. This indicator is a gauge as to market direction and can be a primary trend indicator in many trading systems.
The RMO is displayed as a histogram. As a bullish “buy” sign, we will look for the point at which the histogram shows movement crossing the oscillator’s zero line going upwards. If it should go down and cross the line going down, that would be our “sell” sign, or a “short-sell” sign.
The complete trading system is available through the Equis International MetaStock Charting Software. An example of the complete, 5 step method is shown in the Chart below.
This is the way the Charted RMO Trading Model looks using Apple Computers(AAPL):
published by MetaStock(www.equis.com)
The RMO Oscillator, explained above, is the green graph shown at the top window of the Chart. This indicator is the first gauge as to the market direction. Once the primary trend is determined, the second window should be observed.
The second window of the Chart contains Swing Trade 2 in pink, and Swing Trade 3, which is purple. These two indicators are designed to help us see the medium term and the long term trends. The pink histogram (Swing Trade 2) represents the medium term trend and the purple histogram (Swing Trade 3) represents the long term trend. When the histograms cross each other, it represents a change in the strength of the trend.
Moving forward past the third window for the while, we see the blue and red Bar Chart below it. The red and blue alert arrows and the color of the bars on the Bar Chart represent the crossing points of the Swing Trade 2 and Swing Trade 3 histograms. These signify a change in the strength of the trend. Blue bars are taken as bullish signals, while Red bars are bearish.
To enter a long buy or exit a short sell position, three conditions must be met:
1. The RMO is currently above zero.
2. The most recent alert arrow must be blue.
3. The price bars on the Bar Chart must have become blue at or before the examined time frame.
To enter a short-sell or exit a position, the reverse must be true on all three conditions.
Now to the third window that we skipped before. This is the exit swing indicator and gives added protection when applying stops by having us put in a trailing stop at certain situations. The rules for applying this is that first you must be invested and in a profitable position. If you are in a long position, for example, and this indicator falls below the red horizontal line demarcating the chart, consider putting a trailing stop below the trade. And if this indicator, called the exit swing indicator crosses above the blue line demarcating the chart, consider putting a trailing stop above your short sell position.
This is just one example of the many different and complex trading methods in the Science of Technical Analysis. It has a whole realm on to itself that can never be beat by any other method of Market Analysis for success rate, popularity and enthusiasm which investors using it see. This world must be examined by all who wish to invest and those who put it off or blame it for certain disasters speak from a stance of utter ignorance of the Science, for if they examined even the simplest line studies, they would know the truth.