Posts Tagged ‘momentum indicators’
Do you Know a Sure Thing When You See One?
This advanced lesson will teach you the Know Sure Thing. This happens to be an indicator that is a complex, smoothed price velocity momentum indicator. This is a price velocity indicator that shows the rate of change in the prices over a moving average and weighted to give more recent data precedence. If it is used wisely, makes investing choices easier for even the most experienced. It was developed by Martin J. Pring and described in his book Martin Pring on Market Momentum, McGraw Hill 1993. Before you go jumping to conclusions, there IS no sure thing, as Pring points out, “it’s also important to know that this approach is not a sure thing.” But since there are better indicators available to us, we continue to search for the best method.
The KST can be used as a buy signal when the oscillating lines shown below cross each other going upwards. The sell signal is indicated when the lines seem to peak and come into a horizontal position, more or less. This is my approach, it is rather simple but it can give you more than 65% chance of having a profitable investment, more so when used for long term investment.
The KST seems to work, on the Charts I’ve tried it on, and may be useful to those who can get the formula and build the indicator in MetaStock version 11.0.
If you’re interested, this is MetaStock’s code for the KST indicator:
Periods:= Input(“Enter the number of periods”, 1,9999,1);
((1*Mov(((C/Ref(C,-(9*periods)))*100),(6*periods),E)
+2*(Mov(((C/Ref(C,-(12*periods)))*100),(12*periods),E))
+3*(Mov(((C/Ref(C,-(18*periods)))*100),(6*periods),E))
+4*(Mov(((C/Ref(C,-(24*periods)))*100),(6*periods),E)))
/10)-100;Mov(
((1**(Mov(((C/Ref(C,-(9*periods)))*100),(6*periods),E)
+2*(Mov(((C/RefC,-(12*+periods)))*100),(6*periods),E))
+3*(Mov(((C/RefC,-(18*periods)))*100),(6*periods),E))
+4*(Mov(((C/RefC,-(24*periods)))*100),(9*periods),E))
)/10-100,(9*periods),E);Input(“Plot a horizontal line at “,-100,100,0);
To get this indicator working, you must type the above code in the Equis Metastock 11.0 Charting Software at the Indicator Builder Option. Below is an example of It being used on Fannie Mae. Note that both red lines below the Chart have bowed into a horizontal position. This seems a time to sell, but never short-sell on this indicator, as that is not one of its defined uses.
produced by MetaStock (www.equis.com)
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The ProShares Ultra Oil and Gas Fund
This is a doubled up Fund, which means that if oil and gas prices go up 1 dollar, you gain 2 dollars and, understandably the converse is also true. This Commodity ETF is on a good upwards trend. The blue lines that demarcates the price line are Donchian Channels. When a security on its particular chart shows prices close to the upper bound of these channels for some time, as is the case here, this means that they will go down and do indeed at some point tend to go down past the Donchian Channel midpoint, that is the red line between the 2 blue channel lines. That was done in the last few days, and now the equity has broken its’ trend line, looking as if it is about to break into downwards pattern.
The ROC indicator has gone down to show a new downwards trend in the making, and so has the STOCH indicator, showing a clear sell after Wednesday trading. But the Weekly Charts show positive momentum on the ROC indicator and a buy signal has appeared on the STOCH, or Stochastics Indicator. Which is why I think that this is a good ETF to invest in only for a long period of time, taking into account that above the high s/r line in the daily chart, there is a whole lot of blank space with no horizontal lines in the horizon.
This is a long-term investment only. To profit from such investments, one must invest in the chosen equity for at least a year or more. I do beleive that Petrol Fuel prices are going to go up, but not soon. They have been down for the whole period of this last recession and, with the recovery in progress, and I still believe we are in a recovery with NO double-dip in sight and this is by all means an economically secure and fundamentally sound investment. It may stand still for a period, of even go down somewhat on the Daily Level, but on the Weekly and Monthly Charts, I see a lot of room for the thesis of a decent upwards trend developing.
For acting on this and positioning in this ETF, using the Monthly Chart is recommended in addition to the Weekly Chart. Though actions should be performed on a weekly basis with the Weekly Chart in mind.
This is the way the Daily Chart looks:
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:
