Monday, August 17, 2009

Technical analysis - A buy signal

When support is broken it becomes the new resistance.
When resistance is broken it becomes the new support.

Area around the moving average considered support or resistance.

Moving average is good when the stock is in the trend

Red and green arrows around the moving average signal that the price move below or above the 30 days moving average. They are permanent only if the price was the closing price.

MACD -Moving Average Convergence Divergence - its center called the signal or the zero line.
It is the short term indicator. If you see arrows then pay attention to the rest
Red and green mark the point that the MACD crosses the zero line.

STO -Stochastic indicator. It uses the 25% (oversold) and the 75% (overbought). Don't
react just because the stock is in that area. Wait for the arrows and confirm with
other indicators.
Phantom Arrows- When the 25% or the 75% lines are not crossed but the indicator
change its direction - we can view it as having an arrows whose color is determined by
the direction of the STO. But, still, the closer the turn to the 25% or the 75% it is more
significant.

Volume - spikes in volume may mark the beginning of a significant trend. Spike is at least 50%
more than the usual.

Buy sugnal- uptrend stock with three green arrows.
Sideway stock with three green arrows and a volum surge.
Get into the trade as close as possible to the closing price of the day with the most
recent green arrow (the three arrows don't necessary have to be in the excat same
day).
Don't forget the stochastic phantom arrow:)

So to buy a stock:

check phas 2- F/E >=3.25, Price Patter >=2.5
Good price pattern -
Strong industry group - In the top 20%. It has to be stable and rising for the last 2 month. If
moves sideways it is still ok if other requirements are met.
Also, if all the market is rising it is possible that your group is not
80% or above. You can skip this signal in small industry group
of < =10 stocks.
Institutional money coming into the stock - volume at least 50% higher than normal
or accumulation/distribution >=60 (you can see it in phase1)
Also, make sure that when the volume is high the stock is going up and not
down :)

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