MailBag October 30, 2009 at 03:54 PM
A cumulative indicator can be constructed for any price series that oscillates above/below zero. Cumulative adds when positive and subtracts when negative. Therefore, this setting will not work for a price series that is always positive. Net Advances, Net Advancing Volume and Net New Highs fluctuate above/below zero. Net Advances equals advancing stocks less declining stocks (advance-decline issues). Net Advancing Volume equals volume of advancing stocks less volume of declining stocks (advance-decline volume). Net New Highs equals new 52-week highs less new 52-week lows (new highs-new Read More
MailBag October 23, 2009 at 12:45 PM
Knowing what an indicator measures is the first step to really understanding it. Sure, the formulas can get technical, but it is important to understand an indicator before using its for trading. Today we are going to dive into the Stochastic Oscillator, a popular momentum oscillator developed by George Lane. The Stochastic Oscillator is composed of two parts: %K and %D. %K measures the current price level versus the high-low range over a given look-back period, typically 14 days. %D is a 3-day SMA of %K and acts as a signal line. This discussion will focus on %K, which is referred to as Read More
MailBag October 16, 2009 at 02:50 PM
A bearish signal reversed is a Point & Figure signal that reverses a downtrend. A downtrend is present because of lower lows and lower highs. Each column of O’s declines below the prior column to forge a lower low. Each column of X’s falls short of the prior column to forge a lower high. The combination of lower lows and lower highs creates the downtrend or the bearish signal. This signal is reversed when a column of X’s finally exceeds the prior column to forge a higher high. The chart for Southwest Airlines (LUV) shows lower lows from October (red A) until March (red 3). A move Read More
MailBag October 12, 2009 at 02:28 PM
Q: Force Index is not calculated during the day, but only shows value from previous day. This is an important correction to make for us who uses this indicator. - Hans A: Because the Force Index uses volume data in its calculation, we do not compute a value for the current period until that period is complete and all the volume for that period has been totaled. This prevents our charts from giving misleading Force Index signals.For example, consider a hypothetical stock that normally trade 1 million shares per day. Recall that the force index is defined as "the Read More
MailBag October 09, 2009 at 01:32 PM
Yes, Sharpcharts users can apply moving averages, and other indicators, to indicators. Start with a Sharpchart and select an indicator from the drop down box under the chart. Once you have selected an indicator, more choices will appear on the right. Here you can select your overlay, which is an indicator of the indicator. Once the overlay has been selected, you can then set the parameters accordingly. In the example below, I chose OBV with a 50-day moving average. On the QQQQ chart below, you can see that OBV has been above its 50-day SMA since the second week of July Read More
MailBag October 02, 2009 at 02:45 PM
There are two types of divergences: negative divergences and positive divergences. A negative divergence occurs when the underlying security moves to a new high, but the indicator fails to record a new high and forms a lower high. For momentum indicators, a negative divergence shows slowing upside momentum that can sometimes foreshadow a bearish reversal. Not all negative divergences result in good signals, especially during a strong uptrend. On the Staples (SPLS) chart, the stock formed a higher high in September, but MACD did not exceed its prior high. A negative divergence formed and Read More
