Below is a summary of the MACD technique to watch for confirmation in trends and possibly reversal in certain circumstances. The following is an excerpt from Andrew Page's article from Trading Tutors.
1. The MACD line signals upward momentum when in positive territory, and downward momentum when negative. Use this to validate an observed trend in price.
2. The MACD line can signal overbought and oversold positions. The further the line deviates away from zero, the more likely it is we will see a correction in price. Try drawing support and resistance lines for you MACD line to work out what levels typically represent overbought / oversold positions.
3. Buy signals are generated when the MACD line crosses above the signal line. Buy signals are reinforced when the MACD line is in positive territory.
4. Sell signals are generated when the MACD line crosses below the signal line. Sell signals are reinforced when the MACD line is negative.
5. Divergence between the price and MACD histogram signal weakness in the trend (loss of momentum). When you start to see the two diverge, look to the other MACD signals to confirm the end of a trend.
Showing posts with label downtrend. Show all posts
Showing posts with label downtrend. Show all posts
Saturday, October 17, 2009
Monday, August 17, 2009
Technical Analysis (Gann Charts) - Dow and All Ords Stumble
Source: http://ozstock.blogspot.com
Here is the next monthly update on the Dow and All Ords using Gann angles to analyse future trend. Before looking into the charts, a quick check of the Seasonal Time Periods from Gann shows that we are nowhere close to any important dates. We are now between the August 5th and the September 22 dates (see future blog for complete Seasonal Time Periods)
Firstly, looking at the All Ords, the last 4 weeks has clearly broken the Gann +1/2 angle, question is if it will drop down. The past 4 weeks have also convincing broken the Gann -32 downtrend line and has pushed the 20 day moving average envelope to the limits. So this has been a strong trend that may retrace back to the Gann +1/2 but currently there is no evidence to suggest a stronger, longer pullback although the news seem to suddenly turn negative in the media.
Secondly, the Dow show a similar behaviour, in the past 4 weeks, it convincingly broke the Gann -10 downtrend angle. It may still plunge towards the intersection of the Gann -10 and Gann +10 angles but there is no current evidence to support this. It is also between the two major uptrend Gann angle of Gann +10, Gann +20. Should the upward trend continue, the Gann -5 downtrend angle may be a good reference to look for.
This week will see many Australian companies release their annual results. This will truly test the sentiment and so even though the trend is strongly upward over the last 4 weeks, the fundamentals may have a say this week.
Here is the next monthly update on the Dow and All Ords using Gann angles to analyse future trend. Before looking into the charts, a quick check of the Seasonal Time Periods from Gann shows that we are nowhere close to any important dates. We are now between the August 5th and the September 22 dates (see future blog for complete Seasonal Time Periods)
Firstly, looking at the All Ords, the last 4 weeks has clearly broken the Gann +1/2 angle, question is if it will drop down. The past 4 weeks have also convincing broken the Gann -32 downtrend line and has pushed the 20 day moving average envelope to the limits. So this has been a strong trend that may retrace back to the Gann +1/2 but currently there is no evidence to suggest a stronger, longer pullback although the news seem to suddenly turn negative in the media.
Secondly, the Dow show a similar behaviour, in the past 4 weeks, it convincingly broke the Gann -10 downtrend angle. It may still plunge towards the intersection of the Gann -10 and Gann +10 angles but there is no current evidence to support this. It is also between the two major uptrend Gann angle of Gann +10, Gann +20. Should the upward trend continue, the Gann -5 downtrend angle may be a good reference to look for.
This week will see many Australian companies release their annual results. This will truly test the sentiment and so even though the trend is strongly upward over the last 4 weeks, the fundamentals may have a say this week.
Wednesday, July 22, 2009
Technical Analysis (Gann Charts) - Dow and All Ords refuses to fall
Source: http://ozstock.blogspot.com
About a month ago, my article (in June) was titled "All Ords headed for June fall?" As you may have guessed, I am bearish, and in the market following my own advice last month. The market actually dropped for a few weeks as forecasted by previous blog, but my mistake was not using a stop loss. Over the last week the market surged strongly. Let's have a look at what the Gann angles say.
Looking at the All Ords graph first, I've added a new (Green line) angle of ratio 32:1 downwards from the 2007 all time high. The angle gradient of 32 is a power of 2, and I've tried others like 16:1, 8:1 and they were quite far off so I settled on 32:1. But see how it turn out to be a resistance angle to the previous rallies since Oct 2007?
Looking closely, it turns out the June fall hugged the 32:1 angle closely and the recent surge broke the resistance emphatically. In absolute terms, the rise is quite small, but the fact that it broke the line warrants further watch, or even good reason to speculate of further rise.
It's only now after the new green line (32:1) has been added to the All Ords, that I realize the Dow Jones chart's pink line marks out a very similar trend. In the Dow Jones chart, the June fall and mid-July rise follow the same pattern along the Gann -10 line as the All Ords. The resistance is not only broken but appears prominently on the up side.
In summary, if the current rise in the market can be sustain for at least two weeks, there is a good case for a strong rally in this bear market.
About a month ago, my article (in June) was titled "All Ords headed for June fall?" As you may have guessed, I am bearish, and in the market following my own advice last month. The market actually dropped for a few weeks as forecasted by previous blog, but my mistake was not using a stop loss. Over the last week the market surged strongly. Let's have a look at what the Gann angles say.
Looking at the All Ords graph first, I've added a new (Green line) angle of ratio 32:1 downwards from the 2007 all time high. The angle gradient of 32 is a power of 2, and I've tried others like 16:1, 8:1 and they were quite far off so I settled on 32:1. But see how it turn out to be a resistance angle to the previous rallies since Oct 2007?
Looking closely, it turns out the June fall hugged the 32:1 angle closely and the recent surge broke the resistance emphatically. In absolute terms, the rise is quite small, but the fact that it broke the line warrants further watch, or even good reason to speculate of further rise.
It's only now after the new green line (32:1) has been added to the All Ords, that I realize the Dow Jones chart's pink line marks out a very similar trend. In the Dow Jones chart, the June fall and mid-July rise follow the same pattern along the Gann -10 line as the All Ords. The resistance is not only broken but appears prominently on the up side.
In summary, if the current rise in the market can be sustain for at least two weeks, there is a good case for a strong rally in this bear market.
Sunday, June 22, 2008
TLS - A case example in Stochastic Oscillator and Momentum(ROC)
Previously we looked at TLS when the Rate of Change (ROC) is crossing into negative territory indicating the possible start of a downtrend.
http://ozstock.blogspot.com/2008/05/tls-rate-of-change.html
Today we look at a new analysis where TLS has indeed fallen. The new graph below shows the price has drop since around the last analysis on 28 May. The new graph has a Momentum (this is actually the Rate of Change indicator) with a longer period of 12 days and only crosses the negative region after 3 June and has trended down since. So the shorter ROC predicted this trend earlier but the longer ROC gives confirmation later.
Another interesting indicator is the Stochastic ocsillator (SO) which has confirmed the trend. In general when the SO oscillator is above 75% it indicates an overbought position. It signals a time to sell when it crosses the 75% line downwards. Conversely, if it is below 25%, it is oversold. When it crosses above the 25% line in the upwards direction, then it is a signal to buy.
In the case of TLS, it crossed the 75% line and moved downwards, thus indicating time to start selling - which confirms the ROC analysis. Recently, the SO has fallen below 25% and headed upwards again. However, it quickly went down the 25% line again. Using the ROC/Momentum indicator, it gave a strong signal that the 25% break-out was not a strong trend since the ROC is still well in negative territory.
At the latest point, the momentum is still quite negative. This indicates it is not time to start buying TLS yet. For those in short already, this may be a good time to start offloading. When ROC starts approaching the 0% line from the bottom and ROC starts crossing teh 25%, then it will be time to buy again.
Technical Note:
ROC = (Current Price - Price N days ago)
...... ----------------------------- x 100%
Price N days ago
In some literature, Momentum is similar to above but without the division and percentage.
http://ozstock.blogspot.com/2008/05/tls-rate-of-change.html
Today we look at a new analysis where TLS has indeed fallen. The new graph below shows the price has drop since around the last analysis on 28 May. The new graph has a Momentum (this is actually the Rate of Change indicator) with a longer period of 12 days and only crosses the negative region after 3 June and has trended down since. So the shorter ROC predicted this trend earlier but the longer ROC gives confirmation later.
Another interesting indicator is the Stochastic ocsillator (SO) which has confirmed the trend. In general when the SO oscillator is above 75% it indicates an overbought position. It signals a time to sell when it crosses the 75% line downwards. Conversely, if it is below 25%, it is oversold. When it crosses above the 25% line in the upwards direction, then it is a signal to buy.
In the case of TLS, it crossed the 75% line and moved downwards, thus indicating time to start selling - which confirms the ROC analysis. Recently, the SO has fallen below 25% and headed upwards again. However, it quickly went down the 25% line again. Using the ROC/Momentum indicator, it gave a strong signal that the 25% break-out was not a strong trend since the ROC is still well in negative territory.
At the latest point, the momentum is still quite negative. This indicates it is not time to start buying TLS yet. For those in short already, this may be a good time to start offloading. When ROC starts approaching the 0% line from the bottom and ROC starts crossing teh 25%, then it will be time to buy again.
Technical Note:
ROC = (Current Price - Price N days ago)
...... ----------------------------- x 100%
Price N days ago
In some literature, Momentum is similar to above but without the division and percentage.
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