Oversold

Market School: Technical Indicators 12 – Triple Exponential Average (TRIX)

Mar 11

Triple Exponential Average (TRIX) is a momentum indicator that displays the percent rate-of-change of a triple exponentially smoothed moving average of a security’s closing price. The triple exponential average (TRIX) indicator is an oscillator used to identify oversold and overbought markets, and it can also be used as a momentum indicator. Like many oscillators, TRIX oscillates around a zero line. When it is used as an oscillator, a positive value indicates an overbought market while a negative value indicates an oversold market. When TRIX is used as a momentum indicator, a positive value suggests momentum is increasing while a negative value suggests momentum is decreasing. Many analysts believe that when the TRIX crosses above the zero line it gives a buy signal, and when it closes below the zero line, it gives a sell signal. Also, divergences between price and TRIX can indicate significant turning points in the market.

USES

Since TRIX measures the rate-of-change of closing prices, a positive TRIX value is interpreted as a steady rise in the closing price of a security. A positive TRIX is thus akin to a positive trending price, allowing the indicator to act as a buy signal whenever it crosses up above the zero line. Similarly, crossing below the zero line suggests the price is tending to close down at the end of each period, which can be a sell signal.

The “signal line” is also a useful buy/sell indicator. Since the signal line period is shorter, a cross above it suggests that recent stock prices are closing much higher. A buy signal is triggered when TRIX crosses above its signal line, and a sell signal is triggered when TRIX crosses below its signal line. This method can generate false signals during sideways price movements, so it works best when prices are trending. It is therefore wise to use TRIX in tandem with other indicators for confirmation.

[Chart via Stock Signals]

Track and use Triple Exponential Average (TRIX) in your daily analysis in real-time with our iPhone & iPad apps.

Market School: Technical Indicators 7 – Stochastic Oscillator

Feb 15

The Stochastic Oscillator is a momentum indicator designed to show the relation of the current close price relative to the high/low range over a given number of periods using a scale of 0-100. It is based on the assumption that in a rising market the price(s) will close near the high of the range and in a declining market the price(s) will close near the low of the range.

The Stochastic Oscillators are typically plotted as 2 lines: %K and %D. %K is the main (fast) line and %D is the signal (slow) line.

There are three types of Stochastic Oscillators: Fast, Slow, and Full. Slow Stochastic is smoother with less false signals.

USES

There are three basic techniques for using the various Stochastic Oscillators to generate trading signals.

Crossovers: 1) %K line / %D line Crossover: A buy signal occurs When the %K line crosses above the %D line and a sell signal occurs when the %K line crosses below the %D line. 2) %K line / 50-level Crossover: When the %K line crosses above 50 a buy signal is given. Alternatively, when the %K line crosses below 50 a sell signal is given.

Divergence: Looking for divergences between the Stochastic Oscillator and price can prove to be very effective in identifying potential reversal points in price movement. Trade long on Classic Bullish Divergence: Lower lows in price and higher lows in the Stochastic Oscillator; Trade short on Classic Bearish Divergence: Higher highs in price and lower highs in the Stochastic Oscillator.

Overbought/Oversold Conditions: The Stochastic Oscillator can be used to identify potential overbought and oversold conditions in price movements. An Overbought condition is generally described as the Stochastic Oscillator being greater than or equal to the 80% level while an oversold condition is generally described as the Stochastic Oscillator being less than or equal to the 20% level. Trades can be generated when the Stochastic Oscillator crosses these levels. A buy signal occurs when the Stochastic Oscillator declines below 20% and then rises above that level. A sell signal occurs when the Stochastic Oscillator rises above 80% and then declines below that level.

Track and use Stochastic Oscillators in your daily analysis in real-time with our iPhone & iPad apps.

Market School: Technical Indicators 6 – Rate of Change (ROC)

Feb 14

The Rate of Change (ROC) indicator is one of the simplest equations available in modern technical analysis. ROC is a measure of price change velocity calculated as the difference between the current bar’s price and the price a selected number of bars ago. Basically, it represents the rate of change of the trading instrument’s price over those specified time periods. The faster prices rise, the larger the increase in momentum. The faster prices decline, the larger the decrease in momentum. As the price movement begins to slow the momentum will also slow and return to a more median level.

USES

The Momentum indicator is a versatile indicator capable of producing a wide array of buy and sell signals. However, there are three basic methods of interpreting the ROC indicator:

Zero-Level Crossovers: A buy signal occurs when ROC crosses above zero and sell signal when ROC crosses below zero.

Extreme Overbought/Oversold Levels: To use ROC as an overbought/oversold indicator, the user must identify potential overbought and oversold levels based on previous indicator readings; when choosing the overbought and oversold levels the user should ensure that at least two-thirds of previous ROC values fall between the overbought and oversold levels. Readings above the overbought level imply an overbought condition (and a pending price correction) while readings below the oversold level imply an oversold condition (and a pending rally).

Trend Line Breakouts: Trend lines can be drawn connecting the peaks and troughs of the ROC indicator. Often momentum begins to turn before price thereby making it a leading indicator. ROC readings breaking above a declining trend line warns of a possible bullish reversal while ROC readings breaking below a rising trend line warns of a possible bearish reversal.

Track and use Rate of Change (ROC) in your daily analysis in real-time with our iPhone & iPad apps.

Market School: Technical Indicators 5 – Williams %R

Feb 12

The Williams %R indicator is a momentum oscillator used to measure overbought and oversold levels. It’s very similar to the Stochastic Oscillator except that the %R is plotted on a negative scale from 0 to -100 and has no internal smoothing. The %R defines the relationship of the close price relative to the High-Low range over n-Periods. The nearer the close price is to the highest high of the range the nearer to zero the reading will be. Alternatively, the nearer the close price is to the lowest low of the range the nearer to -100 the reading will be. If the close price equals the highest high of the range the reading will be 0; if the close price equals the lowest low of the range to reading will be -100.

USES

As an overbought/oversold indicator, Williams %R values from 0 to -20 are considered overbought while values from -80 to -100 are considered oversold. One method of using Williams %R might be to identify the underlying trend and then look for trading opportunities in the direction of the trend. In an uptrend, traders may look to oversold readings to establish long positions. In a downtrend, traders may look to overbought readings to establish short positions.

Track and use Williams %R in your daily analysis in real-time with our iPhone & iPad apps.

Overextended Stock:SMA 200

Apr 12

A quick scan of yesterdays market for overextended stocks, specifically oversold stocks, SMA 200 via the iPad app Daily Stocks gives us the following lisT: FSLR, RSH, BTU, NFLX, NSM, NRG, BHI, and DV. For other scans like this and more please check out Daily Stocks on the app store.

Oversold Stocks with an Improving RSI

Nov 30

Market Scan for the iPad comes loaded with some great predefined scans. An examples is the “Oversold Stocks with an Improving RSI” which today brought back 15 matching stocks. The list below has some of the stocks in this predefined scans and the red X on the right denotes a stock in our Watchlist so that we can easily spot stocks that interest us.

[Click Screenshot to Enlarge]

LGND – Ligand Pharmaceuticals Incorpor (NasdaqGM) Closed at $11.73 +0.32 2.80%
MERC – Mercer International Inc. (NasdaqG) Closed at $5.93 +0.59 11.05%
NGA – Niska Gas Storage Partners LLC (NYSE) Closed at $9.68 +0.38 4.09%
NMR – Nomura Holdings Inc ADR America (NYSE) Closed at $3.30 +0.21 6.80%
OME – Omega Protein Corporation Commo (NYSE) Closed at $8.43 +0.72 9.34%
ORI – Old Republic International Corp (NYSE) Closed at $8.22 +0.57 7.45%
QNST – QuinStreet, Inc. (NasdaqGS) Closed at $9.26 +0.33 3.70%
SMG – The Scotts Miracle-Gro Company (NYSE) Closed at $44.09 +2.05 4.88%
VRTX – Vertex Pharmaceuticals Incorpor (NasdaqGS) Closed at $28.99 +1.66 6.07%

If you think this scan, and other scans like it would be valuable to you in your day to day trading strategy be sure to check out Market Scan.

Oversold Stocks – SMA 200

Nov 02

A list of stocks that are oversold over SMA 200 via Daily Stocks.
[Click to Enlarge]

Stocks that we found interesting: [Click Ticker to See Chart]
FSLR – First Solar, Inc. (Nasdaq) Closed at $47.23 +0.45 -0.96% Closed 151.2% below SMA 200
X – United States Steel Corporation (NYSE) Closed at $46.78 +1.45 -5.91% Closed 63.1% below SMA 200
WFR – Whirlpool Corporation Common St (NYSE) Closed at $5.78 -0.02 -0.35% Closed 62.8% below SMA 200
S – Sprint Nextel Corporation Comm (NYSE) Closed at $2.72 +0.23 -9.24% Closed 59.2% below SMA 200

Oversold Stocks – SMA 200

Oct 18

One long-term factor that we generally look at are overextended stocks, Daily Stocks for the iPad is a great tool for this because it let’s us look at Oversold and Overbought stocks over SMA 9, 20, 50, 100, 150, and 200. Today we’re looking at Oversold Stocks SMA 200. This generally forecasts that the spread between the price and the moving average will shrink. Being SMA 200 this is a long term forecast and you should look for other technicals, as well as fundamental analysis to decide the timing on your trade.
By clicking the OS (Overextended Stocks) tab in Daily Stocks and choosing your Overbought or Oversold SMA, in this case Oversold SMA 200, you’ll get a screen similar to the one below:

In actuality our list was a little bit longer however we decided to limit this post to the eight stocks that were displayed on screen. [Click Ticket to See Chart]

EK‎ – Eastman Kodak Company (NYSE)‎ 146.2% Below SMA 200

FSLR‎ – First Solar, Inc. (NASDAQ)‎ 133.2% Below SMA 200

ODP – Office Depot, Inc. (NYSE) 100% Below SMA 200

X – United States Steel Corporation (NYSE)93.3% Below SMA 200

NFLX – Netflix, Inc. (NASDAQ) 87.7% Below SMA 200

GNW – Genworth Financial, Inc. (NYSE) 85.9% Below SMA 200

BAC – Bank of America Corp (NYSE) 84.7% Below SMA 200

RF – Regions Financial Corporation (NYSE) 78.3% Below SMA 200