Forum Archive Index - May 2002

[Phaedrus <Phaedrus@techemail.com>]

 Gerry's recommendations have proved to be very reliable and profitable. 
Nevertheless, the supplementary use of technical analysis to assist in timing 
entries and exits can enhance these profits. PTD is an excellent example of 
this.

 Anyone buying PTD on Gerry's recommendation ($2.30, 29/9/01) would have 
doubled their money in just over 4 months, only to give all their gains back to 
the market over the next 3 months. The use of some fairly elementary TA would 
would have obviated this.

 The attached chart demonstrates use of the Directional Movement Indicator, a 
deservedly popular trend indicator. As with all trend indicators, DMI gives 
unreliable signals if a stock is not trending. This is determined by the 
ADX/ADXR elements of the Directional Movement system, which constitute the 
"trend ribbon" beneath the DMI. Any +DI/-DI crossover signals are only 
significant if the ADXR is greater than 25, and the ADX is greater than either 
+DI or -DI. If these conditions are met, the trend ribbon shows a "Trade Zone". 
If these conditions are not met, the trend ribbon shows a "No Trade Zone" and 
any crossover signals are ignored.
  The chart has not been optimised or curve-fitted in any way whatsoever. All 
DMI indicators utilised (+DI, -DI, ADX, ADXR) use the MetaStock default value 
of 14 days.
 I have also plotted a 35 day exponential moving average. Note the 
exceptionally close agreement between the signals generated by these two very 
different trend indicators.

                           Phaedrus.

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