Forum Archive Index - June 2002

[Phaedrus <Phaedrus@techemail.com>]

 While BCA has not yet broken above its 30 day ema, it closed on Friday 
slightly above its trendline, and the +DI has just barely crossed above the 
-DI. Superficially, these may appear to be Buy signals, but if we look more 
closely, we will see that they are not. They signal the end of the downtrend, 
rather than its reversal. It is possible to see this from the chart - these 
signals were triggered by price action going sideways, as opposed to rising. 
Rather than relying on such subjective indications, the ADX/ADXR components of 
the DMI system are designed to quantify the "trendiness" of a stock. ADX/ADXR 
values of over 25 indicate that a stock is trending, either up or down. (ADXR 
is simply a smoothed ADX, and is therefore slower). During the six months of 
the downtrend, BCA maintained an ADXR level of 30 or more. It is now at 25 and 
falling - in other words, technically, this stock is no longer trending down. 
These signals therefore would constitute a Buy to close out an existing short 
trade, but not a Buy to enter a new long trade.
 
 A number of different trading systems have developed around the Directional 
Movement set of indicators. Another version, based on a system used by Dr 
Alexander Elder in his book Trading for a Living, is presented at  
http://www.incrediblecharts.com/technical/directional_movement.htm

 Since BCA is no longer trending, it is no longer appropriate to use trend 
indicators. This stock is now presumed to be in a trading range, until such 
time as it either enters a new uptrend, or resumes its downtrend.

                  Phaedrus.

_____________________________________________________________
Are you a Techie? Get Your Free Tech Email Address Now! Visit 
http://www.TechEmail.com

_____________________________________________________________
Promote your group and strengthen ties to your members with email@yourgroup.org 
by Everyone.net  http://www.everyone.net/?btn=tag

----------------------------------------------------------------------------
To remove yourself from this list, please use the form at
http://www.sharechat.co.nz/chat/forum/