Forum Archive Index - December 2002

[Phaedrus <Phaedrus@techemail.com>]

Bill,
     Good comments. My 5c worth :-
Long-term uptrend. According to me, the longterm up trendline has been broken 
(circled). I wonder if you are perhaps using a linear price scale, rather than 
log?
 Suitable buying points for safety first investors. Buying at the longterm 
uptrend line, so long as it is not broken and the short-term trend is up, would 
be a relatively low risk entry point.
 Time to watch carefully at $1.34? Indeed. As you noted, resistance there was 
holding firm.
 By about 21/10/02 there had been three successive RSI sell signals, a triple 
top had formed at resistance, and there had been a trendline break of a 
confirmed medium-term trendline. Very clearly time for medium-term trend 
traders to pull the plug. At this point, though, price action was still well 
above the longterm trendline, so longterm traders would not be selling here.
 Where are you getting your charts from, that you only have two indicators? 
Have you seen the charts at 
http://bigcharts.marketwatch.com/intchart/frames/frames.asp?symb=NZ%3ATEL&time=&freq=
 for example? Just enter the stock code as NZ:WRI. The Java charts are best - 
you can draw trendlines on them.

 Over the 2 years or so covered by the chart, WRI has been trending. This means 
that trend indicators work best. Oscillators such as the RSI you mentioned give 
a string of Sell signals when a stock is rising, and a string of Buy signals 
when a stock is falling. The last one of these signals is the one you want to 
act on, but the problem is, you do not know which is the last one until much 
later. All the RSI signals are "good", but acting on them alone will ensure 
that you miss out on a lot of the profit from a trend. I have plotted a 100 day 
sma, which works reasonably well, though not as well as trading the trendline 
breaks as marked by large arrows. 
 Backtesting the RSI over ten years of data shows that this is not one of the 
better indicators for this stock. The optimum period for the RSI over this time 
was 13 days, near enough to the default of 14.
 MACD is a very popular indicator, and is used by many people, although I don't 
use it much - everybody has their favourites.
 You are doing well - keep at it. Just remember that the indicators you use and 
the actions you take depend totally on your chosen timeframe. You need a system 
that suits your trading preferences and style.

   Regards,
               Phaedrus.

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