Forum Archive Index - September 2003

[Phaedrus <Phaedrus@techemail.com>]

Allan,
      POT remains in a long-term uptrend. It is above the long-term trendline 
and above a longterm moving average. It would need a close of below $3.85 to 
break the trend. POT is not heavily traded and this fact combined with a fair 
degree of volatility means that it is all too easy to be "flicked out" of 
stocks like this by using technical indicators that are too sensitive. This is 
overcome by using long periods for any chosen indicator. All the indicators 
shown below have been "detuned" by this means. I have marked the secondary 
trends with red and light green trendlines. 
 So, longterm holders will still be holding. Medium-term traders will probably 
have sold early this year when the medium-term upward trendline was broken. 
They would be looking to buy back in on a break of the current downward 
medium-term trendline or perhaps an SAR reversal signal. With stocks like POT, 
so long as the longterm trend remains intact, it is difficult (though not 
impossible) to beat simply buying and holding.
 Regarding entry opportunities, one of my favourite indicators is the Relative 
Momentum Index. This gave a Buy signal on 31/3/03. It is interesting to see 
that this detuned indicator has given only 5 buy signals in 10 years. Anyone 
wanting more action than this need only shorten the period. I used 50 days - 
the MetaStock default value for this indicator is 20 days.
           Regards,
                      Phaedrus.

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