Announcing partnership with CityFALCON. Read more (Published: 2017-02-13)

Questions & Answers


​Score is a evaluation from -10 to 10 based on a system we have developed for recognizing and evaluate several technical indicators like moving averages, trend, volume, pivot points, rsi etc. These indicators are then run in a our algorithm for final calculation.

Evaluation:
​-10.00  to - 5.00 Strong Sell
​-4.99 to -1.00 Sell
​- 0.99 to 0.99 Hold
​1.00 to 4.99 Buy
​5.00 to 10.00 Strong Buy

In most cases, we try to adjust the split the same day, while dividends are adjusted on data clean up. (When reloading/cleaning data)

 

The dividend itself is no technical indicator, but it skews the price picture as all previous prices should be adjusted accordingly. The changes affect trend, score etc.

 

There is a discussion amongst chartists if it is correct or not correct to change the history for dividends. Imagen this;

 

A Stock is at USD 51.50. A dividend payout puts it at USD 49.50.  Big round numbers are resistance, especially if it is first attempt to break it. The magnitude of 50 is now (after dividend adjustment) not particularly big. 50 has been broken before and the majority of traders know this. Furthermore, a dividend payout is also a reduction of the company’s actual value (by taking money out of the Company). Is this significant and should it be visible? (un-adjusted) or should the chart show price as nothing has happened?

 

In our opinion you can stand to interpret big indicators like volume wrong if you don’t adjust for dividends. But on the other hand, the impact of dividends, as such, is usually very little.

Stocks listed in the possible runner list are stocks which currently are oversold on RSI 14, they have found a pivot bottom and are turning up on increasing volume. As in any other list these are just options. Some may go very good good and far. While some will not perform at all. Penny stocks, or stocks traded under USD 1, often behave erratically. In order to see the real potential of the run you should look for nearest resistance level, this will often define the first stop and a good selling point. Since these stocks have high volatility you have to monitor them closely. What goes up often goes down as well. Or as other like to say it: "Easy come, easy go..."

 

"

 

 

Stop-Loss is the level were you will sell your stock if it falls back. Most brokers offers this as an auto-sell option in their systems as long as you set the limit. The stop-loss should be floating, which means that if price go up you adjust your stop-loss to new levels. Some keep a rigid system where they use for example -5% to calculate their stop-loss. This is easy to set, but it do not take into consideration the fluctuations (volatility) some stocks have during intraday. We recommend stop-loss to be set based on your time horizon, risk, and volatility. You can use percentages or look at support levels and add a safety margin. If stocks fall below support levels if often fall a lot further. Some like to use trends, but make sure you give this level some slack. Amongst devoted people that uses technical analysis as their decision tool all major signals should be verified by +/-3%. To illustrate this; if a trend is broken it must be confirmed by falling 3% bellow trend line. Same goes for pivot points, accumulated volume etc.

To sell a stock, commodity or currency is way harder than buying. By nature we always hope for more or to get back some of our losses. A strong and good stop-loss strategy will save you a lot of money. If a stock is sold because of stop-loss you can still buy it back, perhaps at lower levels giving you more shares (accumulation).
 

If a stock turns in the bottom of a set trend it is always a good signal. If a stock turns in the middle of a trend it can be a signal about a forthcoming trend change. To buy in the middle of the trend or not has a lot to do with your general strategy. Are you aiming for short term or long term? If it is for short term then volume, support and resistance is of higher importance.

The chart below illustrates the question very well. In this case WisdomTree is in the middle of the trend. The high level of support just under current price indicates a possible good buy opertunity.

.

Moving average

Moving average is a widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random price fluctuations. A moving average (MA) is a trend-following or lagging indicator because it is based on past prices. The two basic and commonly used MAs are the simple moving average (SMA), which is the simple average of a security over a defined number of time periods, and the exponential moving average (EMA), which gives bigger weight to more recent prices. The most common applications of MAs are to identify the trend direction and to determine support and resistance levels. While MAs are useful enough on their own, they also form the basis for other indicators such as the Moving Average Convergence Divergence (MACD)

 

1) For long term we use standard 100 and 200 days moving average. (Dark blue line)

2) For short term we use dynamically moving average that is being calculated upon the number of days in the chart. (Grey line)

Explanation:
Using a dynamically calculated moving average is the correct approach, even though many swear to the standards of 4, 7, 8, 9, 12, 15,
18, 21, 23, 26, 27, 29, 32, 35, 100, 200 based on standard 1,3,6,12,24,48 and 96 months charts. But what happens with charts not having full length of history?

Mathematically solution:

Moving Average = ((Num of days/5)/2)+1

Example:

3 mnd equals approx. 66 days of history
Moving Average = ((66/5)/2)+1 => 7.6 (Equals 8 days moving average)

1 year equals approx 264 days of history
Moving Average = ((264/5)/2)+1 => 27,4 (Equals 28 days moving average)

Using dynamically approach to set the correct moving average length for short term shows particular useful when dealing with charts not having full set of historical data7

.​

Pivot listed in the support and the resistance is the pivotal point between last days high, low and closing price. It is calculated by:

 ((High + Low + Close)/3).

Given the example a stock ended at USD 50 last day. It was traded as low as 47 and as high as 51. The pivot is then: (51+47-50) / 3 = 49,3. This indicates a high chance for an opening lower than yesterday’s closing price and is explained by the market psychology that this is the breaking point between buyers and sellers. For many traders the pivot is not representing the opening price, but next day’s best buy level. This is more reasonable as more and more people us auto bots for trading. ​

Death Star is a strong technical sell signal that appears if the moving averages crosses each other in a certain pattern being on the price line.  The signal needs to be verified to appear by 2 days executive trading days. The delay in the signal is often within a 1-3% range (change of price after it occurs), but our back testing shows that stock with these signals often fall long and hard.  It is important to notice that signal is weakened in stocks with low volume and wrong signals will appear more often.

Golden Star is an technical signal that first was introduced in 2007 by J. Stromberg at the website getagraph.com. The signal derives from the well know Golden Cross that uses the 200 days moving average and the 50 days moving averages to define what has been argued by many to be the best technical signal of them all.  Backtesting prove very strong results on the signal which has a delay of 2 days.

The Golden Star signal differs from the Golden Cross by adding more conditions for the signal to appear. For instance, the moving averages has to be selected based on the time frame selected. In addition, it has to cross the price line at a given pattern as show bellow.

 

Golden cross

Yes, a user registration is totally free and we tried to make it easy offering auto signup by your facebook account as well. Remember you need to be 16 years or more to register on these pages.

Why is volume important ?

There are many reasons why volume is important. Volume is an expression for liquidity, and liquidity is an expression for turnover. In common terms this boils down to the amount of shares trade per day.

Ill-liquidity and risk
If there are few trades the stock becomes ill-liquid and the risk increases as you might not get to buy or sell when you want.

Volume as an indicator
Volume tells something about the investors interest for the share. If volume increase there is a higher demand for the stock, and the opposite if volume falls. In very general terms volume should follow the stock. This reduces risk and makes the predications/assumptions more credible. (E.g if volume rises you can expect price rise as well)

Volume is amongst the most used tools in technical analysis and as buy/sell strategies.

1) For long term we use standard 100 and 200 days moving average. (Dark blue line)

2) For short term we use dynamically moving average that is being calculated upon the number of days in the chart. (Grey line)

Explanation:
Using a dynamically calculated moving average is the correct approach, even though many swear to the standards of 4, 7, 8, 9, 12, 15,
18, 21, 23, 26, 27, 29, 32, 35, 100, 200 based on standard 1,3,6,12,24,48 and 96 months charts. But what happens with charts not having full length of history?

Mathematically solution:

Moving Average = ((Num of days/5)/2)+1

Example:

3 mnd equals approx. 66 days of history
Moving Average = ((66/5)/2)+1 => 7.6 (Equals 8 days moving average)

1 year equals approx 264 days of history
Moving Average = ((264/5)/2)+1 => 27,4 (Equals 28 days moving average)

Using dynamically approach to set the correct moving average length for short term shows particular useful when dealing with charts not having full set of historical data.​

A great question is how to calculate RSI?

The math
The math is pure and simple. One look at changes from day to day for a given period. Let us say 14 days. Summarize all positive changes and all negative changes and put it in this formula.

RSI14 = 100X(pos-change/(pos-change + neg-change))

The big question
In more or less any case the RSI calculates are a smooth job. But for low- liquid stocks you will be phased with this question.

Shall days of no volume be counted???

Our way of thinking to this issue
There are days for many stocks with no change in the end-of-day price. A day without trading is a day without change. This should be reflected in the RSI-calculation and therefor should all days be counted, stock traded that day or not. Stocks with such low trading impose a risk anyway, and any use of technical analysis are weakened in such cases.

There are a few definitions of RSI, but the most used are:

"The Relative Strength measured by looking at daily positive and negative changes"

In more human term you can say that RSI measures if a stock is oversold, overbought or just somewhere in the middle. It is done by looking at how many days a stock has been rising or falling in a period of time. If a stock has been gaining to long there is a far chance it will take a break. To visualize the increased risk our charts are colored with a red line. The line does not mean that you must sell, but to watch it even closer. Some stocks go very high while being overbought on RSI like the stock shown below.  Oversold is colored with green colors. RSI is often done for 14 or 21 days depending on charting period.

It is an ongoing discussion if MACD divergence is accurate or not as trading strategy. The idea behind all divergence trading is that the divergence is one of the first signals about a forthcomming change. A falling MACD (after topping) while price still rises indicates that the price will fall back shortly. The problem is when stocks have little volatility or move sideways.

The Fan Theory was first described by W.D.Gann and says:

The Gann Fan is made up of nine angles based on this concept. These trend lines are used to indicate support and resistance levels. When one line is broken (by the entire days price range) prices should move to the next line. The drawing of these lines should start from either a market top or bottom.

Find more info from here:

http://help.geckosoftware.com/40manual/new/advchart_tools/gannfan/gann_fan.htm

Pivot Points

Pivot Points, or significant tops or bottoms, as it really is, are generated if special conditions are in place. We look at several factors, like, volume, rsi, patterns in the last rise, trends and naturally there has to be a retraction after a gain in order to properly identify a top. (and opposite for a bottom). The retraction cannot be simulated, and due to the fact that it has to happen, it causes a delay for this signal. Usually approx. 2 days. Statistically you would loose 1-3% of the signal due to the delay.

We use self-developed logarithms to identify the Pivot Points. As a general rule a signals are weakned if stocks are traded on low volume (ill-liquide), and the chance for a false signal increases.

We do not not give a direct advice what you should do with your shares. We look at the technical picture and not the fundamental picture. (TA assume every information is in the price and that price is correct) If TA signals buy then it indicates that more ppl will be positive and push the stock in right direction.

If you are scared due to fundamental causes (fear of bankcruptcy) you should look at sources that work on figures like cashflow etc.

It depends very much on timing. Some stocks take out the potential early, while some use some time. A very high percentage of the predictions return 2-5% from buy signal until it goes to hold or sell. Currently about 50-55% return between 5-10% and close to 15% return more than 10%.

Next analysis update:

Want to be one step ahead of others?

Subscribe Now!

Click for pro features list

Last donation

Do you find our website useful too?
Help us improve by making a small donation or get a Subscription.

5164
Companies analyzed today