hi,
my favorite tool to known if i can place order is to use divergence on RSI and MACD and ROC...But other indicators can be use.
Have a look on CPWR in august-september 2004 :
Price makes new low but we can see that MACD and RSI and ROC doesn't follow the same way that price and at the opposite of the price doesn't make new low ! -> We have a divergence !
Divergence can be use like an alert that the downtrend dry up.
My strategy :
buy the day after a new low is established
place your stop loss at the low
Uses resistances to sold your positions
AN ANOTHER example :
PTSC
Hi,
an another example: OMR and it is always good to buy... ;)
Look at doc word
Hum, FRPT a good candidate ?
Buy at 0.900
Stop at 0.810
target at 1.25
EVCI a good candidate ?? :)
An another good example : CLBE -> quick gains !!! :D
yes, i've always been a huge fan of divergences. as long as there is enough liquidity around to give some good signals, seems a great indicator to use along with a few others. i would also recommend checking it out on the ADX / DMI lines.
Thank you for your help "Domination"...
What do you think of HYGS...
Hi,
have a look on ULTR....
Seb,
How is a divergence explained?
The only indicator I truly understand, even though I know how to read a few, is RSI. In my mind, RSI has to "go with" the stock price, not against. Do you have a link/reference I could read to understand how this works?
Thanks!
Hi Livana,
In technical analysis it is important to known how each indicators you uses are built..."Divergence" can be powerful to make decisions because it is "not normal" that RSI (RSI as example) doesn't follow price. In fact, RSI follows Price but it is possible that price makes new lows and indicators doesn't make new lows (despite they decrease also..)
For more explanations (about RSI but divergence can be used withe any others indicators like MACD, ROC...)
http://www.streetauthority.com/terms/r/rsidivergence.asp
http://www.stockcharts.com/education/GlossaryD.html
http://www.investopedia.com/terms/d/divergence.asp
http://www.incrediblecharts.com/technical/indicator_basics.htm
http://www.tradetrek.com/education/pairtrade/market_neural_strategy04.asp
I hope you have enough explanations.
Have a good read ! :)
Have a look on CGHI...
Excellent points regarding the power of Divergence. Remember as well that the Longer the Divergence the stronger the signal! ;)
This one you guys are going to LOVE. I use a 6,12,6 PPO signal along with the standard MACD and find that most often the PPO will give a faster potential Breakout whether it's down or up before the macd will. Most often if the PPO is trending up and is still below the zero line with little price movement it is then setting up for a major move as it crosses the centerline......... Dead