3 best tech ind

8/20/2019 3 BEST Tech ind

1/11

by Louis Basenese

Chief Investment Strategist, Wall Street Daily


2/11

THE 3 BESTTECHNICAL INDICATORS ON EARTH

Tis of-quoted warning also orms the basis or technical

analysis. Only I’d tweak it to say, “Tose who do remember

the past are likely to profit rom it.”

THAT’S TECHNICAL ANALYSIS IN A NUTSHELL.Afer all, technical analysis is based on the idea that all

the inormation is represented in price and volume. So by

comparing what’s happening in the market today to what’s

happened in the past, you can tell what will (most likely)

occur in the uture.

“Tose who cannot remember the past

are condemned to repeat it.”

2The Three Best Technical Indicators on EarthHow to Start Killing the Market and Never Look Back


3/11


In other words, while fundamental analysis involves screening

businesses’ balance sheets, earnings reports and economic conditions to

try to predict stock returns, technical analysis relies on the participants

in the market to distill all that information into meaningful data.

And by watching price and volume, you can interpret the emotionsdriving the market.

Some believe that technical analysis is simply about drawing lines on a

chart – and that it’s essentially the equivalent of inancial astrology.

Hogwash!Granted, some methods have failed to produce real returns. And I agree

that not all technical indicators are worthy of your attention.

That’s why it’s important to focus only on the key indicators that have

proven successful – time after time.

Lucky for you, we’ve found the top three, best of breed, technical

indicators that you can use to maximize your proits. Here’s a brief

rundown of each…

INDICATOR #1:

MOVING AVERAGE CONVERGENCE/DIVERGENCE (OR MACD)The MACD indicator is a great introduction to technical analysis

because it’s based on one of the easiest, most powerful concepts:

the moving average.

Calculating and drawing a moving average line is simple. It’s just the

average price of a stock over a number of days, usually 50 or 200.


4/11


A stock trading above this line is a strong bullish indicator by itself. But

you can take a moving average to the next level by tracking when moving

averages of different lengths of time cross paths.

Take a look at the chart for Under Armour (NYSE: UA) to see what I mean.

When the 50-day moving average crosses above the 200-day moving

average, it means the stock is likely going to see a big move higher.

Basically, MACD takes moving averages, ine tunes them and combines

them into a single indicator. It just takes a few more steps…

1) First, instead of a 50- or 200-day moving average, MACD uses 12 and26 days. It also focuses speciically on the “exponential moving

average,” which means more weight (and importance) is given to the

most recent stock prices.


5/11


2) The next step is creating the “MACD line,” which is simply thedifference between the 12- and 26-day exponential moving averages

from step one.

3) Once that’s done, the “signal line” is created. That’s the nine-day

exponential moving average of the new MACD line.

If this sounds complicated, keep in mind that you don’t really need to

know how the lines are created. The important part is how they interact.

Check out the following chart of Bank of America (NYSE: BAC) to see

what I mean.

There are two main things you need to watch for…

1) When the MACD line jumps above zero, it shows that the currentmomentum is positive. And when it drops below zero, momentum

is negative.


6/11


2) Most important, you can identify when these shifts in trajectoryare likely to occur. It’s all about watching when the lines cross

over each other.

When the MACD line crosses above the signal line, momentum is

about to turn positive. And when the signal line jumps higher than

MACD, it’s a sign that the share price is about to dip.

The chart indicates the bullish points with green arrows and the

bearish patterns in red. Sure enough, the stock movements (mostly)

correspond with the “Buy” and “Sell” signals.

The trick is to spot the crossovers as close to the zero line as

possible. That’s where the strongest signals occur.

INDICATOR #2:PARABOLIC SARDon’t let the imposing name fool you. Parabolic SAR is dead simple

to interpret.

SAR stands for “stop and reverse,” meaning that it’s designed to ind

turning points in stock trends.

In short, Parabolic SAR captures momentum.

The indicator is typically drawn as dots that follow a stock chart.

When the dots are below the price, the momentum is positive, like

the dots are pushing the stock up. When the dots are above the

price, momentum is negative.

In simplest terms, when the dots switch from above the stock price

to below, that’s a clear “Buy” signal. On the lip side, when they

switch from below the price to above, it’s a “Sell.”

When the MACD

line crossesabove thesignal line,

momentum is

about to turnpositive. Anwhen the signal

line jumpshigher thanMACD, it’s a sign

that the share

price is about

to dip.


7/11


You’ll also notice that the dots tend to converge with the stock price right

before they switch sides. So the closer the dots get to the share price line,

the sooner the current share price direction is likely to reverse.

So not only does Parabolic SAR identify the turning point, it shows how

much time you have to invest accordingly.

Simple, right?

There’s one trick to using Parabolic SAR, however. You need to be

selective about your “Buy” signals.

You see, if a stock is trading within a narrow range, the dots will give off

multiple “Buy and “Sell” signals in rapid succession. That’s not a formula

for making money.

The Symantec (Nasdaq: SYMC) chart below shows what I mean.


8/11


When the stock traded in a tight range between June and August,

there was a lurry of signals that wouldn’t have been proitable. But

between January and March, the signal worked well.

To reconcile this, verify that the overall stock market is trending

in a similar direction, too, and not staying stagnant. Of course, youcould pair the MACD line with Parabolic SAR to double check your

indings.

INDICATOR #3:

MONEY FLOWWe already know there are two sides to every stock trade –

the buyer and seller.

But wouldn’t it be nice to know what’s going on behind the scenes?

That is, whether the buyers or the sellers are more eager to act?

With a stronger grasp of investor sentiment about a particular

stock, you could pick your “Buy” and “Sell” levels with more

conidence.

That’s what the Chaikin Money Flow tries to capture. It indicates

“buying pressure” and “selling pressure.”

The Chaikin Money Flow takes positive and negative periods for astock, then multiplies them by the volume of trading over that time.

This assigns greater weight to days when there was heavy volume.

Then it compares the ratio of positive pressure to negative pressure

and converts that to a value between -100 and 100 (or between -1

and 1 on some software).

At that point, you chart it as an additional line under the stock.

When Money Flow is high, it means the stock has more buying

With astrongergrasp of investor

sentimentabout a

particular stock

you could pick

your “Buy”and “Sell”levels with

more confidenc


9/11


pressure than selling pressure – and vice versa.

Now, you may be tempted to use this as a trend indicator. So you’d buy

when there’s a lot of buying pressure.

But Money Flow actually identiies when a stock is overbought or

oversold. As a result, it shows the end of the trend (or a reversal point).

In other words, it’s more of a contrarian indicator. When the rating ishigh, it means there may be too much buying pressure and the stock is

set to collapse.

On such merits, when the Money Flow passes a critical level (25 or -25

is a good rule of thumb) and stays there for a while, it’s a sign that a

reversal is imminent.

(An indicator called the Money Flow Index is very similar to Chaikin

Money Flow, with only a slight change in the calculations. You can

www.wallstreetdaily.com

Money Flow Pinpoints When Stocks Are Due for a Reversal

21

20

19

18

17

16

15

14

13

25

0

25

Source: RightWayCharts.com

Morgan Stanley (NYSE: MS)

Nov Dec 2012 Feb Mar Apr May Jun Jul Aug Sep Oct


10/11


interpret the signals the same way.)

Bottom line: Combining these three simple indicators can create a

powerful system for identifying when stocks are likely to rise or fall.

You don’t need a math degree. Heck, you don’t even need to

understand the formulas to use these indicators to boost your

investment proits.

You just need to look at a few charts until you can see the patterns

repeating themselves. After all, that’s the basis of technical analysis.

The chart says it all.

Wall Street Daily provides its subscrib

with unique opportunities to build and p

tect wealth globally, under all market c

ditions. We believe the advice presente

to subscribers in our published resour

and at our seminars is the best and museful to global investors today. The r

ommendations and analysis presented

is for the exclusive use of subscribe

Subscribers should be aware that inve

ment markets have inherent risks a

there can be no guarantee of future profi

Likewise, past performance does not

cure future results. Recommendations

subject to change at any time, so subsc

ers are encouraged to make regular use

our website, www.WSDInsider.com.

Copyright 2012 Wall Street Daily, LLC.105 W. Monument Street, BaltimoreMD 21201. All rights reserved.

Protected by copyright laws of the Uni

States and international treaties. This p

lication may only be used persuant to

subscription agreement and any reprodtion, copying, or redistribution (electro

or otherwise, including on the world w

web), in whole or in part, is strictly p

hibited without the express written p

mission of Wall Street Daily. Informat

contained herein is obtained from sour

believed to be reliable, but its accur

cannot be guaranteed. You and your fa

ily are entitled to review and act on a

recommendations made in this docume

Wall Street Daily expressly forbids

writers from having a financial inter

in any security they recommend to th

readers. All Wall Street Daily employ

and agents must wait 24 hours after

internet publication and 72 hours afte

publication is mailed before taking act

on an initial recommendation. Wall Str

Daily does not act as an investment ad

sor, or advocate the purchase or sale

any security or investment. Investme

recommended in this publication sho

be made only after consulting with y

investment advisor and only after revie

ing the prospectus or financial stateme

of the company.

WSD13-1112


11/11

Nothing published by Wall Street Daily should be considered personalized investment advice. Although our employees may answer your genera

customer service questions, they are not licensed under securities laws to address your particular investment situation. No communication by

our employees to you should be deemed as personalized investment advice. We expressly orbid our writers rom having a financial interest in

any security recommended to our readers. All o our employees and agents must wait 24 hours afer on-line publication, or 72 hours afer the

mailing o printed-only publication prior to ollowing an initial recommendation. Any investments recommended by Wall Street Daily should

be made only afer consulting with your investment advisor and only afer reviewing the prospectus or financial statements o the company.

© 2012 Wall Street Daily, LLC. All rights reserved.

105 West Monument Street, Baltimore, MD 21201 // T. 877.242.1730 or 410.230.1266 F. 410.223.2650

In a world of liars, theTRUTH

starts here.

3 best tech ind

Documents