Thursday, November 27, 2008

For GT Blog November 27, 2008

A word on Technical Indicators

I was never a squiggly line guy, studies like Average Directional Index (ADX), Bollinger Bands, Moving Average Convergence/Divergence (MACD), Moving Average Envelopes, Parabolic (SAR), Relative Strength Index (RSI) and Stochastic Oscillators can be messy.

I like “clean” studies like divergence and trend lines.

Price divergence between two plots will occur when one fails to follow the other to a new trading high or low – note the failure of the TSX Energy Index to follow crude to new highs in mid July – setting up a “sell” signal.

Now note the failure of the TSX Energy Index to follow the price of crude to new lows over the past several days and in turn setting up a “buy” signal.

Bill Carrigan

Bullish Positive Divergence for the Energy Stocks

1 comment:

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