SOME OF THE TECHNICAL INDICATORS I USE,
CANDLESTICK BASICS (INCLUDING ITS MOST RELIABLE
BULLISH CONFIRMATION PATTERN CALLED "THREE WHILE SOLDIERS" )
(Information has been simplified for an average individual to comprehend)
The Linear Regression Channel (LRC) is a form of an indicator whose purpose has to do with telling us is if a given stock is trending (trending means moving in a specific direction, whether upwards or downwards) or might there be a trend reversal at hand. LRC is composed of Linear Regression trendlines which is accompanied with parallel lines above and below it. Parallel lines are created using two standard deviations (Standard deviation being a statistical term which provides us with a a good indication of volatility). LRC can be defined as a straight line that is drawn through a security's price chart (using the least squares method). Lower channel line represents support level (support level being a point where stock price seems to not go bellow or floor price) and the upper channel line represents resistance level (resistance being a point where stock price seems to not go above or sealing price). When prices are found outside of the channel areas then probability increases for a trend reversal.
The Ribbon Study (RS) is composed of multiple lines called Moving Averages (or MA's, Moving Average can be of different time frame periods and are used to smooth out short-term fluctuations, and with that highlighting longer-term trends or cycles) of different time frame periods which are drown over the price data for a given time frame. When there is a convergence of multiple moving averages (MA's) this can be understood as a increased possibility of a directional price change. (Hint: Exponential moving average or a EMA is a special for of MA that is considered a more accurate form of MA being it is more sensitive since it is giving much more importance to recent observations).
Negative Volume Index (NVI). This kind of indicator is used often together with the Positive Volume Index, all in an attempt to help locate a possibility of a bullish (equals upwards) move within markets. These indicators are associated with an opinion that the so called 'smart money' (or money that is associated with big players such as institutions) dominates trading on days when volume decreases (and as a result trading becomes more stable and less volatile) while on the other hand 'dumb money' (or money associated with small time investors) dominates trading on more active and volatile days. Odds of a bull market (according to Fosback, in his book 'Stock Market Logic') become 95/100 in a situation where NVI surpasses its one-year MA. The odds of a bull market are roughly 50/50 when the NVI is below its one-year MA. Therefore is such logic is applied it can be stated that NVI would be most useful as a bull market indicator.
The Positive Volume Index (PVI). In addition to already stated above about PVI I will repeat that in the days when PVI is increasing it can be stated that 'dumb money' is starting to dominate the markets. With this said it should also be stated that PVI should not be regarded as a so called "contrarian indicator" (contrarian trading is associated with buying when most others are selling and vice versa). While PVI shows what 'dumb money' may be doing, it also trends in the same direction as price.
Ultimate Oscillator. The three time frames represent short, intermediate, and long term market cycles (7, 14, & 28-period). / It is expressed as a single line plotted on a vertical range valued between 0 and 100, with oversold territory below 30 and overbought territory above 70. / Trading should take place when there is a divergence between price and the Ultimate Oscillator. When the price reaches a new low and is not supported by a new low of the Ultimate Oscillator, a bullish signal is generated, provided the Oscillator falls below thirty during this divergence and the Oscillator then rises above its high during the divergence. According to Williams the subsequent uptrend can be ended should the value of the Ultimate Oscillator rise above seventy or rise above fifty and then fall below forty-five. When the price reaches a new high and is not supported by a new high of the Ultimate Oscillator, a bearish signal is generated, provided that the Oscillator rises above fifty during this divergence and the Oscillator then falls to a new low during the divergence. The subsequent downtrend can be ended should the value of the Ultimate Oscillator rise above sixty-five or fall below thirty. "
Disparity Index. Measures the relative position of the most recent closing price to a selected MA and reports the value as a percentage. A value greater than zero suggests that the asset is gaining upward momentum, while a value less than zero can be interpreted as a sign that selling pressure is increasing. / Extreme values of this indicator can be a very useful tool for contrarian investors to foretell periods of exhaustion. Once the price is excessively pushed in one direction, there are very few investors to take the other side of the transaction when the participants wish to close their position, ultimately leading to a price reversal. Similar to the ROC indicator, important signals are generated when the indicator crosses over the zero line because it is an early signal that momentum is building.
Candlestickss
Aroon Oscillator measures the strength of a trend. /The Aroon Oscillator is constructed by subtracting Aroon Down from Aroon Up. Since Aroon Up and Aroon Down oscillate between 0 and +100, the Aroon Oscillator oscillates between -100 and +100 with zero as the center crossover line. The Aroon Oscillator signals an uptrend if it is moving towards its upper limit. It signals a downtrend when it is moving towards the lower limit. The closer the Aroon Oscillator value is to either extreme the stronger the trend.
Bullish Three White Soldiers Candlestick
• Direction: Bullish / • Type: Reversal / • Reliability: Strong
A bullish candlestick pattern that is used to predict the reversal of the current downtrend. This pattern consists of three consecutive long-bodied candlesticks that have closed higher than the previous day, with each session's open occurring within the body of the previous candle. / These long-bodied candlesticks are a sign of the change in investor sentiment and are used by traders to confirm a shift in momentum. This pattern may form after a period of consolidation, which is still a valid sign of a move higher, but it is not as desirable as it would be if it were found at the end of a prolonged downtrend.
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