Sunday, December 22, 2013

What comes first in a chart, Volume or Momentum?

For this discussion I am using MACD and Volume, we know what Volume is.

MACD – Basic

The most simple momentum oscillator, this indicator uses two moving average (I use them as an alternative for trend lines at times). Momentum change happens as there are consecutive breakouts or breakdowns of any trend lines. So that’s how momentum is measured.
MACD Line: (13-day EMA - 21-day EMA)
Signal Line: 8-day EMA of MACD Line
MACD Histogram: MACD Line - Signal Line

The math was simple ain’t it?
MACD – the convergence occurs when the moving averages move towards each other and the divergence occurs when the moving averages move away from each other. It is an oscillator because it oscillates above and below the zero line.
Any Momentum indicator that you like to use, either RSI or MACD can be applied in the RSI new high trick that was discussed earlier.
There is a difference between RSI and MACD.
MACD cannot have an upper limit, while RSI can have. Why is this important? We will discuss this using TSLA.

You can use these tricks, in conjunction with the Market or the Sectors. Make sure you are playing in the Market or Sector direction.

From the above chart, we can see what can be used for hunting the tickers. Hunting with the momentum based indicators puts in the odds of getting in early. 

GL all. Merry Christmas and Happy New Year. 

Sunday, December 8, 2013

RSI (3) trading strategy

Swing Trading with the most simple strategy.

In one of my previous Tips and Tricks ( #3) I have told you guys why buying in Overbought could be profitable.

Now I am going to tell you when to buy Oversold. Treat the following as a starting point with RSI to scan for stocks.

There are two ways to apply this strategy.

1) Finding a long term Momentum direction (and / or).
                  using CCI (150 or 200) would be better.

2) Find the major trend.
                  using 200 SMA

Lets just see the most simple option first.

Step 1. This is a generalized statement observed (or used ) in the market “The long-term trend is up when a security is above its 200-day SMA and down when a security is below its 200-day SMA. Traders should look for buying opportunities when above the 200-day SMA and short-selling opportunities when below the 200-day SMA”

Step 2. Use Daily RSI(3) and find tickers trading below 15 (I like 10)  for buy and 85 (I like 90) for sell on RSI chart.

Time for a sweet example (I don't see a point in posting 100 of charts showing this, I would recommend you to go through that exercise to get a feel for the strategy).

Remember there is risk, trading whatever your strategy is, we can minimize the risk to certain level, That’s about it.

In the following chart, you can see the horizontal lines (dotted blue lines), showing signals of RSI (3) buy and trading above 200 SMA. Yes, there are about 4 bad signals, but learn to take the good ones. And get rid of the crappy ones with a stoploss as quick as possible.

For friends and Promotion stock secret members, if you are looking to fine tune this strategy send me an email.

Below is the scan code  
(btw, i am not selling stockcharts, I just like it for scans)
[type = stock] and [group is not etf] 
and [today's sma(50,volume) > 100,000]
and [daily close > daily sma(200,close)]
and [RSI(3) < 15]

I have fine tuned this scan for personal use, its more complicated for a budding chartist, the goal of my blog is to keep things simple. 


NURO (NeuroMetrix Inc.)


Finally showing strength of buyers. (Trick #3) On my continued watch for pattern breakout plays.

Note: Treat this as educational resource only. I don't personally recommend you to buy or sell this ticker, any decision you make in terms of buy and sell is totally on you. 

News :
NeuroMetrix Launches

This News went live on Nov 22nd, the volume spikes earlier than news.

Sunday, December 1, 2013

Week - 3 Swing Trading - Introduction to Technical Indicators

Welcome back to the Swing Trading – Week 3

Swing trading stocks begins with a hunt and the hunt goes on until you find the perfect one. There are many different ways you can hunt for stocks, using fundamentals or using technicals.  We are going to take the technical hunt, inorder to perform this hunt you need to understand every technical indicators you like to use. Lets jump right in……….

Technical indicators are broadly classified as Indicators (RSI, MACD, OBV, etc) and Overlays (SMA, EMA, KC, BB) (indicators are sometimes called as leading indicators, and overlays as lagging indicators FYI only).

Indicators can be classified as Momentum, Trend and Volume Indicators. Some Volatility Indicators are overlays on chart like the Bollinger Band.

Before we get into the details on indicators, I think it is my duty to give you the most important warnings.

·         Do not use Technical indicators as signal to Buy or Sell.
  • Technical indicators measure price and/or volume “behavior”. The most newcomers often make mistake is treating them as buy or sell signals. Technical indicators are great for stock hunt, Buy and sell signals should be based on the price action.

Following table can give you a summary of all known Indicators and their functions.

Based on
Rate of Change in Volume
Measures increase in Volume
Volume Oscillator
Measures Trend in Volume
On Balance Volume
Measure the accumulation or distribution by comparing volume to price.
Closing Price and Volume
Price - Volume Trend
Measure the strength of price trends
Closing Price and Volume
Measure the Price and Volume relative movements
Closing Price, Range and Volume
Money Flow Index
Measure the volume on green vs red days (RSI for Volume)
Closing Price, Range and Volume
Chaikin Money Flow
Measure the Price and Volume relative movements
Closing Price, Range and Volume
Relative Strength index
Strength of buyers and sellers in its current direction
Closing Price, previous closes
Aroon Indicator
Determines whether a stock is trending or not
Average Directional Index
Measures the Strength of Trend
Closing Price, High/Low
True Strength Index
Smooth RSI version
Vortex Indicator
Identifies the start of a new trend.
Parabolic SAR
Measures reversal points based on High and Low price data
Closing Price, High/Low
Simple Moving Average
Measure of trend direction by smoothing price data
Closing Price
Exponential Moving Average
Measure of trend direction by smoothing price data
Closing Price
Moving Average Convergence and Divergence
Measures the distance between the two moving average lines
Moving Average

Triple-smoothed exponential moving average of closing prices
Moving Average
Commodity Channel Index
Shows a price variation from its Moving Average.
Closing price, Moving Average
Detrended Price Oscillator
Compares closing price to a prior moving average
Closing price, Moving Average
Measures the Momentum based on closing price and MAs.
Closing Price, Range
Williams %R
Measures the Momentum based on closing price and MAs.
Closing Price, Range
Williams Accum/Dist
Measures Accumulation/Distribution without Volume
Closing Price, High/Low
Elder Ray Index
Measures buying and selling pressure in the market.
High/Low, Moving Average
Average True Range
Measures a stock's volatility
High vs Low
Bollinger Band
Measures Volatility
Standard Deviation and SMA
Keltner Channels
Overlay based on ATR
Average True Range, Multiplier
Ichimoku Cloud
Defines Support & Resistance, Trend, Momentum and Trading Signals
High/Low of various time periods
Pivot Points
Defines Support & Resistance
Closing Price, High/Low

You don’t need to know all the indicators in-depth. But having an in-depth knowledge on important indicators can help build a trading strategy.

For Example,
Let’s use Aroon Indicator, this indicator determines the trend, we can use this indicator to find stocks that are consolidating (can use this indicator to scan for many other trade ideas), using the following expressions on

We will get in details about this indicator in later lessons.

Stockcharts advanced scan criteria.
[Daily Aroon Up(25) < 20] AND [Daily Aroon Down(25) < 20]

Using this scan, showing the 6 of 50 stocks result. 
SM Energy Co.
Exploration & Production
Simpson Mfg Co, Inc.
Building Materials
Synaptics, Inc.
Computer Hardware
Timken Co.
Industrial Machinery
Tractor Supply Co.
Specialty Retailers
Texas Roadhouse Inc.
Restaurants & Bars

Note: I have not looked at these stocks charts yet, this is not a buy or sell recommendation.

Saturday, November 23, 2013

Week - 2 Swing Trading - Basics

Welcome back guys and girls to WEEK 2 on Swing trading

Last week we started with an intro on stage analysis. This week I am going to give you a broader view on all four stages and three phases associated with every stage.

Lets get started rite away, We will do a quick lesson on Elliot wave this week, that would complete the major lessons on swing charting (not trading).

I firmly believe that to compete in the market arena, the four stock market stages will be one of your weapons to time the move perfectly and add confidence in buying any rally. But this comes only with practice, take 10 charts a week, practice and practice until you master it. It is my advice to use this as a supporting point to any other analysis you perform.
The chart (from last week) for reference again

Lets take a look at all the stages and phases.

Stage 1A – Bottom Found.

                First sign of strength after a down trend (typically)

Stage 1 – Pattern forming.
Breakout of the down trend and price putting out higher lows in tight range (Starter position, with tight losses)

Stage 1B – Pattern Breakout.

Breakout – This is where we come in as Swing trader.

Stage 2A – Retrace - First Breakout.

Retrace to test, fib levels, pivots, supports, trendlines etc.

Stage 2 - Advancing Stage

The move happens, and the ticker gets overbought and keeps moving.

Stage 2B – Parabolic move or a huge % gain candle.

(I try to keep an eye for any parabolic moves here, if it happens,I quickly plot out trendlines, and watch for trendline supports on different time period or use 10 SMA instead of trendlines ).  

Stage 3A – Price action slowing, signs of weakness.

Look for reversal chart pattern to begin forming. (look for consolidation volume)

Stage 3 – Top heavy. (decreasing volume on push ups is one way to spot this)

Scale out inside the reversal chart pattern

Stage 3B – Breaking down.

Watch for 20 SMA or Trendline support to break.

Stage 4A – Downtrend begins.

Break down and trend down.

Stage 4 - The Declining Stage.

Here there may be a retest of up trend line that was broken, be sure to watch for shorts typically will lose at the trendline resistance. (Very few stocks breakout again, AAMRQ recently is a good example of this).

Stage 4B - Late in downtrend.

Forget the ticker for a while, let it cool. Move on to the second ticker from your list.

On all these stages, you should keep an eye on Volume and Price. Any technical indicator you use or read about is based on either one or both. Nothing else.

Note: A leading indicator cannot be a leading indicator, because the price and volume has to develop completely for the indicators to generate or confirm a signal.

Stock market stages occur in all time frames on every chart you look at. Sometimes can be hidden in a weekly chart, or 30 min chart or 5 min chart. It is up to you to decide what time frame you want to look at, and see if you have enough reward to risk ratio. If you don’t find it good enough, move on, we have 10,000+ stocks trading why get stuck with crappy tickers? .

(I am going to just touch the basic here, this is very complicated to locate the pattern, there are various views discussed on this, but honestly I don’t use it, well with that being said, the overview from my perspective of Elliot theory is any breakout will retrace, that’s all I need from these 300+ books that talks about Elliot's theory).

The Elliott wave pattern defines that securities tend to move in a five + three wave patterns that consists of a Trending and a consolidation phase.
This is how an Elliot wave is described to be. 

To show some Live examples of Elliot wave, below is a chart again TSLA – it is familiar and has what I was looking to add an example.

On the above chart you can see there is one complete Elliot wave (I, II, III, IV, V), and One incomplete Elliot wave ((I), (II), (III)) It is incomplete because the (IV) and (V) is missing. Hindsight can tell you lot of stories. Will TSLA complete the missing moves??? Only Elliot and his firm believer can bet on it, Not me.

If you can successfully spot an Elliot wave (especially 3 or III or iii) and time it perfectly, you are a genius and you are going to over take any so called stock market teachers monthly gains, I am serious, lol. 


- Next week we will get into SMA vs EMA, what to use? and how to use?

I am not going to talk about Golden cross, Silver cross, Bronze cross (I am yet to see platinum and diamond crosses lol), you can find all that information on every site available, whether it is paid or free. The methods i describe here are some techniques i use and how i use moving averages. 

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