ACTA - an example of divergence 26.10.2007

Since summer this year Acta has been in a downward moving trend. The question we can ask is if the trend is coming to an end and if the stock price can start rising again soon?
Looking at ADX the value (34) indicate a relatively strong trend, and from the fact that -DI is higher than +DI we can without looking at the price curve say that the trend is negative. If we draw the trend channel for the price chart everything suggest that the downward movement will continue as before. Drawing the trend channel for RSI and putting it in relation with the price chart we see something interesting. The support line for RSI is rising while the support line in the price chart is falling - there is a divergence between the price movement and the RSI movement. When we see this it is usually a very positive signal indicating that the downward movement in price is coming to an end, and a rise can come in the near future. If RSI bounce up again without forming a lower bottom than the last one (the bottom defining the trendline) this will further strengthen our analysis that we can expect a rise in price soon. Therefore the critical level to pay attention to now first is the level that is defined from the support line for RSI. The RSI value must not end lower than value for the trend line.

GGS 25.10.2007

GGS has after being in a negative trend stabilized and started to rise. The long term trend is still negative and will possibly be so for some more time. The level for the resistance line in the long term negative trend that will have to be passed is around 2.20 - 2.30 NOK at the moment. In the short term a rising trend is starting to form as we can see from the rising ADX levels. The price curve is moving in a newly developed trend channel where there is support at about 1.70 NOK and resistance at about 1.90 NOK at the moment. The price trend channel correspond nicely with the RSI trend channel and we can in the days to come expect a price movement within this channel. If on the other hand the resistance- and support- levels are broken act according to your trading plans.

DNO 24.10.2007

As we can see from the price chart there has been a lot of negative news for DNO the last few weeks. The Turkish army is lined up along the Kurdish boarder ready to attack PKK guerrilla bases. What will happen politically is difficult to tell but here we will look at the stock from a pure technical analysis point of view.
The stock price has found some support at the support line around 9,90 - 10.00 NOK. What is concerning is that the rsi value has fallen through the support line indicating a further possible fall in stock price. There is room for a small fall to the support line but if this support fails the stock price can soon fall down to 9,60 at least. On the other hand if the stock price rise the potential is up to about 11,30 NOK. ADX is showing increasing values indicating that the price is moving towards a trend. Hopefully ADX will show lower values tomorrow indicating that this down movement in price might come to an end for this time.

TGS 22.10.2007

Since mid-September when the stock price touched the upper resistance line for the falling trend channel, the stock price has fallen towards the lower support line in the falling trend channel. There is now a possibility for upward movement in the stock price. The potential for the moment is up to about 114 NOK. But before there can be any movement upwards there need to be a rise in the RSI. There is good support at about 26-27 and hopefully this support will still hold. Overall the stock gives negative indications and we can expect a fall to about 83 NOK the coming days before a rise. But as said before the support at 26-27 for RSI seems strong and if RSI moves down to this level a bounce upwards can occur. There is however some positive signals to spot and that is that the volume is falling meaning the "panic" selling seems to be over for this time. Maybe it is time for accumulation soon?

Belships Skibs 19.10.2007

Belship has been in a long rising trend but are now in the higher part of the trendchannel where there seems to be strong resistance that can prevent further rise for the stock for a while. Most likely the stock will move downwards to the supportlevel at about 25 NOK. The reason why we can say this is because of the falling RSI tops. In order to get higher stock price for BEL now RSI needs to rise and break through the falling trendline at level about 81 otherwise the stock will fall.

Trendlines, RSI, Pricechart with example - Marine Harvest Group (MHG)

There is much talk about how to use oscillators when doing technical analysis. Some people rely solemnly on them while others would not touch them. But how can we use oscillators effectively?
The key is to have a setup of indicators that "work" together. One suggestion is to use a price chart, adx and rsi. ADX is used for telling if the stock is trending or moving sideways. Low adx values means sideway movement for the stock price while high values means the stock is trending.
Now what is high and low values for adx? As a rule of thumb the market is in a trend when adx shows values above 20. ADX by itself can not tell if the stock is moving up or down. What we know about oscillator indicators is that they work best when the market is moving sideways. If the market is in a trend either up or down you need to use trendlines also in the oscillator (oscillator in this article is rsi). One more thing about the rsi oscillator, usually when the market is moving sideways a value for rsi above 70 is indicating that the stock is overbought and is likely to fall soon, while a value below 30 is indicating that the stock is oversold and is likely to rise soon.
Lets look at one example.
I have picked out the Norwegian company called Marine Harvest Group.
Looking at the price chart we see that the trendlines are falling but there is some support at about 5,90 at the almost horizontal trend line. So is our interpretation that there is a falling trend valid? Looking at adx we see that the value is 28,576 indicating that the stock is in a trend. From the price chart we could see that the trend was a falling trend and should therefor be fairly valid. The stock is in a trend but we still choose to look at the oscillator called rsi to see if we get some extra information. We have drawn trendlines that coincide with the trendlines in the price chart. From this we have some idea of how the stock could develop the coming days. RSI and the price chart give room for a stock price rise to about 6,50 -6,60 but the potential downside is to about 5,90 where we find support from our horizontal trendline.

Two variables EMA optimization

I wanted to do a quick check of what values give me the best return when using EMA as signals for when to buy and sell. The system says buy when fast ema crosses above slow ema, and sell when fast ema cross below slow moving ema. I am not using this system myself and if I did want to use something like this I would probably go for using three variables instead of two. Anyway here is my result from optimization (of my osebx database) in Amibroker. Basically red means good. If you try these values in your trading software and do some backtesting on them this could possibly give some nice numbers. I would still be cautious about a system like this and possibly use some more indicators in addition to ema.

Insider portfolio 12.10.2007

Here is a short update for how our portfolio is performing before weekend starts.

GGS 11.10.2007

Yesterday the stock price for GGS (Global Geo Services) raised above the down trending resistance line. This coincide with the rsi chart where there was also a rise above the downward trending resistance line. I would be reluctant to say that this company is now healthy but what we can see is that the two last days have been very positive for ggs. If I was to buy this stock I would wait and see if there will be a pullback to the newly formed rising support trendline and buy if this support line holds.

OSEBX 09.10.2007

45 days EMA still holds as a resistance line and OSEBX is about to move towards the falling trendline. RSI fits perfectly with the trendline drawn and is currently able to stay positive over the trendline. A new bottom has formed in the index chart that coincide with the trendline for rsi. If this holds the index will move up and test the falling trendline in a few days . What is important then is if this falling trendline can be broken indicating further rise. Contrary there can be a fall down towards 483.

Insider portfolio