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Nir
Hi All After loosing money, I decided to invest the last 6 month
posted Dec 08 '14 by nir
Hi All

After loosing money, I decided to invest the last 6 month in reading as much as I can about stock investments.
The rule #1 makes a lot of sense and I understand it require a lot of work to create the watch list.
What I don't understand is the technical tools. While I understand the simplicity of three signals, I don't understand what you need to do if you see opposite signals.

Does opposite signal on the same tool, cancel each other?
If I see a buy signal in MACD and few days later the MACD signal is now a "sell" signal how do I need to interpret it (as a sell signal or as a cancelation signal to the original buy)?

I will appreciate any help to understand how to use the three tools in a more realistic world as I see from the graphs today.

Thanks
Nir

Also what is the time interval I expect to see the three signals, is it relevant to sell if the third signal appear a week or two after the others?

This is the only part in the method I don't really understand

ALEX
Price Chart and Technical Indicators
posted Dec 09 '14 by alex
Price Chart and Technical Indicators

It is very rear that you can see that all three tools are perfectly aligned in the same day. Usually, there is a delay between signals. The reason is all of them a based on different time frames – for example, MA30 tracks only 30 days of history, while MA 200 – 200 days.

In general, there are primary and secondary indicators. I think of a price chart as a primary indicator and the rest of them are secondary. All secondary indicators may be divided by time frame: 10 and 30 days Moving Averages usually considered as a short term indicators; MA50 – middle term and 150 and 200 days moving averages are long term indicators. Depends on your strategy and objectives you should focus on appropriate indicators. For example, if you are planning to hold your position for a long time (at least several months) you probably will do better paying more attention to the long term indicators. At the same time, you can use all of them to confirm your understanding of a stock trend.

When signals confirm each other it should give you an extra confidence. Stock2own TI Alerts built using the same logic – you shall see signal “Almost Buy” when 2 or more tools are moving into “positive” or “bullish” territory and the “Buy” signal shown only after the latest indicator gives the “buy” (basically all other indicators may already be in a “hold” state for several days).
It could be confusing at first…

Nir, let’s take a look to the stock you are interested in and try to make sense of it’s chart together. Would you mind to pick a stock?

Nir
Hi Alex First thank you very much for the detailed answer. So I
posted Dec 09 '14 by nir
Hi Alex

First thank you very much for the detailed answer.
So I looked at IPGP ticker. After doing all the Analysis according to Rule #1 book and using your site, I saw it was in "Buy" mode (this was the signal 3 days ago).

ALEX
IPGP – Technical Analysis
posted Dec 09 '14 by alex
IPGP – Technical Analysis
IPGP currently is in up trend, it is in a Bull market stage (Latest stock price 76.34 is above long term (200 days) moving average (MA200 is 68.37). 50 day moving average is 70.12 and above 200 days moving average.). More than that, lately it’s been traded with well above average volume, it shows a lot of interest to this stock.

Yesterday (December 8th) was very interesting day because the trade volume was enormous – almost 6 mln shares vs usual volume of around 300k. And yet the price did not move much and on a candlestick chart I can see a doji – it looks like a cross. It signifies that no buyers and no sellers won, they are in a perfect balance. In other words, there is no decision of the short term direction has made as of yesterday. By the way, there is a short article available about candlestick chart (original text taken from Wikipedia):
http://www.stock2own.com/StockMarket/Theory/TechnicalAnalysis/Candlestick-Chart

In terms of Technical Indicators Alert, it currently show “Hold”, because all indicators are currently in a positive territory. I think the “Buy” signal was on December 3rd, when price crossed up MA10 and MACD was finally giving the buy signal (started to form a “mountain”). At the same time RSI crossed above 50 level, which means stock started to perform better than usual.

Also, I’m usually trying to draw support/resistance lines and as far as I can see, there is a strong support line at the level of 75. When I switch chart to 1 year date range (just click on “1y” button at the top of the chart), I can see that the price was staying at the 75 level and could not get up pretty much all April. Recently, it tested 75 level again at the beginning of November and on December 3rd the price finally made it through. Because previous resistance line become new support, we can see that price sort of bouncing off this level ($75) for the last few days.

So, I think the good entry point for a long position was on December 3rd, when all indicators gave the “buy” signal and at price level of slightly above $75. It is very close to a support level, which usually a relatively safe entry point. Big volume confirmed the move up and the stock is trading in the uptrend since the middle of October. All moving averages are pointing up, all secondary indicators (stochastic, MACD, RSI) are in a positive territory – I would say it is ready to go up.

The next level of resistance is probably this year’s high of 79, therefore we can expect it to run to that level at least. I would definitely place a stop loss right under the current support level of $75, so if this analysis is wrong and stock goes down, broker will automatically close this position at that level. How far below $75 – it should be defined based on your own rules and risk tolerance…

ALEX
I just added a price chart image with support line - it is available
posted Dec 09 '14 by alex
I just added a price chart image with support line - it is available on S2O wordpress blog:
stock2own.wordpress.com/2014/12/09/ipgp-technical-analysis/

Also I forgot to mention that weekly prices are also very important as a long term analysis of the price trend. And for IPGP it stays above moving average (positive signal for a long position) and currently in a "decision making mode" - it shows goji again. So be careful and watch what direction the price will move to.

Nir
Thank you Alex for the detailed answer.
posted Dec 10 '14 by nir
Thank you Alex for the detailed answer.

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