What To Watch Out For

By: All About Trends

In the stock market there are three things you need to know.

  • Uptrends and how to trade them
  • Downtrends and how to trade them
  • Change In Trends and how to identify them be it down to up or up to down.

Given we are sitting at some year highs all going into May with it's "Sell In May And Go Away" mantra (for those who subscribe to that self fulfilling prophecy) not to mention the potential wave count (5 waves up) and a fair amount of resistance now is a good time to talk a bit about Change In Trend patterns to be aware of. Continue reading "What To Watch Out For"

Trader's Toolbox: Stochastics (K%D)

Yesterday you freshened up with the Williams %R oscillator. Today we have an indicator that you may or may not be familiar with as well.Like we have said before, if you have used other technical analysis indicators previously, you can use a combination of the studies and other techniques in conjunction with the "Trade Triangles" to further confirm trends.

The stochastics indicator created by George Lane measures the relative position of the closing price within a given time interval. This indicator is based upon the premise that prices tend to close near the upper portion of a trading range during uptrends and near the lower portion of a trading range during downtrends. When prices close in the middle of a range, this suggests a sideways market. There are two components to this calculation, the %K value and the %D value. The %K is calculated as follows: %K= (C-Ln / Hn – Ln) x 100 where C = closing price of current period, Ln = lowest low during n time periods. Hn = highest high during n time periods and n = number of periods.

The %D value is the moving average of the %K value. The simple moving average calculation is: %D = 100 (Hn / Ln) also in the %K formula.

These formulas produce two lines that oscillate between a scale of 0 and 100. As with the other oscillators, a stochastic value below 30% suggest an oversold condition, while a value greater than 70% suggests an overbought condition.

Some simple trading rules apply in the use of the stochastics indicator. A sell rule would be to sell when the fast (%K) crosses over the slow (%D) and both are pointing down, but are still above the 70% level. A buy signal would be triggered when the fast crosses the slow, and both point up, but are below the 30% level.

Another type of signal occurs when the stochastics indicator diverges from a price move similar to momentum and RSI.

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You can learn more about the Stochastics and George Lane by visiting INO TV.

Nasdaq Index - Trendline Alert

One of the most powerful technical tools that a trader possesses is a pencil and a ruler. It sounds kind of old-school, but the reality is trend lines in technical analysis are enormously important.

In my new video I will show you how the NASDAQ index has broken a very important trend line and what the ramifications are for this index.

We can all learn from the simplicity of this approach and how effective it is in the long run.

As always our videos are free to watch and there are no registration requirements.

Enjoy the video and please feel free to comment on blog about this simple yet effective way of trading.

All the best,

Adam Hewison
President, INO.com
Co-creator, MarketClub

Traders Toolbox: Support & Resistance Revisited...

Trader's Toolbox

At MarketClub our mission is to help you become a better trader. Our passion is creating superior trading tools to help you achieve your goals -- no matter which way the markets move -- with objective and unbiased recommendations not available from brokers.

The Trader's Toolbox posts are just another free resource from MarketClub.

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Support & Resistance Example

"Although many of you will find this lesson in one of the most basic concepts of market behavior “old hat”, it never hurts to review. One of the first things a new trader is told (I hesitate to say learns as many never do) is to buy a breakout above resistance and sell a fall through support.

Resistance is the level which holds a market down, while support is an area which props up a market much like a ceiling and a floor. The key is to identify the critical levels. There are a number of methods to determine support and resistance: trendlines, moving averages, retracements, Gann angles, etc. However, simple observation can be an effective means of locating the important areas. A quick glance at the October cotton chart reveals the most basic levels of support and resistance (broken lines)..."

Revisit the Trader's Toolbox Post: "Support & Resistance" here.