Tuesday, October 28, 2008

Markets Surge Forward

Wow! What a day. The 2nd biggest ever and I really expect to see more as the days go forward. Those smart enough to have taken advantage of the discounted prices saw their fortitude flourish today as the buyers overwhelmed the sellers by far. When you have many buyers and few sellers, people end up paying a premium. Those who didn't sell know they are holding what will apparently appreciate even more. We will see some profit taking in the following days, but I believe the bear is loosing some bite.

Have a good one,

Relative Strength Index as an Indicator

Most widely termed RSI, the relative strength index is another way to measure the overbought or oversold status of an equity. It compares the amount of recent gains to recent losses and a value above 70 is generally considered overbought and less than 30 oversold. I prefer stocks on the oversold side because the are due for a pop to the upside, so this tool can be used to filter your picks also.

Have a good one,

Monday, October 27, 2008

Parabolic SAR as an Indicator

Parabolic "stop and reverse," or PSAR, is a very useful and accurate indicator during a trending period. Outside of a trend, it is kind of useless. Since we look at getting in before the trend begins, its more of an "after the fact" confirmation but makes a very good exit signal. I will be getting into more technical indicators, their benefits and their pitfalls in the upcoming weeks.

Have a good one,

Quick Analysis

One quick way I use to sort through many potential stock picks is to go to Yahoo Finance and look at the following:

1) Price/book ratio. The lower the better as far as value goes.
2) Shares short less than previous month. The lower the better as far as people betting against the stock.
3) Slow Stochastics. I'm looking for %K crossing above %D and as close to 20 on the oversold side as possible. I wrote more about this in an earlier post.
4) PSAR. I'm looking for parabolic SAR below the stock price.

All of these together make for a quick way to analyze several picks to narrow down your choices.

- Roger