StockFetcher Forums · Filter Exchange · RSI(2) - The Little Indicator That Could<< 1 ... 7 8 9 10 11 ... 26 >>Post Follow-up
abkhn00
4 posts
msg #29942
Ignore abkhn00
11/19/2003 1:52:11 PM

Hi,
New to sf, great posts and am trying to read through all of them, thanks. Not a successful trader yet, mainly because of cash management (great post RumpledOne from Optionetics) but one of these days hope to turn corner.
I've tried the rsi(2) and linear regression and I've noticed when both were showing drop dead bottoms on AXYX, NWD, and EELN, stocks didn't react as they should have. If I can add my two cents, those filters need to be used in conjunction with high volume alert on the stocks recently or as I think ewzuber is pointing out the weekly stochastics has to bottom. I haven't fully figured that out yet but I think it explains why axyx is not jumping up and to a certain extent nwd. eeln had a quick jump but couldn't hold.


TheRumpledOne
6,359 posts
msg #29945
Ignore TheRumpledOne
11/19/2003 2:13:42 PM

abkhn:

You need to look at the dow and nasdaq indices too using RSI(2) and Linear Regression. No need to add more indicators... KEEP IT SIMPLE.

Also, look at the WEEKLY RSI(2) and WEEKLY Linear Regression. Make sure they confirm you decision based on the Daily charts.

Finally, trade stocks that trade millions of shares per day, rather than thousands.

MAY ALL YOUR FILLS BE COMPLETE.


txtrapper
548 posts
msg #29950
Ignore txtrapper
11/19/2003 7:36:17 PM

abkhn00

I cannot find any consistancy in Stochastics Weekly or Daily; take WJCI today for example, looking at a 1yr/weekly www.prophet.net chart right in front of me right now.

WJCI, the stock jumped $.21 today on red volume and and a weekly Stochastic Fast line crossover in a fast decline. Explain that? Now on a 3 month another chart; Stochastics 3mos/daily fast line not yet reached the slow line crossover yet. If there was consistancy with daily and weekly charts indication I might trust stochastic more, but the above example shows they throw false signals. JMO

tx

tx





txtrapper
548 posts
msg #29951
Ignore txtrapper
11/19/2003 8:01:42 PM

Another example, look at the Nasdaq under Indices at www. Prophet.net on a 3month/daily chart. It's shows a marked improvement in the Nasdaq today crossing/bouncing thru the EMA(50)line, with good volume, however, my 3mos/Daily Stochastics (on the same chart) has not clearly signaled the uptrend of the Nasdaq. Does that not seem odd? Of course RSI(2), OBV and Williams %R all gave a positive signals.


tx


TheRumpledOne
6,359 posts
msg #29963
Ignore TheRumpledOne
11/20/2003 2:18:51 AM

Hey guys.. this thread is about RSI(2)... let's keep to the subject, please.

Thanking You in Advance.

P.S. RSI(2) had a lot of ripe ones for Wednesday trading. Hope you got some.


EWZuber
1,373 posts
msg #29964
Ignore EWZuber
11/20/2003 2:47:19 AM

txtrapper
Convergent Stochastic Theory does not state that a stock can not rise or that a Daily chart stochastic indicator can not have a fast line cross above the slow line and begin accumulation withion that periodicity while the Weekly chart stochastics are indicating longer term distribution.

These are cycles within cycles. The Daily chart stochastic cycle modulates the Weekly chart cycle. The hourly chart cycle modulates the Daily chart cycle.

To assume that a stock can not rise at all on daily charts during a Weekly chart distribution phase is like assuming a stock can not rise intraday on the hourly chart during a distribution phase on the daily charts.
We have all seen stocks rise to test resistance during distribution.

The signals are not false it is in the interpretation of the indicator.
I have found that if I align the indicators in phase with one another I can get about a 90% success rate. When the indicators are not aligned then you get complex waveforms.
In the case of WJCI, We will consider the Weekly, Daily and Hourly charts.
The Weekly chart is in distribution and becoming mildly oversold @ 34.
Daily chart is extremely oversold @ 9 ( yesterday ).
The hourly chart is extremely oversold @ 3.6.
This move today was highly predictable with Daily and Hourly chart stochastics in very good phase alignment and both exctremely oversold.
To take it a step further the 5 minute chart stochastics were at 0 moments before the trendline break and the subsequent move higher at 1:15 ~ 1:20 today.
That is when trendline resistance was broken.
So we had a lot going for this trade. If Weekly chart stochastics had also been aligned or at least converging fast and slow lines the move would have been stronger.
Let me give you an example.
If you use a 1 year Weekly chart on WJCI ( I'm using Big Charts ) using 5,3 or 5,5 timing. Find the Stochastic Fast line convergence with the Slow line at 4/20 & 7/13 and draw a vertical lines through these points for markers. Expand the scale to look at the period between the beginning of April to the end of August.

Now switch to daily charts.
Here it is evident what influence the Longer term Weekly chart stochastic cycle has on the shorter term Daily chart cycle.
A typical Daily chart cycle might last about 2 weeks and have moderate gains.
But look what happens around 4/21 when the Weekly chart cycle just catches the top of the Daily chart cycle that starts about 4/15. The Daily chart cycle stays in an overbought condition for a prolonged period of time. The cycles become higher and wider at the overbought range of the indicator and the stock price stays near its highs longer.
Notice that the waveform is distorted and doesn't even go into distribution around 5/9 staying in neutral overbought / oversold territory at the worst dropping to a value of 46.

Weekly chart Stochastics have a fast line cross BELOW the Slow line indicating the start of a long term distribution phase.
Look what happens to the Daily chart now.
The Daily chart cycle is now the inverse of the pattern it formed while the Weekly chart cycle was in accumulation. Now it is staying oversold the majority of the time. Notice how the valleys have become deeper and wider, indicating that the stock is spending more time under distribution and even though the Daily chart has accumulation phases throughout this time, the stock produces no new highs.

We have a similar situation again around 7/14.
Draw the resistance trendline from the high of 5/15 ( daily chart ) to the high of 7/23. Where this ( conservative ) trendline resistance is broken the stochastic cycle confirms the break with a fast line cross above the slow line and the beginning of a new cycle of accumulation.
Here the stock climbs and the move is sustained as now Monthly, Weekly and Daily chart stochastics are all aligned in accumulation and the momentum builds.
Now switch to a 1 year Monthly chart and see what happens when the Monthly chart Stochastics Fast line crosses BELOW the Slow line around 10/25.

Then go back to the Weekly chart and see how the drop in price accelerates as the Weekly chart cycle becomes aligned in phase with the Monthly chart cycle.

The Weekly chart cycle crosses into distribution around 9/21 but doesn't really impact the stock until the Monthly chart cycle becomes aligned in phase so that both are in distribution. At that point the stock drops like a rock.

Now draw a supporting trendline from the low of 8/17 ( weekly chart for ease of understanding ) to the low of 11/02.

If one was to short the stock this is the convergence of events I would be looking for. An oversold Monthly, Weekly and Daily chart stochastic cycle with a break of trendline support.
Conservatively this would have gotten you short at about $6 and the stock is now at $4.

It is an art reading chart indicators, not a science. However using these tools I have had very high success rates.
I hope you will take the time to check these charts out because it has taken a long time to write this and check it for accuracy.
I did this for you, not for me. I don't need to prove this to anyone.





EWZuber
1,373 posts
msg #29965
Ignore EWZuber
11/20/2003 2:48:55 AM

TheRumpledOne
Sorry, didn't see your request.


txtrapper
548 posts
msg #29967
Ignore txtrapper
11/20/2003 11:25:11 AM

Thanks Zuber for taking the time to explain that in such detail.

tx



TheRumpledOne
6,359 posts
msg #29971
Ignore TheRumpledOne
11/20/2003 5:10:22 PM

Not a big deal EWZuber... just trying to keep the focus on RSI(2) so when people search for RSI(2) they can find what they seek. That's all.

MAY ALL YOUR FILLS BE COMPLETE.


jthehut
124 posts
msg #29977
Ignore jthehut
11/20/2003 7:17:35 PM

In today's market conditions, if you can beat rsi(2), I'd love to see it!!!

Go Muddies!!!

jthehut


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