Friday, June 27, 2014

How to apply MACD, Time Cycles, DMI indicators on stocks?

In technical analysis there are more than 100 indicators that can be used and applied on stocks. 
But trust me most of the indicators gives similar output. It is better to stick with 3 to 4 indicators that you are most comfortable with and understand it completely. Many of the books and if you search online using Google search will give you very crude way to use these indicators for simply overbought or oversold conditions which are wrongly pre-defined as 70 and 30 levels on RSI. The reason I say these levels as incorrect because during strong bull trend RSI will easily reach 80 to 85 levels and during strong down trend RSI reading of 20 is fairly common. For optimum use of RSI try to see the levels from where RSI has turned previously or in short which level is acting as support and resistance – in a similar way we identify supports and resistances for stocks.
The below article highlights on how do we combined indicators like MACD, Time Cycles and advanced concepts like Directional Movement Indicator. The complete strategy is not revealed which is mentioned in today’s morning research report.
Kotak Bank Daily chart:
Wave Analysis:
As shown in Daily chart of Kotak Bank, since mid 2011 prices are well intact in the upward moving channel. Recently in mid June 2014 prices broke above the channel resistance near 910 levels, made a high near 960. But, after that prices were unable to sustain above the same and showed sharp down move in last few trading session. This down move has broken the black color channel support which was intact since start of 2014. This is suggesting that short term top is in place for Kotak Bank. We have applied various other tools which are giving warning signs at current level that up move from ……. is in danger.
Directional movement index (+) in blue color and Directional movement index (-) in red color is working very well. In the past we observed that whenever blue color line moves above red color line  prices showed strong move on upside on the other side whenever blue color line moves below red line prices have showed down move. In simple terms, crossover of blue and red color line is providing signal for buy and sell. At current level, ………
MACDThis indicator is showing negative divergence and also the red line has crossed below signal line. What does it mean?Indicators are suggesting weakness but is it right to take the trade based on Indicator? Absolutely not! It is imperative to look at price charts of shorter term duration to get good entry or exit levels along with Risk Reward ratio.
Time Cycle of 96 days: is working well to find out the top and bottom.
A detailed 120 mins chart is also shown in today’s morning report for Kotak Bank.Looking at short term indicators with crucial price levels is the key for successful trading and timing the markets.
To know what is next from here subscribe “The Financial Waves short term update” –a flagship product that covers Nifty and 3 different stocks on rotational basis, complete charts, indicators, applied Elliott wave and much more. The reports will be delivered daily in your mailbox and can also be accessed online. Visit for pricing options.

No comments:

Post a Comment