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Thread: 8/27/08 Homework

  1. #1
    Inactive Member jchavez's Avatar
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    Research the Indicator assigned by Tim and provide a summary 1 to 2 paragraphs in length. Use the text for the class, the stock hotline, and Tim as resources. Post on this link.

  2. #2
    Inactive Member lschmerz's Avatar
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    The Average True Range (ATR) was developed by J. Welles Wilder and was introduced in his book, New Concepts in Technical Trading Systems (1978). The ATR indicator does not provide an indication of price direction or duration, but simply the degree of price movement or volatility.

    The True Range indicator is the greatest of the following:
    - current high less the current low
    - the absolute value of the current high less the previous close
    - the absolute value of the current low less the previous close

    The Average True Range is a moving average (generally 14 days) of the True Ranges. The ATR can also be calculated on an intraday, daily, weekly or monthly basis.

    Wilder originally developed the ATR for commodities but the indicator can also be used for stocks and indexes. Simply put, a stock experiencing a high level of volatility will have a higher ATR, and a low volatility stock will have a lower ATR.

  3. #3
    Inactive Member jchavez's Avatar
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    MACD is an indicator that measures momentum based upon the moving averages of a stock?s prices. Things to look for when using the MACD are extreme peaks and valleys, which can indicate that a stock is either overbought or oversold. When the MACD indicator reaches an extreme below the zero line, the market is oversold which is an indicator to support a ?buy?. When an extreme above the zero line is reached, the market can be viewed as being overbought which is an indication to support a ?sell?.

    One thing to note is that MACD uses moving averages which are based on the history of a stock, so it?s a ?lagging indicator?. Therefore the MACD is a secondary indicator which should be used only as additional support or confirmation of a projected move in the market.

  4. #4
    HB Forum Owner blancoarismendi's Avatar
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    The stochastic oscillator is a well-known momentum indicator used in technical analysis. The idea behind this indicator is that the closing prices should predominantly close in the same direction as the prevailing trend.

    In an upward trend the price should be closing near the highs of the trading range and in a downward trend the price should be closing near the lows of the trading range. When this occurs it signals continued momentum and strength in the direction of the prevailing trend.

    The stochastic oscillator is plotted within a range of zero and 100 and signals overbought conditions above 80 and oversold conditions below 20. The stochastic oscillator contains two lines. The first line is the %K which is essentially the raw measure used to formulate the idea of momentum behind the oscillator. The second line is the %D which is simply a moving average of the %K. The %D line is considered to be the more important of the two lines as it seen to produce better signals.

    The stochastic oscillator generally uses the past 14 trading periods in the calculation but can be adjusted to meet the needs of the user.

  5. #5
    Inactive Member MathiasNYC's Avatar
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    RELATIVE STRENGTH INDEX (RSI)

    Relative strength is the rate at which a stock falls relative to other stock groups in a falling market or rises relative to other stocks in a rising market.

    The RSI is an oscilator (a tool to measure momentum) which shows how strongly a stock is moving in its current direction.

    Two main levels to pay attention to with the RSI are the 70 and 30. Generally, RSI will top above 70 and bottom below 30. It usually will form these tops and bottoms before the price chart.

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