Hi Maurice,
According to my Telescan technical analysis reference:
The Wilder RSI is a momentum indicator that measures the velocity of directional price movement by comparing a stock's highest highs and lowest lows over a period of time. The Wilder RSI has become increasingly popular because of its success in calling trend reverals, particularly new uptrends, at a very early point.
RSI = 100 - [100/(1+RS)]
RS = (avg of up closes for x number of days) divided by (avg of down closes for x-number of days)
The RSI oscillates from a value of 0 to 100. When the indicator crosses 25 on the way up (for example, if it went from 23 to 26, NOT 26 to 23), it's a buy signal. When the indicator crosses 75 on the way down, it's a sell signal. In general, when the RSI is below 30, a stock is considered oversold (a condition where there's very few sellers left); Overbought above 70. J. Welles Wilder, Jr. (the person who invented it) recommends using a 14-day RSI for short-term trading.
I use Telescan (an online charting service) to provide me with stock graphs and technical indicators, like RSI. Looking at my 2-year QCOM graph, I can see that the stock has bounced off 35 the last four times. Since mid-1995, the bounces ended at 54, 48, 45, and 49.
Usually, I'm a long-term investor. But until I know much more about the satellite industry, I'll sell to prevent big losses if need be. Because 35 is such a big support level, I'll probably sell at a small loss if QCOM breaks significantly below that price. Breaks below support levels USUALLY indicate further significant price erosion.
Regards, Philip |
